Melbourne Storm’s actions leave News Limited dismayed!

Editorial comment:

Only a few hours ago did news break of one of the greatest sporting scandals in living memory. The Melbourne Storm’s $1.7 million salary cap breaches over the last five years has left the NRL with another scandal and significant damage to the brand in Melbourne, which may be irreparable. There was no warning of today’s developments apart from a few large bets laid on the Storm this morning with TABsportsbet for the Storm to finish last on the NRL ladder this season.

Whilst the game will suffer, what about the ramifications for media giant News Limited, the Australian arm of News Corporation and sole owner of the Melbourne Storm and 50% owner of the National Rugby League? The Herald Sun, a News Limited newspaper, is also a sponsor of the Melbourne Storm.

There has long been doubts over News Limited’s involvement in the NRL since the Super League war. Their involvement as a NRL club owner and 50% owner of the the competition itself, plus a broadcast rights owner through Fox Sports (News Limited have a 50% stake through their50% investment in Fox Sport’s parent Premier Media Group) have led many to comment on a possible conflict of interest.

However today’s event may lead to the conclusion that News Limited’s wide involvement in the NRL is warranted.

John Hartigan, chairman and chief executive of News Limited, said the company had referred the Storm’s breaches to police and installed respected rugby league administrator Frank Stanton as caretaker chief executive of the Storm. News Limited have also appointed forensic accountants Deloitte to go through the Storm’s books.

2GB’s Ray Hadley on Seven’s Matty Johns Show said that News Corporation is the “biggest media organisation in the world.” News Limited and its parent News Corporation are clearly acting fast to protect their reputation.

“This club has had a couple of rats in its ranks,” Hartigan said in response to the breaches and also said that News Limited was unaware of the deception.

Ray Hadley further said on Seven that “the future of Melbourne is now under a grave, grave doubt…the fans will walk away.”

The action of News Limited and the NRL is right. This firm action should leave both organisations’ reputation in tact.

Nonetheless, it will be interesting to see tomorrow’s response from News Limited dailies to the events and if Rupert Murdoch will make a comment or leave it to News Limited Chief John Hartigan.

This breaking news has and will continue to rock the foundations of rugby league in Australia and could be the beginning of the end for Melbourne.

Whichever way you look at it there is more than likely to be sponsorship backlash against Melbourne. They cannot earn any premiership points this year.

This firm action by the NRL will no doubt have an effect to News Limited’s bottom line as the Storm’s punishment will most likely see games attendances fall, sponsors withdrawing and maybe even a reduction in TV audiences for Storm games covered by Fox Sports and the Nine Network.

Despite this as Ray Hadley said on Seven, “great credit [needs] to [go to] John Hartigan for standing up there and copping it on the chin today to say the club that his company owns are liars, cheats and thieves. A defining moment in the game.”

The next few days will be very interesting the see the fallout in the media and what, if any impact it will have on one of the largest media organisations in Australia and the world, News Corporation.

Official media release from NRL (see below)

The National Rugby League has today stripped the Melbourne Storm of the 2007 and 2009 Telstra Premierships, the Minor Premierships of 2006-8 and of its 2010 competition points after confirming a series of salary cap breaches amounting to at least $1.7million over five years.

The club will lose all competition points earned to date in 2010 and also the right to accumulate points going forward in 2010 (competition tables will record wins and losses but the club will not be awarded competition points on the basis of any wins). These measures are effective as of today.

The club has furthermore been fined $500,000 and will be forced to return $1.1million in prize-money with the prize-money being distributed evenly among the other fifteen clubs.

Individual awards by players will continue to be recognised but records will be adjusted to show that the Premiership is not recognised even though the result cannot be overturned. Neither Manly nor Parramatta will assume the Premiership titles in their respective years.

The Storm’s Chairman and Chief Executive met with the NRL in Sydney today to confirm the extent of the breaches uncovered by NRL Salary Cap Auditor Ian Schubert and his audit team.

The investigations have revealed the Storm maintained a dual contract system and the club has today confirmed that side letters promising extra payments were stored in a secret file at the home of the Chief Executive.

The accounts were structured in such a way that it would appear the commitments were not apparent to either the Melbourne Storm Board or its owners.

The NRL has uncovered breaches estimated to be in excess of $1.7million over five years, around $400,000 in 2009 and with a projected breach of $700,000 in 2010.

While the amount itself is cause for concern, the most damning indictment is the systematic attempt by persons within the club to conceal payments from the Salary Cap auditor and, it would now seem certain from the club’s Board and from its owners, on an ongoing basis, Mr Gallop said.

It was through this system that they were able to attract and retain some of the biggest names in Rugby League.

In doing so they have let down the game, the players and the fans of the Melbourne Storm.

Clearly there were some individuals who knew what was going on and perhaps many who did not.

By nature, that means innocent parties will suffer as a result of this punishment but the persons responsible are those who constructed the scheme and anyone who knowingly signed a false statutory declaration to deceive the game.

It would be unfair now on the players and fans of every other club in the competition to allow the Storm to enter this year’s finals series or to retain the titles they won.

As a game we will do all we can to restore the faith of each of those parties but there is no alternative now but to deal with the situation that has been so deliberately engineered.

As was the case with Canterbury after 2002, the only other instance in which we have seen such an elaborate and contrived set of accounts, there is the chance for the club to begin a rebuilding process with the fans and the game by the way it conducts itself in the weeks and months ahead.

A significant step in that process has been the way the Melbourne Board has reacted to the information the Salary Cap team tabled this week.

Rather than look to conceal the activities, the Board has cooperated fully and we have been informed that the club’s owners, News Limited, have now ordered a full forensic examination of all club accounts.

It should be pointed out that, as owners of the club, News Limited has only been made aware of the investigation in recent days.

Ian Schubert and his assistant Jamie Loste Brown have been collecting information in relation to this process for some time and their commitment to that process deserves considerable respect.

Salary cap investigation is among the most difficult and in many ways least rewarding roles in the game but, despite the thoughts of some critics, there is universal acceptance of the importance of the cap and of the contribution it has made to the most successful era in the games history.

In truth, this issue is not so much about the Salary Cap but the simple reality of cheating the rules as they stand at any time. Everyone knew the rules, particularly after 2002.

This investigation has relied on detailed reviews of accounts as well as evidence from informants.

It is a reminder to everyone who wishes to test the rules that there is every likelihood the truth will emerge in time and that the consequences will be severe at that point.

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