Findlay: What would you do if two £7.5million players were injured early and out for the rest of the season? Smith: Panic.. there are no guarantees
Ex-boss tells of Rangers’ £18m overdraft while he asked new owner to bring in fresh talent
FORMER Rangers boss Walter Smith has revealed how he met Craig Whyte ahead of his takeover – and asked for cash to improve the team.
Smith was called as the first witness yesterday in the trial of Whyte, who is charged with fraud over his purchase of the Ibrox club.
He told the court there were “no guarantees” in the high-stakes world of football. And the former Scotland manager said: ● Whyte agreed with him that the Rangers team needed “refreshing” despite having just won the league. ● Sir David Murray had given up day-to-day running of the club in the months leading up to Whyte’s takeover. ● And the failure to qualify for the lucrative Champions League under his successor Ally McCoist had been a “big blow” to the club’s finances.
Smith told how he met Whyte alongside directors Martin Bain and Donald McIntyre in Glasgow city centre in 2011 – before Whyte bought the club from Murray.
Smith said: “From Mr Whyte’s point of view, he was more interested in the financial aspects of the club.
“He asked me towards the end of the meeting what I felt was required for the football team.”
Smith said he told Whyte the team required investment. He said: “I felt the team needed a level of freshness.
“He seemed to take that in. I was obviously meeting him for the first time and I was leaving as manager. I think he accepted that.”
He told the court that at the time he was aware of a tax case involving Rangers but was not directly involved.
Smith said he was also aware of an overdraft the club had, which he said had reduced over the four years he was there from about £30million to about £18million when he left, days after Whyte took over.
Whyte faces two charges relating to the purchase – one of fraud and another under the Companies Act.
It is alleged he pretended to then owner Murray, and others, that funds were available to make all required payments to acquire a “controlling and majority stake” in the club – including clearing £18million debt, £2.8million for the “small tax case” liability, a £1.7million health and safety liability and £5million for the playing squad.
The Crown alleges Whyte had only £4million available from two sources at the time but took out a £24million loan from Ticketus against three years of future season ticket sales “which was held subject to an agreement or agreements being entered into between the club and Ticketus after said acquisition”.
The second charge under the Companies Act centres on the £18million payment between Whyte’s Wavetower company and Rangers to clear a Bank of Scotland debt. Whyte denies both charges. At the High Court in Glasgow yesterday, Smith spoke of Rangers’ dire financial state when he went back to the club as manager in 2007.
Smith, 69, said the overdraft was at £30million and even though he brought eight trophies to Rangers and got them to a European final, the overdraft still stood at around £18million when he left.
Smith told the court that he left as manager three or four days after Whyte’s takeover in May 2011.
Rangers had won the domestic league title by winning their final match at Kilmarnock, Smith’s last match in charge. Asked by Findlay
From Mr Whyte’s point of view, he was more interested in finances WALTER SMITH
whether he remembered how Rangers had done in their bid to qualify for the Champions League after his departure, Smith said: “I know they lost one of the games but I couldn’t tell you accurately, I was on holiday at the time.”
Findlay said: “Do you even remember whether Rangers ended up in the Europa League?”
Smith said: “I don’t think they ended up in the Europa League.”
Findlay said: “That would have been a major disappointment, not just in footballing terms but in financial terms.”
Smith said: “Yes, it is a major disappointment to any club, they are trying to qualify for the Champions League.
“That’s a massive thing, not just financially but for the club overall, for the club’s stature, and then next the Europa League, so it’s a big blow to everyone if you have no European football.”
Smith said his successor as manager, former player McCoist, had done an “excellent” job as his assistant and that he was “hopeful” McCoist would land the top job. He told the court that during his second stint at Rangers, chief executive Martin Bain was more hands-on and had more to do with running the club than previously.
In his first stint, owner Murray was “very hands-on”.
Smith said: “The second time round you would go to Martin Bain, but Sir David still had an influence on the club. If anyone had a problem you could go to him directly.”
He agreed that Bain had gradually taken on “more senior” roles.
Smith said he was aware that Rangers were up for sale. Findlay said: “There wasn’t exactly a stampede of people coming through the door wanting to buy Rangers Football Club, was there Mr Smith?” He replied: “No” Findlay said that while big English clubs are owned by foreign billionaires no such figure wanted to buy Rangers. He said: “It just didn’t happen, did it?”
He put it to Smith that there was no bidder other than Whyte. Smith said: “No”. On the £30million
overdraft in 2007, Findlay said: “That was, on any view, a major financial burden hanging round the club.
“More football clubs are in debt, rather than profit. Why is that?”
Smith said: “I suppose on one hand the banks allowed it to happen, on the other, I can only speak for Rangers, football clubs are prepared to handle that level of debt.”
Findlay asked what Smith would have done if two £7.5million players were injured early in the season and out for the rest of the season.
Smith said: “Panic. There are no guarantees.”
Findlay said buying expensive players with no guarantee of European success could result in disaster. Smith said: “There is no guarantee.”
Findlay said: “So throwing money at it is a stupid idea.” Smith said: “It is a gamble.” Findlay said: “A football club has to operate at a level that is realistic, that would be a sound approach.
“Did you know how bad things were financially at Rangers?”
Smith replied: “Not exactly. We had had success over the period, that I felt was helping lower the debt. We were able to pay off some of that debt.”
Findlay said: “Did you know the bank had had enough of bankrolling Rangers?”
Smith said: “Yes, two to three years earlier, Donald Muir had joined the club. He was there to implement certain cuts to make the club more viable.”
Findlay produced minutes of board meetings from November 2010 and March 2011 which laid bare Rangers’ financial situation.
The club were able to spend only £300,000 on youth development when it was estimated Celtic were spending £2million.
The bank were asking for a £14.6million salary restriction yet Bain was warning that £18million was needed to rebuild the squad.
At one point, ex-chairman John McClelland said new investment was going to be needed just to keep the club “afloat”. Findlay put it to Smith that this happened months before Whyte took over the club.
He said: “Where is anybody going to get £18million from?” Smith said: “If we wish to compete at the highest level, we need to find that money or make a decision not to.
“If a decision is made not to, the consequences are that the club will not achieve the level of success that they would maybe hope.”
Findlay said: “If you are needing – when you already owe £18million – to find another £18million, it would seem you are driving the club deeper and deeper into debt, that would be common sense.”
Smith said: “You would be taking it up to the level it was at beforehand.”
He agreed with Findlay that the club’s finances were in a “perilous state”. Asked if it was distressing for him, Smith said: “Yes it was but we had been trying our best to handle this issue while it was there.”
Smith added: “For the majority of things at Rangers, we have one direct club to challenge, and if we want to challenge that club we have to keep ourselves on a footing that is there or thereabouts at their level.
“For me, that’s where I gain my base level, as to whether or not the club can afford it is not the manager’s decision.”
Later in evidence, McCoist, 54, said he was aware that the company Ticketus offered a service of buying up season tickets and using the club as selling agents.
Advocate Depute Alex Prentice said: “Season ticket money is the fans’ money, is that correct?” McCoist said: “Yes, that’s correct.” He said he had difficulty with Whyte over identifying players and getting the money to buy them.
Findlay showed him a document which suggested the player budget had gone up – after Whyte took over – from £15.4million to £21million.
Findlay said: “To suggest that money was not spent on the squad does not seem to be supported by these figures.”
McCoist said: “I did not say that money was not spent on the squad.”
Findlay said: “No, no, you may not, but other people are trying to.”
The trial, before Lady Stacey, at the High Court in Glasgow, continues.