Melbourne Storm salary cap breach

The Melbourne Storm salary cap breach was a major breach of the National Rugby League's strictly enforced salary cap by the Melbourne Storm club over a period of five years. The discovery of these breaches In 2010 by the NRL resulted in it stripping the Storm of all honours achieved as a team since 2006 (including the 2007 and 2009 premierships and 2006, 2007 and 2009 minor premierships), and sentencing them to finish the 2010 NRL season (of which 75% was still to be played) in last place. In addition to being fined for $1.689 million, Melbourne also had its 2010 World Club Challenge title removed, more than one year since the initial penalties were first announced.

The Investigation

Following claims by a whistleblower that the club was keeping a second set of books, the NRL conducted an investigation in late 2009 and early 2010. After initially denying the claims, Storm officials confessed on 22 April 2010 that the club had committed serious and systematic breaches of the salary cap for the last five years by running a well-organized dual contract and bookkeeping system which left the NRL ignorant of $3.78 million in payments made to players outside of the salary cap, including $303,000 in 2006, $459,000 in 2007, $957,000 in 2008, $1.021 million in 2009 and $1.04 million in 2010.

As a club's compliance with the NRL salary cap is supported by statutory declarations, the club's owners requested that fraud and perjury charges be laid against those responsible and stated that any person who knew of the breach would be expelled from the club. The Victorian Fraud Squad began preliminary investigations on 23 April, and the Australian Securities and Investments Commission also made preliminary investigations and indicated an interest in investigating breaches of the Corporations Act. Storm executives had arranged for inflated invoices to be submitted to hide the payments to players. This involved submitting invoices of up to $20,000 above the real value of the services rendered with this amount paid directly to players by the third party suppliers, although there was no suggestion that the suppliers were involved in submitting the inflated invoices.^[1][2]

As a result NRL Chief Executive David Gallop stripped the Melbourne Storm of their 2007 and 2009 premierships and their 2006, 2007 and 2008 minor premierships, fined them an Australian sporting record $1,689,000 ($1.1 million in NRL prize money which was re-distributed equally between the remaining 15 clubs, $89,000 in prize money from the World Club Challenge which was re-distributed to the Leeds Rhinos, and the maximum of $500,000 for breaching the salary cap), deducted all eight premiership points they had already received in the 2010 season and barred them from receiving premiership points for the rest of the 2010 season.

The Storm initially accepted this decision without question but later appealed the loss of their two premierships and premiership points for the 2010 season. The court action was later dropped with the Storm paying the NRL's legal costs.^[3] The Storm were also ordered to cut their payroll by $1,012,500 to meet the 2011 salary cap by December 31;^[4][5] failure to do so will result in the club being suspended for the 2011 NRL season.

On 23 April the NRL seized a secret dossier hidden in the home of acting chief executive Matt Hanson. The dossier contains letters of offer to three of the Storm's star players (Greg Inglis, Billy Slater, and Cameron Smith) and another unnamed player guaranteeing illegal payments in the form of goods from third parties. For one player with a $400,000 contract lodged with the NRL, the letter of offer was valued at $950,000, and contained a $20,000 gift voucher for a national retailer and a $30,000 boat. Other offers included a new car for a player’s partner and $30,000 in home renovations. The offers together amounted to $700,000 of which the four players had already received $400,000. While Waldron had signed all the letters of offer only Inglis and Slater had signed theirs, albeit the letters were written in a way that the players may not have realised the extra payments were outside the cap.^[1][6]

Suspects

Former CEO Brian Waldron, suspended chief executive officer and former chief financial officer Matt Hanson and current chief financial officer Paul Gregory are alleged to have been the main culprits behind the breaches. Former chief financial officer Cameron Vale, who is now with the AFL's North Melbourne Football Club, was said to have been the whistleblower on the situation, a claim he denies.^[7]

On 23 April 2010 Brian Waldron resigned from his position of chief executive of the Melbourne Rebels rugby union club after just six weeks of taking over the expansion team entering the new Super 15 competition. The AFL investigated, and cleared, St Kilda Football Club's players' payments during Waldron's three-year time at the club alongside now-former Storm CEO Matt Hanson.^[8]

Reaction

The news was referred to by The Age newspaper as "The biggest scandal in Australian sports history".^[9] Club supporters had mixed reactions and feelings towards the situation as the club was left with "dishonour and shame". No club had ever been stripped of a competition title in 102 years of professional rugby league in Australia. Many fans dumped their jerseys and other memorabilia at the team's Carlton headquarters on hearing about the incident, while others simply broke into tears; there was a feeling that former CEO Brian Waldron was to blame and not the players.^[10]

Prime Minister Julia Gillard, who is the club's number one female ticket holder, said that supporters would be shocked and saddened, but hoped that they would stand by the club as it rebuilt. Storm chairman Dr Rob Moodie apologised to the fans, many of whom publicly removed their Storm colours and dumped them in disgust.^[11]

Several sponsors, most notably ME Bank, Hostplus and Skins withdrew support from the club^[12] while Harvey Norman,^[13] Jayco,^[14] Suzuki^[14] and KooGa ^[14] continued their support, with their logos featuring prominently in a hastily reconfigured jersey. In contrast to those sponsors who distanced themselves, Jayco and Suzuki increased their existing support to compensate for the losses of other sponsors .^[15]

We are devastated. This is the lowest day for our club. We have betrayed the trust of the Australian people. We haven't played by the rules.

—Dr Rob Moodie, The Courier Mail

Betting agencies received an "old fashioned betting sting" as some punters found out about the salary cap allegations before they became common knowledge. At the time the Storm were at $4.20 favourites to win the title at the time and $251 to win the wooden spoon. TAB Sportsbet has claimed it will be due to pay out at least $500,000 before betting was suspended.^[16]

Melbourne sports industry experts John Poulakakis (Chief commercial officer, Melbourne F.C.) and Martin Hirons (Melbourne sport business consultant) were reported in The Age, saying it could take little more than four weeks to two months to recover the $2 million it is believed to have already lost in sponsorship.^[17]

By 30 April the Age was reporting a surge in club membership of 700 over the five days since the scandal erupted, with members who had previously revoked their memberships contacting the club to have them reinstated.^[18]

Aftermath

The matter was referred to ASIC and the Victoria Police on 15 July.^[19] The matter was also referred to the Australian Tax Office and the Victorian State Revenue Office the next day.^[20]

We had some rats in our ranks. A small group of senior managers at the club orchestrated and concealed the extra payments. They are Brian Waldron, Matt Hanson, Paul Gregory, Peter O'Sullivan and Cameron Vale.

—John Hartigan, chairman and CEO of News Limited, the owner of the Melbourne Storm, The Courier Mail

On 6 May 2011 the Victoria Police concluded its fraud investigation into the matter saying that "It can no longer expend further resources on this matter" and that "No fraud has been committed".^[21]

On 11 May 2011, the National Rugby League released its report on the breaches. The report did not detail any new breaches or any new penalties, however, it was recommended that Melbourne's 2010 World Club challenge be revoked. It also confirmed the guilty parties and vindicated all players and coaches.^[22]

See also

• Canterbury-Bankstown Bulldogs salary cap breach
• Carlton Football Club salary cap breach

References

1. ^ ^{a b} Kent, Paul (24 April 2010). "The Dossier that ruined a sporting giant". The Advertiser: p. 1. 
2. ^ Tabakoff, Nick (24 April 2010). "Taxman has all teams in sight". The Advertiser: p. 7. 
3. ^ Storm legal action collapses
4. ^ NRL Fixtures – NRL Draw – NRL.com
5. ^ Storm ordered to cut over $1m from payroll
6. ^ O’Halloran, Jess (25 April 2010). "New Storm Brewing". The Sunday mail: p. 15. 
7. ^ Honeysett, Stuart (23 April 2010). "Shocking end to the Melbourne Storm era". The Australian. http://www.theaustralian.com.au/news/sport/shocking-end-to-the-melbourne-storm-era/story-e6frg7mf-1225857195771. Retrieved 22 April 2010. 
8. ^ Rakic, Josh (23 April 2010). "Melbourne Storm salary cap scandal". The Sydney Morning Herald. http://www.smh.com.au/rugby-union/union-news/rebels-act-swiftly-in-asking-waldron-to-clear-his-desk-20100422-tg62.html. Retrieved 23 April 2010. 
9. ^ Munro, Ian (23 April 2010). "Melbourne Storm stripped of everything". The Age. http://www.theage.com.au/rugby-league/league-news/melbourne-storm-stripped-of-everything-20100422-tfy6.html. Retrieved 23 April 2010. 
10. ^ Firkin, Katherine (23 April 2010). "Fans are feeling the pain of Melbourne Storm's penalty". Herald Sun. http://www.heraldsun.com.au/sport/fans-are-feeling-the-pain-of-melbourne-storms-penalty/story-e6frf9if-1225857176581. Retrieved 23 April 2010. 
11. ^ DeKroo, Karl (22 April 2010). "How Melbourne Storm bought its way to the top with salary cap rort". The Courier Mail. http://www.couriermail.com.au/sport/nrl/how-melbourne-storm-bought-its-way-to-top-with-salary-cap-rort/story-e6frep66-1225857165083. Retrieved 22 April 2010. 
12. ^ "Storm stripped of 2 NRL premierships". Television New Zealand. AAP. 22 April 2010. http://tvnz.co.nz/rugby-league-news/storm-stripped-2-nrl-premierships-3484867. Retrieved 23 October 2011. 
13. ^ "Explosive files detailing secret payments to Melbourne Storm players exposed". Heraldsun website (www.heraldsun.com.au). http://www.heraldsun.com.au/sport/nrl/explosive-files-detailing-secret-payments-to-melbourne-storm-players-exposed/story-e6frfgbo-1225857632667. Retrieved 9 May 2010. 
14. ^ ^{a b c} "Thunderstruck- News Ltd shelves plans to sell Storm". Brisbane Times. http://www.brisbanetimes.com.au/rugby-league/league-news/thunderstruck--news-ltd-shelves-plans-to-sell-storm-20100423-tj5k.html. Retrieved 9 May 2010. 
15. ^ "Storm clearing in proud Melbourne". Foxtel website <foxtel.com.au>. http://www.foxsports.com.au/story/0,20797,27036013-5018866,00.html?from=public_rss. Retrieved 9 May 2010. 
16. ^ Hamilton, Adam (23 April 2010). "Spoon-fed punters skin bookmakers". The Herald Sun. http://www.heraldsun.com.au/sport/spoon-fed-punters-skin-bookmakers/story-e6frf9if-1225857205514. Retrieved 22 April 2010. 
17. ^ "Sponsorship deals tipped to come Storming back". The Age <www.theage.com.au>. 
18. ^ "Melbourne Storm membership surge". The Age. 29 April 2010. http://news.theage.com.au/breaking-news-sport/melbourne-storm-membership-surge-20100429-tw8d.html. Retrieved 9 May 2010. 
19. ^ Storm salary cap rort report handed to police
20. ^ "Melbourne Storm salary breaches worse than first thought". ABC. 15 July 2010. http://www.abc.net.au/pm/content/2010/s2954852.htm. Retrieved 23 July 2010. 
21. ^ http://www.heraldsun.com.au/sport/melbourne-storm-executives-wont-be-charged-with-fraud-related-offences/story-e6frf9if-1226051106194
22. ^ http://www.nrl.com/final-report-storm-salary-cap-investigation/tabid/10874/newsid/62723/default.aspx