Nick Bendel
Storm warning
April 25th 2010 23:45
For the last five years, it had seemed as though a combination of astute development, inspirational leadership and a superior culture had allowed so much talent to be accumulated within the $4.1 million salary cap. Now, it turns out that the most important piece in the Storm’s once enviable puzzle has been creative accounting. Secret payments totalling $1.7 million have been made or promised, including a staggering $700,000 for this season.
Shocking though the whole thing is, it is really not so shocking. A sporting team getting caught rorting the salary cap is akin to Ben Johnson getting caught with anabolic steroids in his system. As Brian Waldron, the ex-Storm CEO who masterminded the fraud, was said to have reasoned: “Everybody does it.”
One would have to be naive to think that Johnson was the only doped sprinter in that 1988 Olympic final, just as one would have to be naive to think that Melbourne has been the only club to have committed any sort of financial irregularity between 2006 and 2010. Professional sport is a ruthless game, in which the win-at-all-costs mentality prevails. Some would have you believe that all 16 teams will be the richer for having competed for this year’s premiership. In fact, it will be a case of having one winner and 15 losers. That is the reality of professional sport. That is why some will find the siren song of cutting corners or acting deviously impossible to resist.
Philosophising aside, the NRL must be commended for acting so decisively. Johnson cheated to win his gold medal, so he could not have been allowed to keep it; the Storm cheated to win their spoils, so they could not be allowed to keep them. Even if everyone does it, such calculated and repeated dishonesty cannot be accepted. Chief executive David Gallop and his board had no other option.
While the pundits and punters have generally applauded Gallop’s move to strip the disgraced club of their ill-gotten premierships, minor premierships and prizemoney, there has been much condemnation of his decision to prohibit them from picking up any points this season. Complaining that it’s too harsh, undermines the integrity of the competition and betrays the fans, they have pleaded for this measure to be overturned.
These critics are right – but only partially. When deliberating on an appropriate penalty, the game’s powerbrokers would have considered two important points: how to punish the Storm and how to protect the fans. Dealing with past sins would have been straightforward – simply confiscate all winnings from 2006-9. But dealing with present sins – the Storm competing in this year’s premiership with a team that should never have been formed – must have resulted in considerable debate. Evidently, it was concluded that punishing those presents sins and protecting the fans were mutually exclusive options. Evidently, their critics share the same view.
Yet logic suggests that it would have been possible to achieve both aims. To begin with, the NRL was right to strip the Storm of all the points they had pocketed in the first six rounds, as these were won by fraudulent means. However, the league should not have deprived them of the opportunity to pick up points in the final 20 rounds. What should have been mandated was that as long as this team that should never have been formed remained in its present state, points could not be earned. Only when their squad was back under the salary cap could they have resumed doing so – but on one condition.
Simply getting everyone to accept a combined $700,000 pay cut would have been intolerable, because that would have meant permitting a team that should never have been formed to stay together. Rather, the NRL should have ordered the Storm to shed themselves of $700,000 worth of players at their official rates. So if Joe Bloggs was officially registered as a $500,000 player but had secretly been earning $700,000, somehow getting him off the books could have only been counted as a $500,000 saving. The Storm would then have been required to offload another $200,000 of talent – and the moment that happened, they could have again competed for points. They would therefore have had an incentive to speedily clean up their mess, which would in turn have minimised the damage done to the competition’s integrity and the hurt suffered by the fans. Had such a judgement been issued by the NRL, it would have simultaneously punished the guilty and protected the innocent.
Whatever the rights and wrongs of Gallop’s response, it will have been cheered by the Melbourne Rebels, Melbourne Victory, Melbourne Heart, Melbourne Tigers and Melbourne’s nine AFL clubs. For if rugby league is on its knees, as Sport: The Australian Disease recently argued, then rugby league in Melbourne is clearly in serious peril.
Since their foundation in 1998, the Storm have recorded an unbroken series of losses. Only through the largesse of their owner, News Limited, have they remained afloat – and News has promised to sell in the next few years. If they can’t turn a profit after making four consecutive grand finals (to go with their relatively recent premiership of 1999), how can they expect to get into the black when the sporting cycle turns against them?
We can expect to hear plenty of bad news coming out of Melbourne. Players will be forced to leave for salary cap reasons. Already, sponsors ME Bank, HostPlus and Skins have withdrawn their support. The club’s limited fan base will surely contract. In other words, it appears as though we’re about to see the beginnings of a vicious cycle, in which less talent means less success, less success means less corporate and public support, less support means reduced revenue, and reduced revenue means less money to buy talent. All these problems can be overcome, or at least ignored, when you have a rich owner. But what happens when the sugar daddy walks away?
News and the NRL have promised to stick by the Storm, but it is difficult to take these guarantees seriously. News is known for its ruthlessness, not its altruism, so once it finds a buyer, there is no reason to expect that it will take any interest in its former holding. Gallop’s goodwill can’t be doubted, but where is a CEO with limited financial reserves going to find the money to keep a loss-making organisation afloat?
This extraordinary saga does not spell the death of innocence in rugby league, because that happened a long, long time ago. Nor does it spell the death of the game itself, because Melbourne is not the heart of the empire, but a mere outpost. However, nobody should be surprised if it spells the end of the Storm. If creative accounting was the secret of their success, it may also turn out to be the reason for their demise.
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Comment by Buck
In barring Melbourne from taking a competitive part in this season, the NRL has handed out a fair and reasonable punishment.
Take, for example, the Bulldogs, who cheated the salary cap to a similar level in 2002. Their breach was unveiled in the last few weeks of the regular season, and quite rightly they were docked all their points and effectively made wooden spooners for that season. Even being allowed to collect points for the remainder of the season, finals football was never possible.
Hypothetically, what if the breaches were unveiled at the midpoint of the season? Would it then be wise to strip a team of all its points and give it a fighting chance of making the eight, if it could effectively win all its remaining games?
No. Because it is not fair to base a punishment on the time of the season at which the illegal behaviour is uncovered. Melbourne have taken part in the competition as cheats, and the only fair treatment of cheats is to disqualify them from the competition. It’s sad for the fans, and it’s sad for the game, but no ‘fix’ would make a Melbourne victory on Grand Final day any less tainted by the events of the past week.
One further point, which seems to have gone unmentioned in the media, is the timing of the revelation of these allegations. Rumours have been floating around for several months now about possible breaches in Melbourne, and other clubs. At the same time, News Limited, part owner of the NRL and full owner of the Storm, have been expressing a desire to sell out of the club and out of the game. Were News’ claims a desire to distance themselves from a club they knew was on the nose? Or perhaps, were the leaks and whistleblowing at this particular point in time targeted to make the cost of kicking News out of the club (and the league) as low as possible? Either, or both options are possible, but they are merely speculation. Food for thought, though...
Comment by Nick Bendel
Sport: The Australian Disease
However, I'm confused about the possible News Ltd conspiracy theory you've raised. How does this scandal lower the costs for News of it leaving the game? I can only see down side for News. Firstly, it tarnishes its reputation, however slightly. Secondly, it lessens the value of the asset that it wants to sell.
Comment by Storm-grl
Storm 4 Life
Melbourne Storm's administrators (namely Brian Waldron, former CEO) have done the wrong thing in spending 1.7 million dollars over the salary cap over the span of 5 years, and it is right to take away their earnings of that time, as they have competed with an unbalanced team compared to the rest of the competition, but the penalties of this year's stripping of premiership points and the inability to accrue any more for the rest of the season is ludicrous.
Not only does this mean that the NRL could have a boycott from Melbourne Storm players for the rest of the season on all of their games, but it will involve massive monetary losses for the NRL.
If the Melbourne Storm players have nothing to play for for the rest of the season - if there are no points involved, there is no way that there is any chance of getting into finals, therefore their primary motivation has been removed. It would be easy for Melbourne Storm to not turn up to any games, therefore wasting people's time, and reducing their fan base in Victoria.
Which brings me onto my second point. If Melbourne Storm has to fold, the NRL lose any dominance they had in Victoria. The only reason Melbourne Storm was created in the first place was for the NRL to make money out of Victoria, because they were finding that heaps of people were coming out to watch State of Origin. The NRL didn't expect Melbourne Storm to be so successful though, and as a result, David Gallop has always disapproved of the Storm dominating what is essentially a NSW competition. He also doesn't like the dominance the Queensland teams have over the competition, but his dislike for Melbourne is obvious.
Yet, why would he be angry, when the NRL is making profits out of it? With the construction of AAMI Park, the NRL is cementing it's support of a Melbourne team, and already international games have been scheduled there, including an Australia Vs. England game in late October. But a dominating Melbourne team is the last thing that Gallop wants. Because they are dominating.
Gallop's decision also implied that other teams would be investigated. Which is fair, because Melbourne Storm cannot be singled out in this. Other teams are most likely breaching the salary cap (which, by the way, is too low anyway, and most clubs would agree with that), and should be properly investigated and given the same penalties. Which means that potentially, you could have half of the teams playing in the NRL this season sitting on 0 points, therefore making practically no competition amongst the teams.
But that is IF the investigation are carried out. As stated above, David Gallop doesn't like the Storm, and he will most likely not investigate any other teams, therefore labeling Storm as the 'only' cheating club.
And why shouldn't Melbourne Storm be allowed to rejoin the competition for points if they give salary cuts to players to keep under the salary cap? They're under the salary cap if they do so, and that is all that should matter. There is no rule stating that you cannot field a strong team that is under the salary cap. In fact, it is encouraged. If they have to let go of a few players, it would be to get back under the salary cap, and for nothing else. Because being under the 4.1 million dollars is all that matters in this case. The only thing Melbourne Storm has done is go over the salary cap; they cannot be criticized for anything else they have done, because that is all that they have done wrong.
In the case that players are let go, the NRL's salary cap cannot allow any clubs to purchase them. Because if they did, they would be over the salary cap. Which means, that the only place for these top grade players to go would be to England (where plenty have gone before), or union (in fact, today, Billy Slater is rumoured to have been offered $1 million a season to play for the new Melbourne Rebels side). Which is a loss for the NRL, because these players would not be able to play representative football for their State of Origin or their country.
The salary cap is a complicated thing; it not only involves a primary salary on a yearly basis, it also covers representative football, third party agreements, and any other profiting that is included. Which raises the question: Would Cameron Smith's $45,000 contract with Fox Sports be included under the salary cap?
Some say yes, some say no.
Yes, because both Fox Sports and Melbourne Storm are owned by News Limited, who most likely would have had some hand in agreeing Smith's contract.
But no, because Smith is working for his contract, and it should not be considered as a part of the salary cap because it is under HIS name, not his club. It is separate, and should be treated so under the salary cap.
Before I end this 'comment,' (more like rant, but anyway), I would like to point out that I am 14 years old, I live in country Victoria, and may be only one of 10 people in my 700 strong school that support not only Melbourne Storm, but any form of rugby. That is how dominant AFL is in this state, and if the NRL were to be able to puncture it's stronghold, it would make incredible profits.
Since this salary cap rorting story broke out, I have defended my team every day, and I fully support the players and coaching staff; it is the few administrative staff that have done wrong. These people have been accordingly fired, and the Melbourne Storm should not be accused as cheats; the individuals should.
I rest my case.
Comment by Nick Bendel
Sport: The Australian Disease
However, I must challenge you on one point. If you agree that “it is right to take away [Melbourne’s] earnings” from the last five years “as they have competed with an unbalanced team compared to the rest of the competition”, why do you then say that “the penalties of this year's stripping of premiership points and the inability to accrue any more for the rest of the season is ludicrous”?
After all, before the scandal broke, Melbourne played six rounds with the same “unbalanced team”. And they have just beaten Auckland with that same “unbalanced team”. Surely, at the very least, any points earned while they are over the salary cap must be discarded?
Nevertheless, you then go on to say that Melbourne should be able to earn points if/when they get under the salary cap. I can see the logic in that – even though I disagree with such a position.
As mentioned in my article, I don’t think that it is fair to allow this “unbalanced team” to stay together. Yes, if they took a collective $700,000 pay cut, they would be under the salary cap. However, it is not fair to give the individuals in this “unbalanced team” the chance to do this and then carry on as if nothing had happened, because they should never have been allowed to come together in the first place. If the rules had been followed, this extraordinary collection of talent would never have been able to unite. Consequently, any punishment must ensure that this extraordinary collection of talent is forced to disunite.
Are you with me? Or will we have to agree to disagree?
Comment by Buck
a) News knew of the issue and were trying to get out of the storm; and/or
b) someone outside of News, who wants them out of the game or wants to buy into the storm, leaked the information to make it more likely News leave and less costly to buy them out.
And as I said both could be true.
Comment by The Dogboy
For the good of the game, I believe Melbourne must have the chance to gather points. Whether they sell players or stand them down, once the entire playing roster (non of this rotation rorting) is under the cap, then let them earn points.
However, your earlier point concerning the Storm making consecutive losses must be considered - is this a club worth saving? Do the NRL make that much more in TV revenue to counter the losses that have to be supported?
Also a request for the author - any posts related to football would be welcome, you get tired of reading from Cockerill and Micallef.
Comment by Nick Bendel
Sport: The Australian Disease
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