Melbourne Storm salary cap breach
Encyclopedia
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 premiership
s), 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.
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 declaration
s, 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.
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. The Storm were also ordered to cut their payroll by $1,012,500 to meet the 2011 salary cap by December 31; 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.
's North Melbourne Football Club
, was said to have been the whistleblower on the situation, a claim he denies.
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.
newspaper as "The biggest scandal in Australian sports history". 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.
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.
Several sponsors, most notably ME Bank, Hostplus and Skins withdrew support from the club while Harvey Norman
, Jayco
, Suzuki
and KooGa
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 .
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.
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.
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.
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".
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.
National Rugby League
The National Rugby League is the top league of professional rugby league football clubs in Australasia. The NRL's main competition, called the Telstra Premiership , is contested by sixteen teams, fifteen of which are based in Australia with one based in New Zealand...
's strictly enforced salary cap
Salary cap
In professional sports, a salary cap is a cartel agreement between teams that places a limit on the amount of money that can be spent on player salaries. The limit exists as a per-player limit or a total limit for the team's roster, or both...
by the Melbourne Storm
Melbourne Storm
The Melbourne Storm are an Australian professional rugby league club based in the city of Melbourne. They are the first fully professional rugby league team based in the Australian rules football-dominated state of Victoria....
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 premiership
Minor premiership
A minor premiership is the name of the title given to the team which finishes a sporting competition first in the league standings after the regular season but prior to commencement of the playoffs....
s), and sentencing them to finish the 2010 NRL season
2010 NRL season
The 2010 NRL season was the 103rd season of professional rugby league football club competition in Australia, and the thirteenth run by the National Rugby League. The season commenced on 12 March and ended with the Grand Final, played on 3 October at ANZ Stadium...
(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
2010 World Club Challenge
-Teams:-Match details:-First half:Leeds almost scored early in the first half when Brent Webb ran over but he was held up by Luke MacDougall on the last tackle. Soon after they posted the first points with a penalty goal to captain Kevin Sinfield. Soon after Melbourne drew level with a penalty goal...
title removed, more than one year since the initial penalties were first announced.
The Investigation
Following claims by a whistleblowerWhistleblower
A whistleblower is a person who tells the public or someone in authority about alleged dishonest or illegal activities occurring in a government department, a public or private organization, or a company...
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 declaration
Statutory declaration
A statutory declaration is a legal document defined under the law of certain Commonwealth nations. It is similar to a statement made under oath, however, it is not sworn....
s, 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
Victoria Police
Victoria Police is the primary law enforcement agency of Victoria, Australia. , the Victoria Police has over 12,190 sworn members, along with over 400 recruits, reservists and Protective Service Officers, and over 2,900 civilian staff across 393 police stations.-Early history:The Victoria Police...
began preliminary investigations on 23 April, and the Australian Securities and Investments Commission
Australian Securities and Investments Commission
The Australian Securities & Investments Commission is an independent Australian government body that acts as Australia's corporate regulator...
also made preliminary investigations and indicated an interest in investigating breaches of the Corporations Act
Corporations Act 2001
The Corporations Act 2001 , sometimes referred to just as the Corporations Act , is an act of the Commonwealth of Australia that sets out the laws dealing with business entities in Australia at federal and interstate level...
. 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.
As a result NRL Chief Executive David Gallop
David Gallop
David Gallop is an Australian sports administrator who has been the Chief Executive Officer of the National Rugby League since February 2002. He has also been the Secretary of the Rugby League International Federation since its inception in 1998.-Early life:...
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
World Club Challenge
The World Club Challenge is an annual rugby league football match held between the champions of the Australasian National Rugby League and the European Super League competitions to determine the world's best rugby league club...
which was re-distributed to the Leeds Rhinos
Leeds Rhinos
Leeds Rhinos is an English professional rugby league football club based in Leeds, West Yorkshire. The club won the 2011 Super League and became the most successful club in the Super League era, beating St Helens 32-16 on 8th October 2011. Formed in 1890, Leeds competes in Europe's Super League...
, 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. The Storm were also ordered to cut their payroll by $1,012,500 to meet the 2011 salary cap by December 31; 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
Greg Inglis
Greg Inglis is an Australian professional rugby league player for the South Sydney Rabbitohs. A Queensland State of Origin and Australian international representative outside back, Inglis joined the Rabbitohs in 2011 after much controversy.Inglis is a versatile back, having played in several...
, Billy Slater
Billy Slater
Billy Slater is an Australian professional rugby league footballer for the Melbourne Storm of the National Rugby League . An Australian international and Queensland State of Origin representative fullback, he has played his whole NRL career to date at Melbourne...
, and Cameron Smith
Cameron Smith
Cameron Smith is an Australian professional rugby league footballer who currently captains the Melbourne Storm of the National Rugby League...
) 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.
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 AFLAustralian Football League
The Australian Football League is both the governing body and the major professional competition in the sport of Australian rules football...
's North Melbourne Football Club
North Melbourne Football Club
The North Melbourne Football Club, nicknamed The Kangaroos, is the fourth oldest Australian rules football club in the Australian Football League and is one of the oldest sporting clubs in Australia and the world...
, was said to have been the whistleblower on the situation, a claim he denies.
On 23 April 2010 Brian Waldron resigned from his position of chief executive of the Melbourne Rebels
Melbourne Rebels
The Melbourne Rebels are a professional rugby union team based in Melbourne, Victoria, Australia. They made their debut in SANZAR's Super Rugby tournament in 2011. They are the first privately owned professional rugby union team in Australia...
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.
Reaction
The news was referred to by The AgeThe Age
The Age is a daily broadsheet newspaper, which has been published in Melbourne, Australia since 1854. Owned and published by Fairfax Media, The Age primarily serves Victoria, but is also available for purchase in Tasmania, the Australian Capital Territory and border regions of South Australia and...
newspaper as "The biggest scandal in Australian sports history". 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.
Prime Minister Julia Gillard
Julia Gillard
Julia Eileen Gillard is the 27th and current Prime Minister of Australia, in office since June 2010.Gillard was born in Barry, Vale of Glamorgan, Wales and migrated with her family to Adelaide, Australia in 1966, attending Mitcham Demonstration School and Unley High School. In 1982 Gillard moved...
, 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.
Several sponsors, most notably ME Bank, Hostplus and Skins withdrew support from the club while Harvey Norman
Harvey Norman
Harvey Norman is a large Australian-based retailer of electrical, computer, furniture, entertainment and bedding goods. It is effectively a franchise and the main brand owned by Harvey Norman Holdings Limited...
, Jayco
Jayco, Inc
Jayco, Inc. is a manufacturer of recreational vehicles. They make fold-down travel trailers, "fifth-wheelers", truck campers and motorhomes.-Corporate history:...
, Suzuki
Suzuki
is a Japanese multinational corporation headquartered in Hamamatsu, Japan that specializes in manufacturing compact automobiles and 4x4 vehicles, a full range of motorcycles, all-terrain vehicles , outboard marine engines, wheelchairs and a variety of other small internal combustion engines...
and KooGa
KooGa
KooGa is an Australia-based rugby apparel company. It was established in December 1999. The company is headquartered in Labrador on the Gold Coast of Queensland, with other Australian offices as well as a UK office in Rochdale, Greater Manchester....
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 .
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.
Melbourne sports industry experts John Poulakakis (Chief commercial officer, Melbourne F.C.) and Martin Hirons (Melbourne sport business consultant) were reported in The Age
The Age
The Age is a daily broadsheet newspaper, which has been published in Melbourne, Australia since 1854. Owned and published by Fairfax Media, The Age primarily serves Victoria, but is also available for purchase in Tasmania, the Australian Capital Territory and border regions of South Australia and...
, 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.
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.
Aftermath
The matter was referred to ASIC and the Victoria Police on 15 July. The matter was also referred to the Australian Tax Office and the Victorian State Revenue Office the next day.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".
On 11 May 2011, the National Rugby League
National Rugby League
The National Rugby League is the top league of professional rugby league football clubs in Australasia. The NRL's main competition, called the Telstra Premiership , is contested by sixteen teams, fifteen of which are based in Australia with one based in New Zealand...
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.
See also
- Canterbury-Bankstown Bulldogs salary cap breachCanterbury-Bankstown Bulldogs salary cap breachThe Canterbury-Bankstown Bulldogs salary cap breach was the breach of the National Rugby League's strictly-enforced salary cap by the Canterbury-Bankstown Bulldogs committed during the National Rugby League's 2002 season...
- Carlton Football Club salary cap breachCarlton Football Club salary cap breachThe Carlton Football Club salary cap breach was the breach of the Australian Football League's salary cap by the Carlton Football Club, primarily in the late 1990s and early 2000s...