After a lengthy investigation started in February 2012, the Office Of The Scottish Charity Regulator (OSCR) has issued a damning report on Rangers Charity Foundation.
Following many complaints about funds originally to be raised for charitable purposes being diverted to a now liquidated football club, OSCR carried out a lengthy examination of the circumstances. The regulator has finally ruled that there was obvious misconduct by the charity with decisions made by one Trustee alone, that the Foundation ignored rules set out in its own Trust Deed and that decisions taken by Trustees breached their legal duties due to a clear conflict of interests.
The complaints related to moneys raised in a fundraising match between former players of Rangers and AC Milan. It was originally envisaged that the Foundation, a Scottish Charity that distributes moneys to good causes, and the AC Milan Foundation would share the proceeds of the match. But, as the now defunct Ibrox club had then just gone into administration, funds were diverted to the football club instead. A total of £191,430 was effectively lost to good causes because it was “donated” to the football club instead. And no legal advice was taken before this decision was made.
It is important to note here that the Foundation is a legal body in its own right. It is not owned by, or a subsidiary of, either the old club or new club, or indeed any of the various bodies with the words Rangers or Sevco in their titles. The Foundation is a Scottish charity, and with that charitable status comes specific legal responsibilities.
The OSCR report does not name the three Trustees responsible for the management of the Foundation at the time, instead anonymising them as Trustees A, B and C. But we know that one of the Trustees was always the Chairman of the Board of the former football club. And we know that in February 2012 this was Craig Whyte. We also know that the other Trustees of the Foundation at the time Whyte took control of the club were the then CEO Martin Bain and Finance Officer Jacqueline Gourlay, who is now Head of Business Management with new club The Rangers (formerly Sevco Scotland Ltd).
Documentation relating to the Foundation indicates that Whyte was removed as a Trustee on 13 May 2012, while Bain resigned from his role on 4 April 2012. The Foundation’s web site indicates that Gourlay is still a Trustee. So we therefore know that at the time of the events referred to in the OSCR report, the Trustees were Craig Whyte, Martin Bain and Jacqueline Gourlay.
The Charities and Trustee Investment (Scotland) Act 2005 sets out the role and responsibility of charity Trustees – those who manage charities, usually through a Board of Directors, a Trust Board or a committee. Section 66 of the Act states that trustees have to put the interests of the charity first and to ensure that the charity acts at all times in a manner consistent with its charitable purpose.
But, in this case, all of the Trustees of the Foundation were either employees or directors of Rangers Football Club plc (now in liquidation). There was a clear conflict of interest here between the Trustees responsibilities to the charity and to the football club. And the OSCR report tells us which should have taken priority:
“Should such a conflict arise, the law makes clear the charity trustee’s duty is to act in the interests of the charity. A charity trustee who is unable to put the interests of the charity before those of the person or organisation responsible for appointing them is required to disclose the conflict of interest and refrain from participating in any deliberation or decision with respect to the matter in question.”
An explanation for the moneys being diverted from the Foundation to the then financially stricken club was given to OSCR by the one active Trustee – presumably Ms Gourlay given that Whyte was otherwise occupied and Bain had by then resigned from his CEO position and instigated legal proceedings for constructive dismissal against the club.
The rationale seems to be that diverting funds to the football club was necessary to allow the game to go ahead, and that if this had not happened the administrators appointed by then to run the football club could have stopped it. The Foundation received some funds rather than none if there was no game is the justification. But the report notes that the option of simply paying a fee to the club for the use of Ibrox was never discussed. Surely this was an obvious solution?
The OSCR investigation has also revealed that the Trustees of the Foundation had not met in over a year, and that, as noted above, only one Trustee appeared to be playing an active role. In effect decisions were being made by one person acting alone, in contravention of the Charity’s own rules.
It should be noted that another of the Trustees did not respond at all to any requests for information from OSCR. Clearly this was either Craig Whyte or Martin Bain. Make your own mind up …
OSCR has concluded that there was clear misconduct in the management of the Foundation. But, rather strangely, no action at all will be taken against those involved. It seems that OSCR is content with the explanations offered. The report states:
“we have concluded that although the decision was a breach of legal duties the circumstances were such that it would not be a proportionate use of our regulatory powers to take further action. The decision to assign the Charity’s rights in the contract was made in good faith”
It seems odd, to say the least, that a decision taken in a manner that clearly disadvantaged the charity, that was taken in a manner incompatible with the charity’s own rules, that put the interests of a football club above that of the charity and that was taken without considering any legal advice first, can be explained away in this fashion. A “breach of legal duties” should have consequences.
As someone who has been involved with Scottish charities for over 25 years as (at various times) funder, employee, manager, Director and Trustee, I can reasonably claim to have a great deal of experience in charity administration. And I can state categorically that I have never seen a large charity operate in such a chaotic manner. No meetings, only one active Trustee and a major financial decision involving such a clear conflict of interests taken without recourse to legal advice? Embarrassing is one way of describing the situation.
But then it seems that controversy, mismanagement and embarrassment are pretty much par for the course in the running of any Scottish organisation that has the word Rangers in its name.