good faith n. honest intent to act without taking an unfair advantage over another person or to fulfil a promise to act, even when some legal technicality is not fulfilled.
Two simple words. And yet that is exactly where the Office of the Scottish Charity Regulator (OSCR) has firmly nailed its colours in investigating the Rangers Charity Foundation.
Let’s start with the numbers.
I can now confirm that the Rangers vs. AC Milan match in March 2012 made a net profit of £382,860 from a total income of £561,497 based upon official figures from The Rangers Football Club plc (in administration), OSCR and the Rangers Charity Foundation.
It is important to remember that this figure is net profit: the administrators of The Rangers Football Club plc (Duff & Phelps) have already deducted costs of £178,637, including £40,000 for player travel and a management fee of £25,000 due to the Rangers Charity Foundation.
Under the revised and assigned agreement governing the match, AC Milan Glorie received £100,000 from this profit (NB, there is conflicting evidence that they have ever actually received it) and the Rangers Charity Foundation was due to receive £38,286 (10%). This left a balance of £244,574 which was retained by The Rangers Football Club plc (in administration).
Total income was therefore split as follows:
Rangers Charity Foundation – management fee £25,000 (4.45%)
Rangers Charity Foundation – profit share £38,286 (6.82%)
AC Milan Glorie – profit share £100,000 (17.81%)
The Rangers Football Club plc (in administration) – costs £153,637 (27.36%)
The Rangers Football Club plc (in administration) – profit share £244,574 (43.56%)
Total £561,497 (100%)
However, we also now know for certain from the accounts of the Rangers Charity Foundation that they did not receive their share of the profits (£38,286) from the administrators and the management fee that they were due was written off against monies they owed to the football club.
As hinted above, there is also no evidence to state definitively that AC Milan Glorie received their share either. Scotzine have provided me with the text of an email they received from AC Milan in which it is confirmed that they “received all the payments agreed in the agreement by way of donation to the exclusive purpose of charity activities and projects.” I contacted Carl Dunn, AC Milan’s agent in the UK who organised the legends game, but he denied all responsibility and even denied any knowledge of the game. I also contacted AC Milan only to be told via the telephone that they had not received anything and they have yet to respond to my written request for clarification. That mystery rumbles on, but for the purposes of this article let’s assume that AC Milan did indeed receive their share.
So what we have here is a football club taking a whopping 82% (£461,497) of the income from a charity game and retaining it for its own use. That does of course include costs, but strip these out and the picture is no less rosy; 74% of the money that should have gone to charity from that single game (£282,860) actually ended up in the coffers of a morally, ethically and financially bankrupt football club.
That should, of course, come as no surprise to anybody who has followed my tweets or this blog. After all, I and others have pointed out on several occasions that businesses in administration are quite simply barred under insolvency law from giving money away to charity and indeed anyone to the detriment of creditors without the express permission of the courts. In essence, the Rangers Charity Foundation rather bizarrely became a creditor of The Rangers Football Club plc whilst it was in administration yet did not submit a creditor’s claim to the administrators… which may very well be a world’s first!
So what did OSCR find?
- The charity’s decision-making process which allowed important decisions to be made by one trustee acting alone was in breach of trustees’ duties and constituted misconduct on the part of the charity trustees as a whole.
- The way the decision regarding the fundraising event was taken did not comply with the requirements of the charity’s trust deed.
- Issues of conflict of interest inherent in the charity’s structure had not been appropriately dealt with.
- Although the decision was a breach of legal duties, it was made in good faith and in the interests of the charity given the risk that otherwise the fundraising event might not have taken place.
Would you like me to repeat the highlights?
- “Breach of trustees’ duties”
- “Misconduct”
- “Did not comply with trust deed”
- “Conflict of interest not appropriately dealt with”
- “A breach of legal duties”
Now I am sorry but if I were a regulator and I came across a case with those five bullet points I know what I would do and it wouldn’t be to administer a slap on the wrist.
Let me try to give you an analogy: imagine, if you will, that you are the sole trustee of an estate benefitting a disabled individual who is unable to make decisions for his or herself. Imagine now that you were found guilty of the above failings in respect of that estate and trusteeship. What do you think would happen to you?
Precisely.
Or better still, imagine that as the sole trustee of a charity, you decided to help yourself to some of the charity’s cash in order to give it to another cause which you were close to. What do you think would happen to you when caught?
Precisely.
If I were an ordinary member of the public without access to the evidence, I might accept (as did OSCR) that all of this was done in good faith. But I have had privileged access to all of the evidence presented to OSCR by the Rangers Charity Foundation (some of which has been published on the blog). I have also had access to additional evidence which was supplied to OSCR by other sources. Accordingly, I can honestly state without any hesitation whatsoever that I do not accept that the actions of the Rangers Charity Foundation, The Rangers Football Club plc (in administration) and Duff & Phelps were ever made “in good faith”.
Let me explain by addressing the OSCR report section by section, starting with the penultimate bullet point on page two (from here on, excerpts from the OSCR report to be analysed will be in italics):
“The inquiry has taken some time to complete, partly due to the difficulty of obtaining information from some of the parties involved in a complex and fluid situation.”
I consider this to be a piece of misleading nonsense by OSCR. It is absolutely true that Craig Whyte (identified as Trustee A by OSCR) failed to respond to any correspondence but that is almost certainly due to Mr Whyte’s pathological hatred of officialdom and the fact that he knew nothing about the activities of the Foundation.
Prior to Mr Whyte’s appointment as Chair of the Foundation, the Foundation had been led by Martin Bain in his role as CEO of The Rangers Football Club plc rather than in his role as a trustee of the Foundation. Upon his accession to the Chair, Mr Whyte promptly appointed Jacqueline Gourlay as de facto Chair of the Foundation and line manager for the Foundation’s manager, Connal Cochrane, and played no further part in its management.
OSCR received all the information that it would receive by 31 May 2012 – to its credit, the Foundation co-operated fully with OSCR.
That information came solely from Ms Gourlay, supplemented by a letter from Martin Bain in which he merely endorsed everything Ms Gourlay had stated in her evidence, adding that she had been acting on his behalf since May 2011. At no point did OSCR approach or ask Duff & Phelps for any information.
Furthermore, far from being a “complex and fluid situation”, it was actually, and paradoxically, a rather benign and simple situation. What was complex and fluid was the situation at The Rangers Football Club plc (in administration) between 14 February 2012 and 14 June 2012, but for the Foundation it was business as usual.
“The Trust Deed gave The Rangers Football Club plc sole power to appoint new trustees. The Trust Deed also provided that the Chair of The Rangers Football Club plc is ex officio Chair of the Charity. This meant that the Chair of the Charity held that position by virtue of being Chair of The Rangers Football Club plc.
On 6 May 2011 The Rangers Football Club plc changed ownership and, as provided in the Trust Deed, the new Chair became ex officio Chair of the Charity.”
Absolutely spot on, yet it pays no regard to the fact that Craig Whyte was ‘removed’ from his role as Chair of The Rangers Football Club plc on 14 February 2012 and effectively replaced by the joint administrators. This would have created another conflict of interest which, to my untrained eyes, could only have been resolved with recourse to the Court of Session and a discussion with Lord Hodge.
It might also be pertinent to point out at this juncture that the Foundation’s trust deed does not link the Foundation in any way to Rangers Football Club or Sevco beyond this power to appoint trustees and the Chair (a power which was removed in June 2012 by creation of a supplementary deed executed by our friends Paul Clark and David Whitehouse, see below).
“At the time we opened our inquiry the Charity had three charity trustees. Trustee A was the Chair of the Charity. Trustees B and C were senior employees of The Rangers Football Club plc. Trustee B had been inactive as a charity trustee for some time and resigned on 4 April 2012. Trustee C left the employment of The Rangers Football Club plc on 31 January 2013 but remains a charity trustee. Trustee A was removed as a director of The Rangers Football Club plc with effect from 1 June 2012. This ended Trustee A’s connection with the Charity.”
First up, I have no idea why OSCR should refrain from naming trustees unless someone had a wee word with them.
I have no problem naming them because it is undoubtedly in the public interest to do so and they can be easily identified by anyone simply by looking at the Foundation’s accounts. Trustee A was Craig Whyte, Trustee B was Martin Bain and Trustee C was Jacqueline Gourlay.
Mr Bain was, of course, sacked by Mr Whyte in May 2011 so he was not a “senior employee” of Rangers FC at the time of the charity match, but note that OSCR state he was “inactive as a charity trustee for some time”.
I am somewhat bemused that OSCR should see fit to state that Mr Whyte’s removal as a director of The Rangers Football Club plc on 1 June 2012 “ended [his] connection with the charity”. Would the same then not be true of Mr Bain when he was sacked and Ms Gourlay when she left the employment of Sevco? (OSCR seem to think that Ms Gourlay remained employed by The Rangers Football Club plc up until 31 January 2013 even though they themselves state that it entered liquidation on 31 October 2012)
There is absolutely no provision that I can see within the Foundation’s trust deed that allows for the removal of Mr Whyte as a trustee just because he is no longer Chairman of The Rangers Football Club plc. Remove him as Chair perhaps, but that does not mean he should be removed as a trustee. In fact, this is especially curious as no one had the power to remove Mr Whyte (Ms Gourlay’s discussions with Turcan Connell confirmed that, see below) and OSCR confirmed via a Freedom of Information request that they had not removed him nor sought to have him removed. So who exactly decided this? Funnily enough, OSCR are silent on that point and yet again it goes to the heart of the matter and “good faith”.
I am also somewhat bemused that OSCR have ignored the written evidence presented to them that Ms Gourlay, Mr Whyte and employees of The Rangers Football Club plc were actively engaged in attempts to remove Mr Bain as a trustee of the Foundation in the autumn of 2011. That evidence clearly shows that Ms Gourlay et al even went so far as to take legal advice on that very point and then wrote to Mr Bain as suggested by their legal advisers (Turcan Connell). This is important again in considering the “good faith” argument.
What the dates show, however, are that from June 2011 when Mr Bain left The Rangers Football Club plc until June 2013 when new trustees were appointed, the Foundation was never quorate under Scots law. There is therefore absolutely no way that the Foundation should or could have entered into any legally binding contracts since it never had the trustee authority to do so; Ms Gourlay did not have the legal authority to rescind the agreement with AC Milan Glorie or the legal authority to assign it to anyone, let alone The Rangers Football Club plc (in administration). That is an absolute basic principle of law and charitable law in particular and one which can be easily identified with a quick visit to OSCR’s own website and publications or even by quick enquiry of Glasgow Council for the Voluntary Sector; and yet OSCR would have us believe that Ms Gourlay made this decision “in good faith”.
“When it became clear in June 2012 that The Rangers Football Club plc was insolvent, the Charity took legal advice and executed a Supplementary Deed in July 2012 irrevocably revoking the right of
The Rangers Football Club plc to appoint trustees to the Charity and reinstating the trustees’ power to appoint new trustees.”
It is interesting that Ms Gourlay suddenly decided that it might be best to finally take some legal advice in June 2012 on the appointment of future trustees (yet delayed the appointment of new trustees until June 2013). It is also interesting that she was not averse to taking legal advice on the removal of Mr Bain as a trustee in October 2011. So why did she not take legal advice on the assignation of the charity game? “Good faith?” I don’t think so, do you?
It is also interesting that OSCR take the view that it only became clear in June 2012 that The Rangers Football Club plc were insolvent when any accountant could have stated that they were insolvent as of 14 February 2012 given the scale of debt. Surely anyone senior working in the finance department of that football club would have known this given that they would have had access to the club’s financial affairs? If a bunch of internet bampots could decipher and correctly call the financial implosion of Rangers and the chance of a CVA, why couldn’t a fully qualified accountant?
As an aside, perhaps OSCR should note that the Foundation never had the power to appoint trustees so could not have that power reinstated… but maybe that’s the level of competence that we are dealing with here.
The Rangers Football Club plc was renamed RFC 2012 plc and entered liquidation on 31 October 2012. Since there will not be another Chair of RFC 2012 plc, the charity trustees themselves will in future decide which charity trustee will be Chair.”
On 14 February 2012, Craig Whyte was removed as Chair of The Rangers Football Club plc and replaced by joint administrators appointed by the Court of Session. Perhaps one for the legal minds, but wouldn’t that make Duff & Phelps de facto Chair and therefore Chair of the Foundation?
If so, there is an even bigger conflict of interest which has been deliberately ignored by OSCR. And I say deliberate because that very point was put to them on more than one occasion by me asking for clarification. On each occasion they ignored it, instead referring me to the Foundation for an answer knowing full well that the Foundation was refusing to respond to even basic enquiries (it took them eight months to send me their accounts and incomplete constitution when they have a legal duty to provide these to any member of the public).
If my hunch is right and Duff & Phelps became de facto Chair of the Foundation then there is no way that the decision to assign the charity game to the football club could have been made “in good faith”. Instead, it would be plain old corruption and theft.
“As soon as The Rangers Football Club plc entered administration, Trustee C alerted the Joint Administrators to its undertaking to provide full support for the fundraising event in terms of resources, including the venue to host the friendly football match and staff to support it.”
Hmmm… as soon as the club enters administration, the trustee – who is also a senior employee in the finance department of the football club – alerts the joint administrators to the club’s commitment to a charity game?
I will come back to this later but is it not strange that she doesn’t immediately contact the other two trustees or at least Mr Bain, who later claims Ms Gourlay was acting “on his behalf”? Wouldn’t anyone with half a brain (let alone a highly qualified finance professional) immediately contact their legal representatives for advice?
So, I ask the question; did Ms Gourlay contact the joint administrators in her capacity as trustee or in her capacity as employee of the club? The conflict of interest is so pernicious and all-pervading that it is impossible to answer. Yet OSCR did not ask the question; not even to at least establish a position. Nor did they seek any evidence. Instead, like so much here, they accepted the word of someone who was so heavily conflicted that they should never have been anywhere near any decision making, let alone be the sole decision maker.
How can any decision made under such circumstances be construed in the slightest as having been made “in good faith”?
“It was clear to Trustee C that, since the primary duty of the Joint Administrators was to ensure the creditors of The Rangers Football Club plc (In Administration) were not prejudiced, use of its resources for the fundraising event would need to be justified on a cost benefit basis. Trustee C considered there was a very real risk that the Joint Administrators would not permit The Rangers Football Club plc’s resources to be used for the fundraising event. If that happened, the fundraising event would not take place and neither the Charity nor the AC Milan Foundation would benefit.
In Trustee C’s view unless the Joint Administrators had control of the income from the fundraising event they were unlikely to agree to the event going ahead. Assigning the Charity’s interest in the Agreement with AC Milan Glorie (‘the Agreement’), dated 16 January 2012, for the fundraising event to The Rangers Football Club plc (in Administration) would ensure the Joint Administrators would recover costs and satisfy their duty to creditors to derive income from it.”
Suddenly, Ms Gourlay has discovered her knowledge of insolvency law and practice! It is fascinating – is it not – that she can clearly see how the charity game might be a problem for the joint administrators yet is strangely unable to see how assigning the rights away is not a problem for the charity. It is also fascinating that despite clearly understanding insolvency law and practice, she fails to see that this would absolutely preclude the joint administrators from paying over any funds to the Foundation.
In reflecting upon this section, it is vital to remember that the original agreement with the football club established through precedence over the years was that all income would be treated as charity income (thus allowing it to avoid paying VAT) but that the football club would be reimbursed its costs in full. Ms Gourlay’s financial model, which I have posted here before, clearly shows this. It is also vital to remember that OSCR had access to this information too.
So let’s be clear: there was never any danger that the club would not recover its costs. Even an attendance of 20,000 would still have recovered costs. The club may not have made any profit, but it certainly would never have lost any money on the match. The cost-benefit equation should never have, and never did, enter into the discussion.
The second paragraph really is the crux of the matter – “unless the joint administrators had control of the income”. Because then they could do what they liked with the funds under insolvency law and this fact would not have been lost on Duff & Phelps who went on to prove themselves adept at the sharp end of insolvency practice. A fact not lost on Ms Gourlay either, as it was on her evidence that OSCR stated “the joint administrators would recover costs and satisfy their duty to creditors to derive income from it”.
So we have a qualified accountant and insolvency practitioners who seem to have a highly selective recollection of insolvency law, yet we are to believe that the decision to hand over the proceeds of a charity game was made “in good faith”?
“Trustee C considered that assigning the Charity’s interest in the Agreement to The Rangers Football Club plc (in Administration) fulfilled the legal duties – of a charity trustee because the event would still be able to take place and, in terms of the agreement reached with the Administrators, the Charity would still receive some benefit. Trustee C did not obtain professional advice before making this decision.”
I am not sure where to even begin.
It is akin to saying that if I collect £10,000 for charity but then decide to retain £9,000 for my costs, it is okay provided charity receives £1,000.
Are we seriously to believe that a highly educated, professional person and trustee really believed this rubbish? If this is the level of intelligence employed in Ibrox, it is little surprise that the club went into administration and was liquidated.
This line of argument would never stand up in any court of law, anywhere. It is up there with idiots who wander through customs with 16 kilos of cocaine in their bags then claim they didn’t know it was there and they were forced to carry it.
Look at the numbers at the top of the page. Ms Gourlay handed over £250,000 in return for a management fee of £25,000 and a 10% share of profits knowing full well that neither would be paid to the charity because it was completely illegal without express permission from the courts. Not only that but she didn’t even consider getting legal advice. So she is either immensely dense and staggeringly incompetent when it comes to charity law and trustee responsibilities (in which case the first call she should have made was to Turcan Connell) or she knew full well what she was doing and why she was doing it.
“Good faith”, my arse.
Despite this, OSCR do not see fit to bar her from serving as a trustee with any other charity or forcibly remove her as a trustee of the Foundation (more on that later).
“The date of the decision to assign the event was, unfortunately, not formally recorded but was made on or about 21 February 2012.”
Now that’s convenient, isn’t it?
A decision of this magnitude and no one within the Foundation thought to record it formally, not even the Foundation Manager, Connal Cochrane. I can understand – at a push – that Ms Gourlay, being employed by the club, might have struggled at this time; but Mr Cochrane who was employed by the Foundation and therefore secure in his job? What sort of incompetent organisation are we supposed to think these fools were running?
I do not believe for one instant that neither Ms Gourlay nor Mr Cochrane thought to record this momentous decision. “Good faith”? Absolutely no chance.
Besides, surely the estimable Duff & Phelps, who would have had to record everything for the Courts, would have kept a record? Sadly we do not know because, bizarrely, OSCR did not think to request any evidence from the joint administrators or the Court of Session.
The date of that decision is critical because OSCR made great play that Martin Bain had written to them to affirm that Ms Gourlay was acting on his behalf. What OSCR forgot to mention in their report is that Ms Gourlay confirmed in writing to them that she did not inform Martin Bain until 27 February 2012. “Good faith” or a badly-executed cover up?
“Under the terms of the Agreement the Charity had been due to receive up to 60% of the net profit from the fundraising event in addition to a £25,000 management fee. Mindful that if the fundraising event did not proceed the Charity would receive nothing, and that it had already incurred costs in relation to organising the event, Trustee C agreed to assign the Charity’s interest in the Agreement to The Rangers Football Club plc (in Administration) on the agreement with the Administrators that the Charity would receive 10% of the net profits together with the management fee.”
I am slightly concerned that OSCR is managing news here because Ms Gourlay confirmed in writing to OSCR that the Foundation had only incurred costs of £12,500 at the time of the decision to assign the rights to the charity game, although what these were has never been spelled out and clarification was never sought by OSCR.
Remember these costs would have been borne initially by The Rangers Football Club plc and then reimbursed by the Foundation as this was how their “symbiotic” relationship worked. Call me a fool but would it not have made sense to suggest that if the match was cancelled then the football club should not charge these costs back to the Foundation? Or, better still, to cancel the match but continue with the dinner (has everyone forgotten about that?) which on its own was projected to make a profit of £70,000, thus leaving the Foundation at least £45,000 to the good.
It is important here to remember that Ms Gourlay and the Foundation had been budgeting for a crowd of 25-30,000 which would have generated a net profit of c£200,000. What she was giving up therefore was a projected 50% profit of £100,000 to offset costs of £25,000, which could and should have been recovered from the football club. In the end, they got a crowd of 47,000 generating the sums outlined above. Doesn’t seem such a good deal anymore, does it?
Furthermore, bearing in mind what we know about insolvency law, the idea that the Foundation was going to recover anything is simply laughable. Yet we are asked to believe that this was all done “in good faith”.
Note also that this is now presented to us as Ms Gourlay agreeing to assign the Foundation’s interest. Yet this news was announced to the world as “The Rangers Charity Foundation suggested the club should now benefit from the match and we were delighted that the AC Milan Foundation agreed.” Even OSCR’s report acknowledges that that was the case yet they skate over this as if it was inconsequential.
What this highlights is someone presenting unclear and contradictory evidence rather than someone acting “in good faith”.
“The only alternative to this assignation that Trustee C considered was cancellation. The option of the Charity paying a fee to The Rangers Football Club plc (in Administration) for the use of Ibrox Stadium and facilities was not explored, even though this may have resulted in less of a reduction in income to the Charity. However, a fee would have left the Charity in control of event income and this, in Trustee C’s view, meant there would be uncertainty over the event taking place.”
What a piece of tautological nonsense: they didn’t explore hiring Ibrox but hiring it would have left them in control of income which would have made it uncertain that the event would go ahead?!? Did OSCR seriously accept this rubbish?
Bearing in mind that the club was already going to be reimbursed full costs from the event had it gone ahead as originally envisaged, I am struggling to see what price the joint administrators could have conceivably charged for the use of Ibrox over and above costs that would have rendered the event unprofitable.
“Tickets for the football match were not made available for sale until after the assignation to The Rangers Football Club plc (in Administration). Tickets for the dinner had already gone on sale but all purchasers were contacted to explain the change in circumstances and offered a refund.”
This is a complete red herring because the issue is not misleading the public but the diversion of funds from a charity to a non-charitable entity – The Rangers Football Club plc (in administration) – by someone who had a complete conflict of interest. Besides, hadn’t match tickets actually gone on sale to season ticket holders on 20 February? General public sale was planned to be 27 February.
In relation to the dinner, why did this not proceed on the original basis? As noted above, it could have continued as per the original arrangements and generated a profit of £70,000 all of which would have gone to charity. Furthermore, why would they change the dinner since this had nothing to do with the rental of Ibrox or the joint administrators? There was absolutely no need to change anything about the dinner and, even if we accept Ms Gourlay’s arguments about the match, changing the dinner was completely unnecessary and a criminal dereliction of her fiduciary duty to the charity. At the very least, the £70,000 profit that was generated by this dinner and which was diverted to the football club should be recovered from the trustees themselves.
“After the assignation of the Charity’s interest in the Agreement to The Rangers Football Club plc (in Administration) Trustee B subsequently advised OSCR that Trustee C had afforded the utmost scrutiny and diligence to the Charity’s affairs and that Trustee C had acted on behalf of Trustee B throughout the process. We wrote to Trustee A concerning the assignation but did not receive a reply.”
When I first read this paragraph, I actually burst out laughing. A character reference for Ms Gourlay from Mr Bain? The man she was scheming to remove as a trustee in October 2011 (if she disagreed, why did she fail to raise any concerns with Turcan Connell or OSCR)? The man who used to employ her? The man who went on to employ her when she left the employment of Sevco? Conflict of interest, anyone?
Where is the written evidence that Ms Gourlay was acting on behalf of Mr Bain? Surely not another important decision that went unrecorded? And how does this square with Ms Gourlay’s attempts to remove Mr Bain as a trustee in October 2012? The written evidence proving this was submitted to OSCR so why have they chosen to ignore it?
Remember, Mr Bain didn’t know anything about the decision to assign the game to the club until 27 February 2012 at the earliest, a full six days after the decision was made by Ms Gourlay and my information is he did not respond to her until 1 March.
PS: I’ve got news for you, Martin, no trustee acts on behalf of anyone else; you hold office (trust) on behalf of the public who are supposed to benefit from the charity.
“The event went ahead as scheduled. In addition to the management fee of £25,000, the Charity received £38,286 as its 10% share of the net profit from the fundraising event.”
Absolutely not. As I have demonstrated above and backed previously with written evidence from the Foundation itself, the Foundation did not receive a penny from the match. The management fee was written off against monies owed to the club and it never received the 10% donation. Of greater concern, perhaps, is that the Foundation did not press any claims on Duff & Phelps to be a creditor of the club as it should have done in relation to that 10% donation. “Good faith” or an inconvenient truth?
“Section 66 of the 2005 Act places a duty on charity trustees to act in the interests of the charity. When a potential conflict of interest arises, charity trustees must put the interests of the charity first. A charity trustee who is unable to do this should declare the conflict and take no further part in the deliberations and decision-making process about the matter.
Each of the three charity trustees had a relationship with The Rangers Football Club plc either as an employee or a director of the company. This meant that any decision involving The Rangers Football Club plc and the Charity presented the potential for a conflict of interest. When The Rangers Football Club plc entered administration and the fundraising event was put at risk, the potential for a conflict of interest became real and irreconcilable because of the conflict between the charity trustees’ duty to act in the interests of the Charity and either their duties as an employee or as a director of The Rangers Football Club plc. If they had acted in the interests of one, they would have failed in their duty to the other. They could not act in the interests of both.
Charity law also provides for a very specific conflict of interest that may arise between the interests of the charity and those of the person or organisation responsible for appointing the charity trustee.
Should such a conflict arise, the law makes clear the charity trustee’s duty is to act in the interests of the charity. A charity trustee who is unable to put the interests of the charity before those of the person or organisation responsible for appointing them is required to disclose the conflict of interest and refrain from participating in any deliberation or decision with respect to the matter in question.
The 2005 Act makes clear that the duty to act in the interests of the charity and avoid conflicts of interest is not only a duty on individual charity trustees; it is also the duty of their fellow charity trustees to ensure that they do so.”
So why did Mr Bain and Mr Whyte not do so? Because neither Mr Whyte nor Mr Bain had the faintest clue or interest in what was happening in the Foundation; if they had, don’t you think they would have attended or called for board meetings? Instead, they allowed the Foundation to trundle on its merry way as a de facto department of the football club (and, even then, only a team within the PR department). It is interesting that OSCR never once asked for board minutes prior to May 2011. I do not know the answer but I’m going to take a wild stab in the dark and guess that there were very, very few board meetings throughout the history of the Rangers Charity Foundation.
Why did Ms Gourlay not address the conflict of interest or at least seek legal advice? Because she knew very well that to do so would have marked her out as a troublemaker for the joint administrators, which would have endangered her position as an employee? Not only that, but as a key finance employee within the club, did she recognise the need to secure every penny for the club to try and help it survive administration?
I find this the most eloquent and sensible passage in the entire report quite possibly because it is also the most accurate. Without any shadow of a doubt, every trustee was guilty of a breach of their duty of care to the Foundation.
“When we met with Trustee C, the relationship between the Charity and The Rangers Football Club plc was explained to us as a “symbiotic” one. The Charity was effectively seen as a department within The Rangers Football Club plc although we were assured there was an awareness that the Charity “worked to different rules”. The Rangers Football Club plc provided office space and other support for the Charity.”
Anyone reading this might skim over the detail and even the bigger picture to concentrate upon the first and last sentences. That would, however, be a mistake because what this paragraph actually tells us is the bigger picture: OSCR had one meeting with Ms Gourlay (9 March 2012 in the Teacher Building, St Enoch Square, Glasgow) and OSCR took pretty much everything she said at face value and without interrogation.
This was no hard-nosed, good cop-bad cop Taggart style interrogation. Instead, it was a polite chat over tea and biscuits to reassure everyone that this was all just a big misunderstanding.
Did OSCR ask for further information such as board minutes prior to May 2011? Did OSCR ask Duff & Phelps for information or petition the Court of Session? Did OSCR meet with Martin Bain or Craig Whyte? Did OSCR take Ms Gourlay’s evidence and subject it to any rigorous testing or checking? Did OSCR ask Ms Gourlay for copies of agreements between the club and the Foundation? No, instead they were “assured” by Ms Gourlay. Well that’s alright then, isn’t it?
In terms of the detail, what it tells us is that there is an admission that not only did the trustees have a real, profound and irreconcilable conflict of interest but that the Foundation as a whole did because it was de facto an integral part of the club. This was no independent Foundation; it was simply a part of the Rangers PR department guided by the club and its strategy and not by trustees. Further evidence of this was actually submitted to OSCR in the form of Foundation management reports (all of which are remarkably similar in content, but that’s another issue) which talk about future strategy in line with the club’s CSR and Football in the Community agenda as well as operational issues that are inextricably entwined with those of the club.
“We were told that since the change in The Rangers Football Club plc’s ownership in May 2011 no charity trustee meetings had been held, and since then Trustee C had been the only trustee actively involved with the Charity. Trustee C met with the manager of the Charity on a weekly basis to ensure that at least one trustee was fully aware at all times of the current state of affairs of the Charity.”
I assume OSCR obtained written records of these meetings? No? Didn’t think so.
Wonder if they thought to ask or seek evidence for whom Mr Cochrane actually reported to on a day-to-day basis and who actually carried out his appraisals? No? Didn’t think so.
Wonder if OSCR asked for copies of emails or other correspondence between Ms Gourlay and the other trustees to ensure they were being kept up to date? No? Didn’t think so.
Wonder if OSCR asked for copy of minutes prior to May 2011? No? Didn’t think so.
“Trustee C highlighted to OSCR the statements in the Charity’s 2011 and 2012 Trustees’ Annual Reports (part of the Charity’s accounts) that said all major decisions were made by charity trustees at periodic meetings or else by an individual trustee in the interim as necessary.”
Is that meant to be some kind of justification? If it is then it’s up there with the Sandy Bryson defence strategy. But then I guess trustee meetings every three years could be construed as “periodic”.
“Trustee C considered the decision to assign the Charity’s interest in the Agreement had been taken while acting as the “individual trustee in the interim as necessary” and had informed the other charity trustees of the decision after it had been made.”
Yep, there it is in black and white: Jacqueline Gourlay made the decision on her own without recourse to either legal advice or other trustees and only informed other trustees after the fact, presenting them, in essence, with a fait accompli. And, as OSCR go on to state quite clearly, that was completely wrong and outwith the powers of the Foundation’s trust deed and the Trusts (Scotland) Act 1921 compounded by Ms Gourlay’s blatant conflict of interest.
“Based on the information provided to us, we further consider that the decision-making process in the Charity, which allowed a decision to be taken by one trustee to assign the Agreement with AC Milan Glorie to The Rangers Football Club plc (in Administration) without consultation with the other charity trustees and without a quorum, was in breach of the charity trustee duties. In addition, the conflict of interest presented by the assignation was not managed appropriately and professional advice was not obtained as required by the Charity’s Trust Deed.
A breach of section 66 charity trustee duties is misconduct in the administration of a charity…
After careful consideration of the circumstances…we have concluded that although the decision was a breach of legal duties the circumstances were such that it would not be a proportionate use of our regulatory powers to take further action. The decision to assign the Charity’s rights in the contract was made in good faith and in the interests of the Charity given the risk that otherwise the event may not have taken place, in which case the Charity would have received no benefit at all.”
So let’s get this straight. There’s been:
- a complete breach of section 66 charity trustee duties
- an inherent and mismanaged conflict of interest
- maladministration and mismanagement
But we are supposed to believe that it was all done in good faith? Move along Timmy, nothing to see here! I hope I have presented ample evidence to demonstrate why this is patent nonsense but let me reiterate:
- The Rangers Football Club plc (in administration) contrived – with the acquiescence, approval and assistance of the Rangers Charity Foundation – to divert to itself £282,860 that should have been due to the Foundation.
- This was a decision made by the joint administrators and the Foundation’s only active trustee (a heavily-conflicted, qualified accountant who worked in the Rangers’ finance department) who would have been completely aware of what they were doing and how it would fall foul of the Insolvency Act 1986.
Where is the “good faith” here?
Looking at the available evidence and the findings of the OSCR investigation, I am staggered that they could conceivably accept the argument put forward by Jacqueline Gourlay that she acted “in good faith” and “in the best interests of the charity”. Not only that but that they accepted her written and verbal evidence without murmur or question.
On 21 February 2012, Ms Gourlay had several options open to her which would still have brought significant income to the Foundation and she did not consider them at all, nor did she discuss these with her fellow trustees or professional advisers. Instead, less than a week later, she assigned the right to 74% of the profits from a charity match and dinner to a morally, ethically and financially bankrupt football club.
“At the time we opened our inquiry the assignation of the Charity’s interest in the Agreement to The Rangers Football Club plc (in Administration) had already taken place. OSCR has no powers under the 2005 Act to direct the Charity to renegotiate the assignation to increase its share of net profit from the fundraising event. We also recognised that the Joint Administrators’ primary duty to creditors would preclude such renegotiation. We were aware as well that, when tickets for the football match became available for sale, the basis on which the event was going ahead was well publicised. Members of the public may have bought tickets specifically to benefit The Rangers Football Club plc (in Administration) rather than the Charity.”
OSCR may not have any powers to order the Foundation to renegotiate the assignation but it does have powers to pursue trustees for financial mismanagement and to seek repayment of misappropriated or maladministered funds.
Hidden in the middle of this paragraph is what I believe to be the key element in my case: “the joint administrators’ primary duty to creditors would preclude such renegotiation”. OSCR rightly recognise that, in actual fact, Duff & Phelps’ only duty was to the creditors of The Rangers Football Club plc (in administration). Not only could they not renegotiate the assignation but they could never hand over any funds to charity.
I’m not going to make a big thing about this, but my understanding and my records show that tickets for the match actually went on sale to season ticket holders on 20 February 2012, ie before the assignation was agreed. Nevertheless, it is irrelevant because the Foundation was still budgeting for a profit of £200,000 according to Ms Gourlay’s own financial model and projections which were based on historical precedent.
“Our deliberations included an assessment of the risk the three charity trustees might pose to other charities of which they are also charity trustees, with a view if necessary to monitoring these charities proactively in future. To assess this risk, we wrote asking them for information about other charities with which they are involved as charity trustees. Trustee C remains a charity trustee of the Charity, and Trustees B and C disclosed to us the names of other charities with which they are involved as charity trustees.
After assessing carefully the information we hold about these charities, and in the knowledge that we have made Trustees B and C aware of our finding of their breach of duties, we consider that the risk posed is minimal and that it would not be proportionate to undertake proactive monitoring of these charities.
Trustee A did not respond to any of our requests for information, including a request for information about other charity trustee roles. As a result, we have been unable to assess the risk posed to other charities of which Trustee A may be a charity trustee. Should we become aware that Trustee A is a charity trustee of another charity we will consider the risk this might pose. We have made Trustee A aware of our finding of breach of charity trustee duties.”
An assessment of risk? Really? How was that carried out? By asking them what other charities they were involved in. Pardon me for laughing but isn’t that a bit like asking a convicted criminal if he has been involved in any other crimes? Still, given that OSCR took Ms Gourlay’s word for everything without subjecting it to any rigour or examination, I am hardly surprised here.
“Since our inquiry opened, Trustee C has taken independent legal advice to improve the Charity’s governance, particularly in relation to its relationship with The Rangers Football Club Limited, the new company. Trustee C appointed two new charity trustees in June 2013. Trustee C has also been advised that the Charity should put regulations in place to govern the Charity’s relationship with The Rangers Football Club Limited, and this will be taken forward with the new charity trustees.”
Are you sure about that? Have you got any evidence to back that up? Because my information is that there has been one conversation with Turcan Connell and that was only to discuss the amendment of the trust deed to allow existing trustees the right to appoint new ones.
How were the new trustees recruited and appointed? Was a skills audit carried out to identify the skills, experience and type of person required? Was there a public advertisement and an open, transparent recruitment process?
“We have recommended to Trustees A, B and C that they obtain training in their section 66 duties because we consider their understanding of their charity trustee duties needs to be strengthened. We look to them to develop a proper awareness that section 66 requires charity trustees to act in the best interests of the charity and with the care and diligence it is reasonable to expect of a person who is managing the affairs of another person, particularly in relation to decision making, identifying and handling appropriately potential conflicts of interest and ensuring they understand and comply with provisions in the charity’s governing document.”
Well, I am sure that will make everything all right.
Except, of course, it didn’t, because the Foundation (still led by Ms Gourlay) then got into bed with Sevco to host another charity game which this time only donated £75,000 to charity from a total profit of c£240,000.
Still, all “in good faith”…
Finally, a footnote as it were. I was so astounded at OSCR’s decision (though not its findings which I had predicted for quite some time) that I gave copies of all the evidence to a past president of a professional membership and regulatory body, a current senior executive of a regulatory body, and a practising solicitor. Not one of them understood how OSCR could have ever come to the conclusion that the Foundation had acted “in good faith” simply because this could never be established through OSCR’s “fundamentally flawed, inadequate and inept investigation”.
And yet, sadly, and rather ridiculously, that is where this must end unless you, the reader, petition your MSP to look into this travesty and raise it with the Scottish Government because there is no right of appeal against OSCR’s decision by anyone. There is no ombudsman, no independent appeals body, no government minister; as a non-ministerial department within the Scottish Government, the only higher authority is the Scottish Parliament and there isn’t even a formal mechanism to appeal a decision there. In other words, you, the people whom OSCR is set up to protect, have no protection from them.
In a democracy, that is disgraceful.
alzipratu 