From www.stuff.co.nz
The relationship between the Warriors' two owners - millionaires Eric Watson and Mark Hotchin - and the NZRL has hit rock bottom and one (or both) will have to quit the league club. STEVE KILGALLON reports.
Warriors director Andrew Chalmers is taking specialist legal advice to see if millionaire club owners Eric Watson and Mark Hotchin can be forced out of the rugby league franchise.
The Sunday Star-Times understands the New Zealand Rugby League, the club's minority shareholder, wants Cullen Sports (owned by Watson and Hotchin) to give up ownership of the club. Sources said potential buyers are ready to take over.
Chalmers is an NZRL director who is also a director of a body called the National Teams Competitions, which for business reasons is the organisation that actually holds the NZRL stake in the club. He has sought legal opinion on a secret share deal by Watson and Hotchin.
It's possible lawyers will tell him the pair breached a shareholders' agreement by not notifying the NZRL of a share sale. The shareholders' agreement has three penalty options for a breach: rectify the mistake within 28 days; the infringing party selling its shares to the other party; or having the club wound up.
The alleged breach dates back to 2003 when former Cullen Sports executive Matthew Ridge ended his relationship with the club and sold his shares in Cullen Sports to companies representing Watson and Hotchin.
"This raises questions of ownership," Chalmers said. "It is an issue we are looking at closely and taking advice on."
It is a complex legal issue that can be argued in several directions, but Chalmers is seeking guidance on whether the Ridge buy-out meant the Warriors' ownership changed without NZRL consultation.
It's a sign of the damaging split between the league and Cullen, which grew wider last week with the news Watson had asked for NRL help in marketing the struggling club, which has fallen way short on budgeted gate takings this season.
The shareholders' agreement says Cullen was given sole management responsibility for the club after its 2000 takeover because of the company's skills in that area. Clause 2.1 says "the Warriors will have world-class coaching and management" and Cullen will "optimise the profile and standing" of the club.
The fact Cullen last week asked the NRL for help with marketing has angered NZRL chief executive Selwyn Pearson.
"It seems strange the areas you are going to someone for help are the exact areas you were gloating about that you were very good at and that clinched the (takeover) deal," said Pearson.
The Star-Times has learned Warriors chief executive Wayne Scurrah consulted NRL official Shane Mattiske for marketing guidance a month ago, without the NZRL being informed.
"We weren't invited (to meet NRL boss David Gallop) - so it's not only the 75% owners treating it like they own the whole lot, but the NRL also behaving like there is only one shareholder," Pearson said.
Warriors chairman Maurice Kidd said that was "talking out of school" because the club board - which includes Pearson and Chalmers - knew of the approach to the NRL.
The NZRL feels bad publicity surrounding the Warriors - such as the failed Pasifika rugby affair and the salary cap scandal - means Cullen hasn't kept its promise to run the club in "world-class" fashion.
"All those wonderful things that were originally offered - people should look at the state of the place and work out for themselves whether they have delivered on it or not," Pearson said.
Chalmers added: "They have said they will bring expertise to the table, but you have to look at the past few years and ask yourself the question. I think our conclusion was reached when I sought agreement from the board to dispose of our shareholding." However, the NZRL would find it difficult to take legal action on that point, as it could be criticised for the years when it was effectively asleep at the wheel and failed to take an active role in the club.
The NZRL's anger at Cullen is reflected in the fact the NZRL has refused to sign off club accounts from 2002, because it has unanswered questions relating to large sums of money going out of the club's profit in the form of management fees.
"We've still had no satisfactory response, so the only position we can take is that, until they provide full and adequate disclosure, is not to sign those accounts," said Chalmers.
Kidd said some NZRL board members were happy with the accounts, others were not.
Midweek reports said Watson had asked NRL chief executive David Gallup for more help to make the club a success, but it is clear that request didn't include direct financial assistance.
NRL communications director John Brady said the league did not provide that sort of help, but would assist with specific projects - something that is not unusual and has been done for other clubs in the past. The Sydney Morning Herald reported Watson had committed to the club in the medium term, but there are suggestions he is increasingly amenable to selling it given the scale of his losses. Kidd said it would be "mischievous" to doubt Watson and Hotchin's commitment to the club.
The loss for the 2006 season is now likely to climb above $2 million and the Warriors have already planned to lose more than $750,000 next season. Cullen has already put about $2m into the club and it's uncertain how long it would be prepared to accept such losses without the prospect of turning a profit. It's understood the NZRL would welcome the chance to take over the club, and then on-sell it.
The relationship between the Warriors' two owners - millionaires Eric Watson and Mark Hotchin - and the NZRL has hit rock bottom and one (or both) will have to quit the league club. STEVE KILGALLON reports.
Warriors director Andrew Chalmers is taking specialist legal advice to see if millionaire club owners Eric Watson and Mark Hotchin can be forced out of the rugby league franchise.
The Sunday Star-Times understands the New Zealand Rugby League, the club's minority shareholder, wants Cullen Sports (owned by Watson and Hotchin) to give up ownership of the club. Sources said potential buyers are ready to take over.
Chalmers is an NZRL director who is also a director of a body called the National Teams Competitions, which for business reasons is the organisation that actually holds the NZRL stake in the club. He has sought legal opinion on a secret share deal by Watson and Hotchin.
It's possible lawyers will tell him the pair breached a shareholders' agreement by not notifying the NZRL of a share sale. The shareholders' agreement has three penalty options for a breach: rectify the mistake within 28 days; the infringing party selling its shares to the other party; or having the club wound up.
The alleged breach dates back to 2003 when former Cullen Sports executive Matthew Ridge ended his relationship with the club and sold his shares in Cullen Sports to companies representing Watson and Hotchin.
"This raises questions of ownership," Chalmers said. "It is an issue we are looking at closely and taking advice on."
It is a complex legal issue that can be argued in several directions, but Chalmers is seeking guidance on whether the Ridge buy-out meant the Warriors' ownership changed without NZRL consultation.
It's a sign of the damaging split between the league and Cullen, which grew wider last week with the news Watson had asked for NRL help in marketing the struggling club, which has fallen way short on budgeted gate takings this season.
The shareholders' agreement says Cullen was given sole management responsibility for the club after its 2000 takeover because of the company's skills in that area. Clause 2.1 says "the Warriors will have world-class coaching and management" and Cullen will "optimise the profile and standing" of the club.
The fact Cullen last week asked the NRL for help with marketing has angered NZRL chief executive Selwyn Pearson.
"It seems strange the areas you are going to someone for help are the exact areas you were gloating about that you were very good at and that clinched the (takeover) deal," said Pearson.
The Star-Times has learned Warriors chief executive Wayne Scurrah consulted NRL official Shane Mattiske for marketing guidance a month ago, without the NZRL being informed.
"We weren't invited (to meet NRL boss David Gallop) - so it's not only the 75% owners treating it like they own the whole lot, but the NRL also behaving like there is only one shareholder," Pearson said.
Warriors chairman Maurice Kidd said that was "talking out of school" because the club board - which includes Pearson and Chalmers - knew of the approach to the NRL.
The NZRL feels bad publicity surrounding the Warriors - such as the failed Pasifika rugby affair and the salary cap scandal - means Cullen hasn't kept its promise to run the club in "world-class" fashion.
"All those wonderful things that were originally offered - people should look at the state of the place and work out for themselves whether they have delivered on it or not," Pearson said.
Chalmers added: "They have said they will bring expertise to the table, but you have to look at the past few years and ask yourself the question. I think our conclusion was reached when I sought agreement from the board to dispose of our shareholding." However, the NZRL would find it difficult to take legal action on that point, as it could be criticised for the years when it was effectively asleep at the wheel and failed to take an active role in the club.
The NZRL's anger at Cullen is reflected in the fact the NZRL has refused to sign off club accounts from 2002, because it has unanswered questions relating to large sums of money going out of the club's profit in the form of management fees.
"We've still had no satisfactory response, so the only position we can take is that, until they provide full and adequate disclosure, is not to sign those accounts," said Chalmers.
Kidd said some NZRL board members were happy with the accounts, others were not.
Midweek reports said Watson had asked NRL chief executive David Gallup for more help to make the club a success, but it is clear that request didn't include direct financial assistance.
NRL communications director John Brady said the league did not provide that sort of help, but would assist with specific projects - something that is not unusual and has been done for other clubs in the past. The Sydney Morning Herald reported Watson had committed to the club in the medium term, but there are suggestions he is increasingly amenable to selling it given the scale of his losses. Kidd said it would be "mischievous" to doubt Watson and Hotchin's commitment to the club.
The loss for the 2006 season is now likely to climb above $2 million and the Warriors have already planned to lose more than $750,000 next season. Cullen has already put about $2m into the club and it's uncertain how long it would be prepared to accept such losses without the prospect of turning a profit. It's understood the NZRL would welcome the chance to take over the club, and then on-sell it.
