Glaws CE insists Saracens should feel 'full force of points deduction'

[Rossm]

Yes, the salary cap rears it's ugly head again. Stephen Vaughan Glaws Chief Executive speaks in the Daily Telegraph. Is it coincidental that the cherry and whites are at Allianz Park this weekend in the playoffs?

Gloucester chief executive Stephen Vaughan warned Saracens will face the full force of points deductions if they have breached Premiership Rugby’s salary cap after being let off the hook four years ago.

Premiership Rugby last month announced that Saracens had not disclosed details of all the investment arrangements between owner Nigel Wray and a number of their leading players, who include Owen Farrell, Maro Itoje and the Vunipola brothers. The Premiership salary cap is currently £7 million, excluding marquee players and academy credits. The maximum punishment for a breach is a 35-point deduction.

Saracens insist they comply with all Premiership regulations while Wray has defended starting business relationships with his players by arguing that investments can diminish as well as increase. That reasoning sits uncomfortably with many Premiership chief executives, including Vaughan who believes Wray’s investments distort the level playing field that the salary cap is supposed to provide. 

“My own opinion on it is from what I know – and I don’t have the intricate details – is that anything that is deemed as a playing inducement to retain a player at a club is morally incorrect,” Vaughan told The Daily Telegraph. “It should sit within the salary cap. If financial inducements have been made, whether to cofound a business or a property partnership, I have an issue with that. That has effectively kept that player at that club. That player will receive benefit in kind in one way, shape or another.

“If Saracens have been clever and found something that is unpunishable then full credit to them, but all anyone asks for is a level playing field and if that is the case then all clubs should have the opportunity to do it or they should be told not to do it. If Saracens have been found to financially inducing players to remain at their club then the full force of points deductions should be administered.”
Saracens, who face Gloucester in the Premiership semi-finals on Saturday, are aiming to complete a second domestic and European double within thee years. Rival clubs have long wondered how they can afford to maintain a squad of 28 internationally capped players and it is widely known that Saracens were previously found in breach of the salary cap in 2015. Yet the breach was never made public after a majority of Premiership team owners effectively agreed to sweep the matter under the carpet, perhaps fearing the discovery of skeletons of their own.

Gloucester were among the band of clubs who fought that decision, but Vaughan is adamant there is now a “categoric” collective appetite to punish any club found to have infringed the salary cap. “I can guarantee you that,” Vaughan said. “I was there then and I am here now. I was involved in a lot of those conversations. I will say there were a number of clubs, Gloucester included, who were extremely vociferous at the time that any misdemeanours were dealt with in the proper way and communicated to the wider world.

“The teams back then were guilty….I can’t comment on what happened behind closed doors but Gloucester were very keen that things should be done out in the open and it wasn’t. I guarantee you now there has been a dramatic shift. 100 per cent there is appetite for punishing any club that has cheated. There is not a club that isn’t on board with that. This is not a witch-hunt by the way, this if any club has done this. We cannot allow the same thing to happen for the sake of the game and for the sake of supporters.”

While Saracens are believed to have come to a private arrangement with the other clubs for their 2015 transgression, Vaughan believes the real deterrent believes in the pubic stigma of cheating rather than any fine or even a points deduction. “I feel that is the bigger punishment in a way,” Vaughan said. “If a club is found to be cheating, the effect it would have on their sponsorships, partnerships, supporters is almost worse than the points deduction or fines. Certain clubs are owned by extremely wealthy men and fining them a few hundred thousand pounds won’t even make a dent. It is everything else that goes around it.”

[wasps]

Good on him

But I disagree with the last paragraph.
The stigma of cheating didn't seem to affect Harlequins fan base too much

[TheTameWasp]

If they had a 35 point reduction, they would still be above Wasps on games won

[RBB]

Nothing will happen to the EAs in terms of punishment for this season, champions of Europe, and likely winners of the GP. The RFU  / EPL will be admitting that a great team has won the highest honours by cheating and operating in a manner that is against the principles of the game we all love. I suspect some lame attempt will be made to close the loophole (which it clearly is) and Saracens will be off the hook for this season.

However what is does mean is that they are likely to be above the cap for next season and will have to jettison some of their enormous talent pool, that would mean prompt action from the governing body, which I doubt will happen, so we may not see anything till two seasons away.

Assuming action is taken and promptly, then if I was a DoR I would be watching with interest to see what transpires as there may be some talent out there, that couldn't previously considered.

Not holding my breath.

[Marlow Nick]

My prediction ... It will be judged that Saracens did not breach the cap hence no punishment then the loophole will be closed and the cap raised to £10 million thus allowing Saracens to continue unchanged and yet again giving an unfair advantage to the minority of clubs that could afford to spend that much on salaries - that's what happened last time and depressingly that's what I think will happen again

[BG]

I'm not sure the Salary Cap will face being raised. This is a PRL rule and as such it needs to be agreed by all (or possibly a majority) clubs. I'm guessing 80% of the clubs are already struggling to get to the £7m plus 2 marquee signings cap level.

Sarries, Bath and Bristol could quite easily use up a cap of £15m probably.

I hope other clubs feel the same as the Glos CEO. I think Wasps were 1 of 3 clubs that wanted the previous investigation making public, so they probably have similar views now.

[Neils]

We have not changed owner so I can't see Derek's view being any different - if not stronger.

[mike909]

For those interested in the detail

https://www.lawinsport.com/topics/sports/rugby/item/a-guide-to-premiership-rugby-s-salary-cap-regulations-2018-19-what-happens-if-there-is-a-breach?category_id=154

From the article by a QC - my bold....

The definition of “Salary” is very wide ranging and includes, purely by way of example, salary, bonuses (including match, win and year-end), certain insurance or assurance premiums, national insurance, accommodation costs, holiday costs, child support or maintenance payments, certain loans, pension contributions (other than certain statutory obligations), payments in connection with promotional, media or endorsement work, signing-on fees, certain payments in kind, payments for off-field activities for the club and agents fees.

I'd guess Sarries might be in a bit of do-do's if the arrangement is defined as accommodation?

[BG]

If a player does some off season promo work then that will be part of his salary, the pertinent question is whether its tied back to his main employer (club) or whether that player is earning that from his own efforts not tied to the club.

I thought the main question was about the companies that were set up and the initial capital injection to start that company. If Wray injected £200k into a new company where a player was a director.. that player then draws down on the bank balance by taking dividends from that company.. but that that would effectively constitute payment directly from Wray.

[Tervueren]

Don't you have to make profit to pay a dividend? In that case it might be seen that the dividend is earning from an unrelated business, so long as it is not clearly a money funneling scheme.

[mike909]

If a player does some off season promo work then that will be part of his salary, the pertinent question is whether its tied back to his main employer (club) or whether that player is earning that from his own efforts not tied to the club.

I thought the main question was about the companies that were set up and the initial capital injection to start that company. If Wray injected £200k into a new company where a player was a director.. that player then draws down on the bank balance by taking dividends from that company.. but that that would effectively constitute payment directly from Wray.

I believe from my accountant friends that if any such financial advantage is only available to those who are contracted to a certain club, then, in terms of taxation/IR it would be considered salary/earnings. If only Sarries players are being offered Directorships with an initial capital injection - then that is earnings tied to the club (for me) and ought to count towards the cap - otherwise what is the point?

If I can pay my key player £100k and an offer of £500k (say) as a company investment, then only the most cynical would suggest that investment ought to lie outside the cap.

They might suggest "investments" can go up and down...it rather depends on the "business" and the risk, if its a directorship of a property owning company with nil debt and a balance sheet of £500k assets then the only "loss" is in valuation from a net advantageous position - any valuation above nil is still to the player's advantage.....

[Marlow Nick]

I thought the main question was about the companies that were set up and the initial capital injection to start that company. If Wray injected £200k into a new company where a player was a director.. that player then draws down on the bank balance by taking dividends from that company.. but that that would effectively constitute payment directly from Wray.

I don't believe they are trying to draw down now. As I understand it the loophole Sarries are trying to exploit is by saying they are jointly investing in something and no dividends / payments are being taken therefore it's alegedly outside the cap. Once the player retires then he takes the profits but it's too late to be counted as salary

[wasps]

I thought the main question was about the companies that were set up and the initial capital injection to start that company. If Wray injected £200k into a new company where a player was a director.. that player then draws down on the bank balance by taking dividends from that company.. but that that would effectively constitute payment directly from Wray.

I don't believe they are trying to draw down now. As I understand it the loophole Sarries are trying to exploit is by saying they are jointly investing in something and no dividends / payments are being taken therefore it's alegedly outside the cap. Once the player retires then he takes the profits but it's too late to be counted as salary

Exactly this.
The players aren't really being paid anything at the moment. It's all future earnings.

As for the accommodation thing, I think only 1 player mentioned having a home owned by way, and I believe he was paying rent.
Whether that's the same level of rent that your average Joe would expect to pay in a nice house in an affluent area is a different question.

[mike909]

Ok - if that is the case - it is a loophole - and is only available to players contracted to Sarries - so is part of the incentive to play for them.

It is effectively cheating

If it wasn't the case, no club can surely afford up to 8 or so Lions starters in a club side.

If its subsidised rent - its caught within the definition I posted.

[Rossm]

And if it's subsidised rent, then HMRC would definitely be interested.