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Re: Salary cap breaches revealed
Posted by: #wolfpack
Date: 23/01/2020 14:04
Provided that NW paid the full valuation provided to him by PWC for Itoje's image rights, I cannot see how this could possibly count towards the salary cap. I assume the 103 page document provides some justification.

Relevant section for this bit is paragraph 250 onwards. This is important because the alleged overspend is 800,000 out of 906,505.57 overspend for year 2018/19.

Unless someone tells me otherwise, the SCM got a report from Saffrey Champness who provided a different valuation to PWC. The SCM was then entitled to use his discretion (which included him thinking that PWC had not used correct criteria) and the valuation he obtained to decide the value of Itoje's image rights - and then put the balance into "salary". In order for this to then NOT count as salary (as Saracens were arguing), Saracens have to argue that it was unreasonable for the SCM to rely on his valuation.

Quote paragraph 236: "In our view, Saracens have to say that the only valuation that Mr Rogers could reasonably have decided to be the true market value was the [REDACTED] that the investors agreed to pay. Contract to what Saracens says at para 139 of its closing written submissions, PRL does not have to say (and does not say) that the valuation provided by Mr Patel for Saffery Champness is the only correct valuation. The question is not what the "correct" valuation is, but whether the conclusion reached by Mr Rogers on the valuation issue was reasonable".

Quote paragraph 270: "...we are satisfied that, relying on the Saffery Champness report, Mr Rogers was reasonably entitled to conclude that the purchase price for the [REDACTED] shares was above the true market value to the extent of 800,000. We emphasise that we are not saying that we find that the market value of the shares was in fact [REDACTED]. We are saying that it was reasonably open to Mr Rogers to come to that conclusion in all the circumstances"

The panel itself acknowledges that "valuation is not a science" (paragraph 262).

So - unless someone corrects me here - this aspect of breach is essentially down an inability to prove the SCM was 'unreasonable' to rely on a different valuation to the one we relied on. i.e. they're not saying that PWC or NW was wrong at all; they're saying we could not prove the salary cap manager's decision was wrong.

not sure this is entirely accurate. The key points from that entire section:

The panel report noted evidence submitted that the player was underpaid.

This was used in conjunction with the IR payment to deem this salary.

In respect of the valuation the report notes the SCM used a mid range valuation from a valuation. He didnt simply pick the low valuation to suit his purpose. You are right in saying that valuations aren't a pure science as there is an element of forecasting involved.

The panel also note that Saracens didnt provide any additional evidence to support the PWC valuation despite the opportunity to do so. It would have helped their case if they had got a further independent valuation. Thats the point in terms of not being able to disprove the SCM valuation. In the absence of further evidence from PWC or another professional firm with a further valuation.

In addition (to avoid this in first place) due to the potential variance in different valuations they didnt seek clearance from the SCM as they should have done (to both rule whether it was salary and/or to what degree).

I don't think what you have said necessarily contradicts what I have said though.

It does seem totally nuts that Saracens didn't ask PWC to provide an opinion on Saffery Champness's valuation, but that is as much the fault of Saracens' lawyers as Saracens themselves I'd suggest.

The crux of this was never whether or not PWC or SC's valuation was correct - or indeed (and this is important) whether Saracens' interpretation of events or the SCM's interpretation of events is correct.

In fact the panel said "there is force" in Saracens' rejection of the implication that the investors "knowingly and fraudently overpaid for the shares in [REDACTED] and the purpose of the overpayment was to compensate [REDACTED] for the fact he was underpaid salary". The panel deliberately does not "express a concluded view on this issue because it is not necessary to do so". (paragraphs 267-269).

The crux is actually whether "it was reasonably open to Mr Rogers to come to [his] conclusion in all the circumstances" (para 270). Not whether Saracens or anyone connected to them deliberately or reckless or manipulatively flouted the salary cap by 800,000 in 2018/19 by making a payment to Maro Itoje. Or, in fact. whether the SCM is actually correct in his assertion that the 800,000 should be counted as 'salary'! It is just whether he acted reasonably when deciding it was.

The point remains: it looks to me that the difference in PWC's valuation and SC's valuation has resulted in 800,000 being added to 'salary' for last season.

With regardless to seeking support of the SCM, I think that provided NW and friends thought what they were doing was commercially sound they probably felt did not need to. They had, afterall, got a valuation from PRL's own auditors! Nave, maybe.

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