Rangers face a real danger of being shut down, reports Alex Anderson
In Scotland it seems even the legal system must be Old Firm-centric. Celtic decried an Edinburgh Sheriff Court jury when the case of a Hearts fan assaulting their manager, witnessed live on TV across the country, was found not proven. Two weeks later, however, the Court of Session, Scotland's supreme civil court, redressed the balance by exposing the threat of Rangers going bankrupt in the very near future.
HM Revenue & Customs' pending claim against Rangers has, in fact, been common knowledge in Glasgow football circles for at least a year now. That the cost to Rangers, should they lose November's tribunal on tax liabilities, could be anything up to £50 million was central to all coverage of the May 2011 takeover of the club by venture capitalist Craig Whyte. What happened in court on September 13, though, made it all decidedly more real. Ring-fencing a sum of £480,000 for the potential settlement of a lawsuit against the club may not seem overly dramatic. But judge Lord Hodge declared he was "satisfied that there is a real and substantial risk of insolvency" at Rangers as he granted an arrestment warrant for the money. The most powerful club in the history of Scottish football was having its assets frozen.
The previous Rangers ownership under Sir David Murray has, if Private Eye and other, less reputable, sources are to be believed, made an arse of paying players through the borderline-legal Employee Benefit Trust system. In seeking to avoid income tax or national insurance payments, Rangers opened themselves up to a massive claim by the tax authorities.
Hodge emphasised he was not concerned with the "actuality or probability" of insolvency at Ibrox but "the degree of possibility". That possibility centres on the fact that Rangers' June 2010 accounts showed net assets, including the stadium, of £70m – a figure which leaves little wiggle room when all is considered.
HMRC are chasing £35m in tax and a further £14m in interest and penalties. Sheriff's officers turned up at Ibrox in August to arrest funds for a separate, smaller claim for £2.3m in unpaid taxes (and an attendant £1.4m fine). Also, Rangers currently have no credit facility with any bank and Craig Whyte has not, as was widely believed, wiped out the £18m debt of the previous regime. Instead he has transferred it from Lloyds Bank to his new company, "Rangers FC Group Ltd". Suddenly all talk of the SPL champions going bust loses its note of hysteria.
Having been knocked out both European competitions before September, the tax tribunal provides a different kind of big-money showdown for Rangers fans this season. Whyte called a press conference as soon as the story broke and vaguely assured everyone Rangers would be playing at Ibrox long after all the hurriedly assembled journalists were dead and buried. However, the idea Rangers are too big a public institution for any bank to risk shutting down does not apply to the HMRC, particularly in a financial downturn when public examples need to be made.
Scottish football couldn't afford to let Rangers fold, but around half the country's fans would dearly love to give it a try. Administration and a points deduction could see Celtic finally regain the SPL in much the same way they qualified for this season's Europa League. Bankruptcy for the first time in 140 years and any need to re-form would be a humiliation beyond anything suffered by a club which, never relegated, has only once finished lower than fifth.
The immediate embarrassment was apparently heightened by the source of the latest freezing of assets. Former chief executive Martin Bain, sacked for declaring his mistrust of Whyte's stewardship, is suing for breach of contract to the tune of £1.3m. Bain was Murray's right-hand man and worked closely with manager Walter Smith in the last four seasons as Rangers overcame burgeoning financial difficulties to win eight domestic trophies and reach a European final.
For some, that successful period was the most romantic of our lives supporting the club, seemingly the result of a familial loyalty among those in charge. Now we're wondering how much it really cost. Bain could, of course, be deliberately using his claim to publicly undermine a man he thinks is bad for Rangers – leaked legal papers detailed Whyte's assurance he'd let Rangers go under if the final HMRC bill exceeded £15m. Or Martin could just want his wages, net of tax.
From WSC 297 November 2011