How Irish soccer ended up on the brink of going bust
With Euro 2020 matches coming up in Dublin, Irish soccer should be in for a windfall. Yet a huge financial scandal at the national association involving its disgraced former CEO has left it on the brink of going bust.
In normal times, June 15, 2020 would be shaping up to be the biggest night in the history of Irish soccer.
Euro 2020 (the quadrennial international soccer tournament between European nations) will be in full swing then and Dublin is one of 12 host cities. Poland, a nation with a huge immigrant population in Ireland, are scheduled to play in the Irish capital’s Aviva Stadium that night.
Their opponent is not yet known, but it could well be either Ireland or Northern Ireland, depending on how a four-team play-off involving both teams goes in March.
Yet there is still a chance that this potentially mammoth game won’t take place in Dublin. Incredibly, there is even a chance that the Irish team won’t be able to fulfil the fixture, even if they qualify. They might not even get the chance to qualify.
This is all because the Football Association of Ireland (FAI), the governing body for soccer in the Republic of Ireland, is facing the very real risk of liquidation.
Businesses go bankrupt and get liquidated all the time, but national football associations don’t. So how has it come to pass that the national football association of Ireland, a prosperous western European nation in which soccer is the most played sport, finds itself in this bizarre position?
Hail glorious St Patrick
It’s difficult to know where to start in answering that question. As good a place as any is Court 14 of the “Four Courts” in Dublin on the night of Saturday, March 16, last year.
It was very unusual for the court to be in session at that time, late on the eve of the St Patrick’s Day public holiday. John Delaney, then the CEO of the FAI, was seeking a high court injunction to prevent The Sunday Times newspaper publishing a report about a €100,000 ($110,400) payment he had made to the FAI. Why would an employee be making such a large payment to his employer?
The judge ruled against Delaney and The Sunday Times published the story the next day. It was the first in a remarkable series of reports about the dreadful state of the finances of the FAI, which up until then had been presented as being in good health.
As well as the revelations about the extent of the FAI’s difficulties, The Sunday Times published several stories in the weeks and months that followed about personal expenses the FAI covered for Delaney.
It was revealed that on top of a €360,000 annual salary, Delaney also had his €3,000 monthly rent covered by the FAI for many years. He had racked up €40,000 spending on an FAI credit card in just six months on items such as executive dry-cleaning and duty-free shopping.
It was also revealed that Delaney had a remarkable “golden handcuffs” provision in his contract that would see him bank up to €2 million as a “loyalty” payment for remaining at the FAI until 2021. Practically all of this had been systematically hidden from the FAI’s auditors, Deloitte, and indeed, from some members of the board of the FAI itself.
Both Delaney and the FAI scrambled desperately to limit the damage. However, as the scale of the deception and financial disaster became clearer, Delaney was finally forced to step down at the end of September.
From debt free to debt of €62 million
He departed with close to €500,000 in severance pay but the FAI’s problems did not leave with him. Deloitte faced serious criticism for the fact that it had signed off for years on annual accounts that had in fact been wildly inaccurate.
Before The Sunday Times‘ first story, the FAI had presented a picture of robust financial health. Delaney had made a personal crusade of the goal to make the FAI debt-free by the year 2020. Instead, he left the FAI with debts of around €62 million.
Mark Tighe, The Sunday Times journalist whose exhaustive reporting ultimately brought down Delaney, says there is a very real risk that the FAI, a limited business, will not be able to stay in business.
“That is a real and live risk,” he told DW. “They need an €18 million bailout. Their outgoings are far in excess of what they are bringing in.”
At the moment, UEFA, the European governing body, is in discussions with the Irish government over who will ultimately foot the bill to keep Irish football in business.
“This deal hasn’t been done yet between the government and UEFA,” he said. “The risk has receded slightly in the last few weeks and at least these talks are happening. UEFA even met the Bank of Ireland (the FAI’s main creditor) when they were in Dublin.
“But it needs to be resolved in the next few weeks. Ireland matches are coming up and four games in the European Championships are being hosted here.”
Turning a surplus into a loss
At the FAI annual general meeting in December, restated accounts were presented for 2016 and 2017. The 2016 figure was adjusted from a €2.3 million surplus to a €66,000 surplus, while the 2017 figure was adjusted from a €2.8 million profit to a €2.9 million loss. A loss of just under €9 million was recorded for 2018.
But how could accounts, signed off by Deloitte, have been so wrong? Tighe explains that there were three elements to the financial mismanagement presided over by Delaney.
On one hand, he was securing front-loaded sponsorship deals to advance funds to the FAI which the sponsors could pull out of at any time. One deal, with the company Frasers Group (formerly Sports Direct), advanced €6 million to the FAI. However, the company pulled the plug on the deal in March.
“Suddenly rather than having €6 million income, you have €6 million extra liability,” says Tighe. “Who agrees to a mad deal like that?”
Then there was Delaney’s personal payments and arrangements, largely hidden from view. When the extent of those liabilities were revealed, the association’s debt deepened sharply.
Amid the growing toxicity of the FAI brand in the face of the crisis, government funding was pulled and the association‘s main sponsor, the Telecommunications firm Three, said it would not renew its contract. It was the perfect storm.
Seeking an injury time equalizer
While a reconfigured FAI is currently trying to rebuild itself, its immediate future is anything but secure according to Niamh Brennan, academic director of the University College Dublin Centre for Corporate Governance.
She says the FAI is “without question” under threat. “I mean, it has just got this extraordinary burden of liabilities and no assets of quality.” She says the FAI’s status as a body of cultural significance will “possibly” save it from liquidation. But even if the association survives, and the Euro 2020 matches take place as normal, she says the FAI is facing years of hardship which will prove very damaging.
“Just like the way Ireland got out of the financial crisis was through austerity, that is what will happen with the FAI. It will be austerity. There won’t be much money for football, it will be all going to serve the liabilities.”
Tighe and his colleague Paul Rowan are currently working on a book about the scandal, titled Champagne Football, due to be released later this year. It will delve further into how Delaney effectively ended up running a national football association without supervision and leaving it on the brink of going bust.
Brennan says she has seen several such cases in her time studying corporate governance and says the FAI affair is a classic case of “board capture,” where a CEO takes complete control of a board and operates outside of meaningful scrutiny.
“Certain types of people get to the top of organizations,” she told DW. “People who are willing to be ruthless, to ruthlessly stamp down on anyone who will prevent them getting to the top. And remember, if you are researching psychopaths, you will typically find them in two places. One is in prisons and secondly, is at the top of organizations.”
For the FAI, its more than 200 permanent staff and its lengthy list of creditors, they are waiting anxiously to see what, if any, deal UEFA can strike with the government. Until such time, their future, as well as the future of Irish football itself, is up in the air.
Source: dw.com