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Financial Integrity, Football

State Aid: Assembling the Case for the EU

The Scottish Government in 2006, allowed the transfer of a £30+ Million 19.53 hectare property near Glasgow, at Lennoxtown, for the heavily discounted (1/60th of the valuation) price of £493,000 to be transferred to Celtic FC for their training facility via the signature of one person, the CEO of Greater Glasgow Health Board. Every attempt was made to keep their ‘valuation’ below the £500,000 limit including not allowing VAT to allow this subversion of accountability. https://footballtaxhavens.wordpress.com/2013/11/13/lennoxtown-sale-approved-solely-by-tom-divers-ceo-greater-glasgow-health-board/

Similarly Glasgow City Council in 2007, for the miserly sum of £675,000 sold 5.33 hectares of land located near their stadium to Celtic which immediately became on the same date of sale, security for a low interest loan facility from the Co-operative Bank. Westhorn using Glasgow City Council‘s method of valuing estimates the land, using Govt. DVS resources, between £5-10 Million.  The Lennoxtown valuation of £30+ Million was also calculated using the same method: https://footballtaxhavens.wordpress.com/2013/12/26/lennoxtown-worth-over-30-million-westhorn-between-5-10-million/

It will be demonstrated below that this is State Aid. We know, like the cheap loans from the failing Co-Operative Bank, this is a corruption of fairness in sporting competition since no other Scottish club has been afforded cheap assets thus saving funds for more playing staff. Celtic also compete in the UEFA Champions League which is attempting to level the playing field by introducing Financial Fair Play(FFP) so it should interest UEFA. Unfortunately Celtic have a conflict of interest since their Chairman of the board in 2006 when the cheap subsidised Lennoxtown transaction was approved by the board is none other than Brian Quinn who sits on the FFP committee evaluating clubs. Therefore the FFP path is compromised as is UEFA and should be set aside for the moment and the EU State Aid case pursued. Also better to be independent of UEFA whose efforts in investigating itself have proven poor and not transparent, like certain football authorities in Scotland.

Like the Lennoxtown and Westhorn land being transferred to Celtic undervalued to the extent of £35-40 Million there are two related cases of football teams receiving benefits through land deals with public authorities before the EU Competition Commissioners. 

Cases before the EU Competition Commission

Firstly there is the case of PSV Eindhoven. The Independent on 7th August 2013, as well as reporting on the Spanish clubs receiving State Aid benefits also mentioned the cases of five Dutch clubs:  http://www.independent.co.uk/sport/football/european/real-madrid-and-barcelonas-privileged-status-set-to-remain-for-now-8751143.html

Yet the competition office has confirmed to The Independent that it is in the advanced stages of an investigation into five Dutch clubs over illegal state aid. PSV Eindhoven, NEC Nijmegen, Willem II, Den Bosch and MVV Maastricht all face serious allegations of receiving illegal state aid from their local municipal authorities, mainly on land deals.

Reuters reported in the PSV Eindhoven case that: http://uk.reuters.com/article/2013/03/06/uk-netherlands-soccer-eu-idUKBRE9250EV20130306

In one case, the council of Eindhoven bought and leased back land worth 48.4 million euros (41.77 million pounds) from local club PSV, the Commission said.

The other case is with Real Madrid and Madrid City Council which relates to land transactions close to their ground:  http://www.independent.co.uk/sport/football/european/exclusive-real-madrid-under-investigation-amid-allegations-of-illegal-state-aid-8557550.html

The investigation into Real’s deal with Madrid city council centres upon an area of land in the north of the city, Las Tablas. Having originally been valued at €421,000 when it was part of a payment by the council to the club in 1998; the same land was then valued at €22.7m in 2011, a 5,400 per cent rise, when the council decided they had to take it back. In lieu of a €22.7m payment, the club was given the land they needed to develop their stadium.

Although both cases are not direct comparisons with the Lennoxtown and Westhorn properties, the Celtic FC case with undervalued payments and the transfer of wealth by the latter method are more clear cut than Eindhoven and Real Madrid cases.

What does the EU State Aid legislation say?

EU State Aid Legislation

The full UK State Aid document is: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/15277/National_State_Aid_Law_Requirements.pdf

and the relevant clauses are:

Is there a transfer of state aid resources

Note in 4.3 that Greater Glasgow Health Board and Glasgow City Council are considered to represent the Member State, the UK. This case will be taken against and is therefore an embarrassment for the UK government, which naturally will not appreciate being put in this position by the Scottish government and Glasgow City Council.

And do both the Lennoxtown and Westhorn undervalued transfers fall under the legislation? Check paragraph 4.9.7 below:

Forms of transfer

And there is no need to prove corruption or fraud, it’s only the effect which counts, and that was a subsidisation of wealth allowing Celtic FC to have £35-40 Million more in team building funds. 

4.10 Effect that matters

And what are the consequences of any case being proven? According to a sports law article by Bauerle and Maier of McDermott Will & Emery: http://www.natlawreview.com/article/european-commissions-launches-first-state-aid-investigations-football-clubs

According to general EU State aid rules, the Commission may investigate public support measures going back ten years.  Should the Commission come to the conclusion that the financing of a professional sports club infringes State aid rules, it can order the Netherlands to recover the aid from the clubs.  The relevant public support measures could no longer be applied and all financial advantages granted to the clubs would have to be recovered.

The full extra financial benefit obtained has to be repaid. Celtic FC will have to pay the extra value for the Lennoxtown training land back to The Scottish Government and the Glasgow City Council for the Westhorn land and the taxpayers & ratepayers. That will be approx. £35-40 Million.

©footballtaxhavens.wordpress.com 2014 CC-by icon

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Discussion

34 thoughts on “State Aid: Assembling the Case for the EU

  1. That’s the thing about Liquidation. It turns people crazy.

    This is desperate stuff from someone who cannot deal with the trauma of their club’s demise. And you know what? Even if there was a single shred of a scenario where Celtic had to pay the state £25 million, Celtic could afford to pay it.

    Celtic would not turn away from money that it owed. Unlike a certain football club currently in the process of liquidation.

    Posted by michael | January 1, 2014, 1:14 pm
    • Michael, these things happened. The council did sell land valued at £5m for £675k and £30m+ for again the low value of £500k and the people voting it through were Celtic shareholders and season ticket holders. It’s easy to say Celtic could afford to pay it but on top of their existing £30m loan which is under scrutiny one has to ask if they really could. A low estimate is that they have received state aid to the value of £35m, which with interest of 8% p.a (This is the standard interest calculation both in scottish courts and EU) brings the amount owed up to nearly £60m. That £60m that the people within GCC boundries have allegedly been deprived of in order for some Celtic fans to give their team an unfair advantage on the pitch. One wonders what Partick Thistle could do with a free £35m

      Posted by Jean-Claude | January 2, 2014, 1:47 am
      • Sometimes, when groups of obsessive saddos gather together and reinforce each other’s worst delusions, you can reach a place on the internet, where “evidence” such as this gets taken seriously. All you have to do is ignore the huge pile of evidence that contradicts the theory (e.g. lots of companies negotiated soft loan rates and Celtic’s is not exceptional, the loan rate is a borrowing facility and not a debt, and land values in the East End are not great but Celtic is a valued employer that the Councils would like to keep operating there) and blow up the importance of the parts of the theory that fit (i.e. there are some tims on the Council and, cheeky upstarts that they are, some of them are influential).

        The power and spread of such delusions can be seen in the recent West of Scotland outbreak of amnesia on the real consequences of liquidation of a clumpany.

        The good news is that your condition can be improved. Take a holiday from the computer. Teach yourself the real meaning of some basic financial terms and distance yourself from the nutter tendency that sends such info to blogs like Leggoland (he ws chucked out of the Flat Earth Society for OTT wild speculation).

        I wish you well on your journey. A wee word of warning though, some of the best psychotherapists for this condition are tims. Hope that does not get in the way of seeking the treatment needed.

        Posted by SFTB | January 2, 2014, 1:37 pm
    • How can celtic afford to pay back £34 million Michael…..it has been PROVEN BEYOND A SHADOW OF A DOUBT that celtic have a debt of £34 million that they are barely paying off the interest year on year.
      Take you head out the sand son….this has NOTHING to do with Rangers…this is all celtics doing and will be the undoing of that disgusting club!

      Posted by BlueStu | January 2, 2014, 3:19 pm
    • Celtic should have titles stripped for this too!! Blatant cheating!

      Posted by Alan | January 20, 2014, 5:39 pm
  2. Glasgow City Council CSC HH

    Posted by Glagow City Council BOSS | January 1, 2014, 5:55 pm
  3. If you actually have a case, why not submit it to the European Commission to assess?

    In the Dutch case, the complainant was an individual. In the Spanish cases the complainants were individuals and investors in football clubs.

    Here is the complaint form: http://ec.europa.eu/competition/forms/intro_en.html

    Posted by Pompey | January 1, 2014, 7:48 pm
  4. PS if you read Reg 14.2 of 659/1999 (as amended) it is not only the subsidy that needs to be repaid but also compound interest on that sum backdated to the point of the award.

    If you look at the case law, there are situations where this has tripled the sum repayable. Indeed this is the real deterrent for organisations not to accept unlawful state aid.

    Posted by Pompey | January 1, 2014, 7:52 pm
  5. Multiple complaints have been made to the EU and I believe investigations are ongoing SA.36872(2013/CP) – Alleged aid to Celtic Glasgow . I must add the more Scottish and Glasgow clubs that feel it gave Celtic an unfair Sporting Advantage or for sporting integrity’s sake please complain.

    Posted by Alan Parker | January 1, 2014, 9:58 pm
  6. You need help for your obsession. Nutter.

    Posted by GREENMAN1888 | January 1, 2014, 11:15 pm
  7. Reblogged this on McMurdo Media.

    Posted by billmcmurdo | January 1, 2014, 11:35 pm
  8. This whole argument is nonsense. It assumes a residential land value on a greenbelt site. Its like saying if my house was on an oilfeild it would be worth 50billion. The facts are it is not a residential site nor is it ever likely to be and my house is not on an oilfield therefore any valuations on these assumptions will be grossly misleading. A better example would be to use agricultural land values which suggest Celtic actually overpaid for Lennoxtown.

    Posted by Paul | January 2, 2014, 1:28 am
    • Already a home on Lennoxtown valued at £500,000 how many more buildings of that value could Lennoxtown hold ? Also with Land at Westhorn there was an apparent geotechnical report saying land was defective at the council which the council can’t produce.

      Westhorn Land did not seem to be defective when the club were building while renting, and survey reports and any complaints to the council have been asked for to check.

      If any land survey needed when building during rental period showed defects or if council had complaints about defective land these should be a matter for public record.

      Notwithstanding not properly marketing any of the lands as required to give tax payers best value.

      Posted by Alan Parker | January 2, 2014, 12:41 pm
    • £30M for 20 hectares of agricultural land!? Is this the level the ex-huns are stooping to?

      Posted by Paul | January 2, 2014, 7:51 pm
  9. ” no other Scottish club has been afforded cheap assets thus saving funds for more playing staff. ”

    I think you might be able to re-arrange those words to make a sentence but damned if I can do it.

    Two little points

    You get your valuation of Lennoxtown by taking the 2006 average for all residential land purchases in Scotland for 2006, Are you seriously arguing rural property, without any residential building consent, is worth the same as a plot in central Edinburgh?

    You mention a, loan being “Below the European commission’s reference rate” You are aware that currently stands at base rate +0.5%? Celtic PLC loans with the Co-Op are base rate +1%

    Nice try though.

    Well nearly

    Posted by James Doleman (@jamesdoleman) | January 2, 2014, 2:00 am
  10. Why did Celtic (of all clubs) need any form of public subsidy?

    A sale of public land at an undervalue is state aid. This 1999 document sets out the law: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2000:137:0028:0032:EN:PDF

    Swansea fans have been alleging something similar with Cardiff’s stadium, but so far none of them have investigated the matter as closely as you have.

    Posted by Anon | January 2, 2014, 7:35 am
  11. Another great piece of work. It might be worth mentioning that the purchase of the albion car park from Lloyds TSB cost Rangers £1.3 million for an area much less than 19.53 hectars. No State aid for the Rangers.you now have an email to contact me I have something that you might wish to include in your blog.regards Chubbybrown (once of Follow follow “web of connections” thread and now banned for asking a question.)

    Posted by chubbybrown | January 2, 2014, 10:17 am
  12. Good luck with finding the legal representation, resources and psychiatrist to take your fantasy revenge on Scotland’s ONLY football power seriously, mate. ;))

    Posted by Realist | January 2, 2014, 12:35 pm
    • No-one here needs to have legal representation to do so, the European Commission will investigate it and they have more legal clout than any business in Scotland, least not the always claimed “Debt free but really in £30m debt” Celtic plc.

      Posted by Jean-Claude | January 8, 2014, 7:44 pm
  13. Wow!!! Celtic have a £40M training facility. Puts that wee one in Milngavie in the shade.

    Posted by Andy Kerins | January 2, 2014, 12:58 pm
  14. Glasgow Celtic ( Champions of Europe ) 1967, best team in Scotland with fantastic supporters pay their taxes and would never think of not paying her majesty the queen money thats due.

    They are a credit to the game as well as being an honest club ( unlike a certain other club that was liquidated to dodo status ) and we will continue to help them in any way possible as we just love them so much

    If you are reading Peter ( soon to be sainted ) and Neil, a big HAIL HAIL to you and lets forget about 10 in a row, give us 20 in a row!!!

    God Bless Celtic FC

    Posted by Glagow City Council BOSS | January 2, 2014, 2:56 pm
  15. WELL DONE FTH,ONWARDS AND UPWARDS!

    Posted by AB | January 2, 2014, 9:49 pm
  16. the thing is james, no one mentioned the European commission’s reference rate, which was 4.9.2. of the paragraph which we presume you were quoting from. no it was paragraph 4.9.7 which you were directed to look at.
    nice try though, well nearly.

    Posted by frank | January 2, 2014, 11:28 pm
  17. If you feel you have the evidence why not approach GCC? Have you called Celtic to question them? Call UEFA and FIFA – write to them suggesting that Celtic has broken rules.

    These are fairly serious allegations.

    Or is this purely conjecture and second guessing facts.

    Posted by Gavin McCann | January 2, 2014, 11:29 pm
    • The FACT that GCC avoid answering any questions on this subject and REFUsE to release documents into the public domain under Freedom of information tell us all we need to know. Contact sellik????? Its been done with not even as much as a reply……speaks volumes!!!
      Its coming for you…..we know it, you know it……no point in the denial.

      bye bye sellik…..wasnt nice knowing you, but it will be nice watching you die 🙂

      Posted by BlueStu | January 3, 2014, 1:43 pm
    • all these things are in motion Gavin, the BTC found in Rangers favour FACT, LNS found in Rangers favour (same club) FACT, EUEFA found in Rangers favour FACT, the ASA found in Rangers favour FACT….Celtic have huge debts to the co-op FACT, the title deeds to ALL Celtic’s assets are held by the co-op FACT and the level of state aid provided by GCC to Celtic in a number of land deals that Celtic could use as security for these loans from the co-op, will i believe soon become an established FACT and not just conjecture…state aid case is looming on the horizon

      Posted by jim fraser | January 3, 2014, 10:32 pm
  18. I hope our politicians and our authorities investigate this properly and prosecute any offenders to the full extent of the law, as well as retrieve any assets obtained illegally with interest owing, and our footballing body treat any irregularities with the same aggressive approach as other clubs who have received fines / signing embargos. I also hope that our football authorities strip any and all titles won during the years of any sporting advantage gained as a result of any illegal dealings.

    Posted by Lord Nimmo Smith | January 6, 2014, 9:31 pm
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