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Author Topic: Saracens salary cap storm transferred to independent panel  (Read 1739 times)

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DOK

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DOK

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Investigations Into Sarries' Salary Cap Heats Up

Some interesting stuff on the possible sanctions here

DOK

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Owen Slot in The Times

If Saracens escape punishment, it will kill the salary cap

Owen Slot, Chief Rugby Correspondent

Wales dropped from first to fourth in the world rankings at the weekend. A fortnight after being dismantled by England, Ireland have hopped up to second. Yet while it has become fashionable these past few weeks to poke fun at the randomness of the rankings, one of the best sides in the world doesn’t get a ranking and is not going to the World Cup. This is Saracens.

Just imagine how far Saracens could go in Japan. They have five of the England pack; seven of the starting XV. In a week, by which time all the World Cup squads will have been announced, they will probably have another six going with other nations. Will Skelton, the Australian, would be a seventh if he had not found his Saracens deal preferable. Elliot Daly is the starting full back for England but may only be third-choice No 15 for Saracens.

If we agree that they could compete at world level, we could probably agree that Saracens are phenomenally strong favourites to win the Gallagher Premiership again this season.
If/when they do they will have won five Premiership titles out of the past six.

You doubt that when CVC, the private equity firm, bought its 27 per cent share of the Premiership this year, it wanted to buy a monopoly. You would presume that it wanted a competition full of intrigue and knife-edge tension. The value of the competition is hardly going to rise if we already know who will be champions.

On to the salary-cap investigation, then. If Exeter Chiefs, Wasps et al cannot break Saracens, will it be this that finally does it?

You will recall that at the end of last season, Saracens were placed under “review”. Several players’ businesses were revealed in the media, particularly Faz Investments Ltd, a company run by Owen Farrell, Wiggy9 Ltd (Richard Wigglesworth’s) and VunProp Ltd (the Vunipola brothers’) all of which were launched with Nigel Wray, the Saracens owner, as a financial partner.

This demanded an answer to the question: is this not a smart way around the salary-cap rules? A payment in kind? Wray quickly issued a substantial, unyielding statement in which he sought not to deny these investments — quite the opposite, he said that they were within the salary-cap rules and that he was proud to be helping his players to become businessmen and invest in their futures in this way.

That is where we left the stand-off. Andrew Rogers, the Premiership salary cap manager, was left investigating it. The pressure is growing on him now because, five months on, the other clubs are chomping at the bit. The Premiership does not start until mid-October, but the Premiership Rugby Cup begins in three weeks.

Some clubs would love to see Saracens brought to their knees with a guilty verdict accompanied by a points deduction and severe reputational damage. Yet while none of them seems to be in a particularly forgiving mood, even if you attempt to take the emotion out, what they all need, before the season’s start, is clarity. Whatever the conclusion, it is hard to see how it cannot damage Saracens.

There are three most likely outcomes.

One: despite a well-resourced legal battle, Wray fails to show that his co-investments are not a benefit in kind that break the cap. Saracens are found to be in breach of the rules. The maximum penalty is a 35-point deduction.

Of longer lasting significance, then, is: what would happen to the squad? Saracens would have to re-budget fast to come down under the cap. There could be a reduction in player wages, a fire sale of players or Wray would have to sell his shareholding in his players’ companies. Maybe a bit of all three.

Two: Wray wins the legal argument and Saracens are found to be not in breach. At that point, suddenly, the salary cap has been detonated. It currently stands at £7 million. If every other club is informed that, legally, they can go into business with their players, like Wray, then the game has been immediately transformed. The ramifications are vast.

At that point, each club would have to decide whether or not they wanted to compete at this level. Money would rule. Wage inflation would rage. The southern-hemisphere nations have few defences to stop their players from being lured by the lucre of the north; they would now find it even harder to cope.

Three: Wray wins the legal argument and Saracens are found not to be in breach, but the reaction of the other clubs is to close the legal loophole. Wray could fight it and we would get into a further legal dispute. However, at some point, the votes of the other 12 clubs would beat the Saracens one. At what stage could those clubs just refuse to play against them?

The inside information is that, with the new season approaching, this is all soon to come to a head. Even if Saracens win this fight, though, it is hard to see how they do not lose.


Bucksquin

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Wonderful news. I had assumed that the politics and the legal action threats of Wray (plus, CVC being scandal-shy) would end up just killing it.

T-Bone

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As has says, if the indepedent panel find that Sarries have only broken the spirit not the law then the cap is done

Donuts

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I think it will be difficult to confirm the value of the benefit to the players.
As I see it basically a company is formed and it acquires a property asset with a substantial loan from Nigel Wray.
At that point the company has no value as its assets (the property) equal the liabilities (the loan still due to Nigel Wray).
the only time that the player will benefit is if the asset grows in value which as it is property over time it is likely to or Nigel Wray decides he doesn't need his money back (which I suspect is what the plan is) and he agrees to write the loan off.
But if he doesn't do this until the player has long since retired then up until then the only increase in value is the gain in the property value plus any income form rental profits earned in the period. Normally properties in Investment companies should revalue their properties every three years but this isn't always done and in any case a friendly valuer can easily make this prudent.

then there is the argument that all Nigel Wray is doing is acting as a mortgage provider (until/or if he writes the loan off).

If he doesn't then all he is doing is as he claims helping take a step up the business ladder for their life beyond rugby

would welcome other thoughts on this


Grins

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With a property company set up in the way you describe then I agree no immediate realisable day 1 gain.  However why is Wray giving the shares to a player?  He has, in essence given the player an option on the shareholding of the company - there are models to value those....

AllyMac

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Donuts, your understanding of the set-up is exactly how I am reading it too, and I agree with your suggestion that the likely scenario is that Mr Wray is unlikely to request repayment of the loans once the player leaves the club.

The interesting part, from my point of view, is the timing of when each company is set-up (usually at the start of a new season) and when the property is purchased (a couple of months later). If you look at Maro Itoje, his company start-ups (Companies House have him listed as a director of a number of property-related businesses) always seem to coincide with the start of a new season and in particular when a new contract starts. 

This may, of course, just be a coincidence...

DOK

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"Now, Sportsmail understands that an independent body - which according to PRL's regulations would be Sport Resolutions - is handling the case. "


T-Bone

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There is nothing I guess stopping anyone from investing in these companies if they want to, and thereby providing capital to purchase properties, which in turns leads to the growth of the companies. The question is, why would you invest in a property company set up by a fulltime rugby player. Therefore the investment by Wray in these companies can't really be justified as a proper investment which any reasonable savvy third party investor would make

Mayor West

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I really hope they broke the cap by more than 1m. It stinks and if they want to create loopholes all the time with all the other clubs (mostly) playing by the rules then they should be expelled to France to play in that league. If they will have them.

harlequins

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Anyone want to bet that Saracens will get off with it all ? The powers that be won’t do anything. Saracens will end up with a global international team, keep winning the league and nothing will be done. The only solution at that point is for all other clubs to either not play them or put out a second team for the experience for perhaps a half. Let them win, it’s getting pointless.

Fursty

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With a property company set up in the way you describe then I agree no immediate realisable day 1 gain.  However why is Wray giving the shares to a player?  He has, in essence given the player an option on the shareholding of the company - there are models to value those....

There's also ways of fair valuing the loans provided to the companies - I'm willing to bet that any loans are at well below the market rate for similar companies with similar performance histories.

Donuts

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"With a property company set up in the way you describe then I agree no immediate realisable day 1 gain.  However why is Wray giving the shares to a player?  He has, in essence given the player an option on the shareholding of the company - there are models to value those...."

I suspect that this is done at the outset or early on so that they have no significant value (as the property value and loan are equal)and therefore are not a benefit in kind

Bucksquin

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I don't know exactly how the regulations are worded (does anyone know what phrase is used?) but I would imagine it refers to (something like) the aggregate value of any salary, bonus, or other pecuniary advantage conveyed to the player, his family or other connected persons either by the club or by any persons connected to the club (which obviously would include Wray and his business interests), whether or not directly related to the player's playing contract. Pecuniary advantage can, as others have said, easily be calculated, and converted to a 'market value' both now and at a future point.

Perhaps the challenge here (if the lawyers have been clever) will be to determine whether the arrangements have avoided having any present-day value e.g. perhaps the deal is: Wray charges no interest or the least possible interest now; the loan is repayable immediately with accrued interest, at any point during the playing career if the player leaves the club, other than by mutual agreement (i.e. retires from all playing, whether voluntarily or due to injury); thereafter, once the player is no longer on the books, Wray waives repayment and accrued interest. Hence the value of the investment is zero now but a lot once he is no longer playing.

       
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