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Apr 23, 2010

The buck stops with News Ltd in the Melbourne Storm scandal

News Limited executives should have been paying far more attention to the way the Storm was being run than they obviously were.


The Melbourne Storm salary cap scandal has shocked the sporting and business worlds.

Never before has a sporting organisation cheated so brazenly and been punished so savagely.

Never before has a company the size of New Corporation — which owns 100% of Melbourne Storm and 50% of the entire National Rugby League competition — been involved in a sporting scandal of this magnitude.

News Limited boss John Hartigan moved swiftly yesterday to distance himself from any blame about the scandal, saying in a statement that the “elaborate collusion and the scale of the deception has been concealed from News Limited and it is our understanding that it has been concealed from the board of the Storm”.

He has also brought in external auditors from Deloitte to fully investigate the extent of the scandal, referred the matter to police and generally vowed to pursue every person at the Storm who might have been involved in the matter.

But it appears to be a case of too little too late.

While the Melbourne Storm is a tiny speck in the News Corporation universe from a business point of view, the huge profile that rugby league enjoys in Australia means News Limited executives should have been paying far more attention to the way the Storm was being run than they obviously were.

These breaches were not simply a one-off event at the end of one season — this was $1.7 million worth of payments made over a five-year period. It was systematic rorting at one of the most prominent clubs in the league.

It simply should have been picked up far earlier than it was.

Hartigan might claim he has fallen victim to a few rats in the ranks, but questions should and must be asked about why News Corporation was apparently unaware that anything was wrong in a business it owns.

In the corporate world, the “I was duped” excuse does not wash — the bucks stops at the top.

News said in a statement yesterday that it “makes it a condition of the internal and external audits that are conducted into the club’s affairs annually, that Storm management must verify in writing each quarter that its contractual obligations to the NRL under the salary cap have been complied with and, specifically, that there is no fraud”.

Clearly those checks were not enough as they were too easily bypassed by a group of Storm officials.

But News should have known that annual audits and a signed bit of paper every three months would not be enough to ensure salary cap breaches were not occurring.

After all, rugby league and the AFL have seen several instances of salary cap breaches in recent years, most notably with the Canterbury Bulldogs in 2002.

There have also been rumours of problems at the Melbourne Storm for years — surely the scuttlebutt from the organisation’s sports reporters would have led someone within News to ask a few more questions more often.

News Corp should have known that these breaches could have occurred at the Storm and should have been watching much more closely — what extra governance controls and processes did News put in place to ensure cap breaches did not occur?

Did forensic accountants examine every player’s contractual arrangements on a regular basis?

Did News Corp ask auditors to examine how money was flowing through the club?

Were invoices checked regularly and thoroughly? There are allegations that suppliers submitted inflated invoices so that overpayments could be made to players. Surely a study of a sample of invoices would have raised questions that might have uncovered these breaches much more quickly.

If the answer to any of these questions is “no”, then News Corporation, and specifically John Hartigan, must ask why not.

It’s all good and well for Hartigan to come out after the fact threatening legal action against everyone in sight, but the question must be asked —  what have he and News Limited been doing for the past five years?

I bet Rupert Murdoch might be asking a similar question this morning.


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42 thoughts on “The buck stops with News Ltd in the Melbourne Storm scandal

  1. Pete from Sydney

    why should News have known that ” annual audits and a signed bit of paper every three months would not be enough to ensure salary cap breaches were not occurring”…it seems that’s the system that every other business in Australia uses …. if someone is going out of their way to deceive a company, they can be very successful in the endeavour, quite obviously…

    James, could you not ask the same question of David Gallop and his administration as well? They were getting the same/similiar assurances, and it’s taken 5 years to figure it out…. they’re pretty close to the game, aren’t they?

  2. macadamia man

    Congratulations on the (inadvertent?) juxtaposition of your two top stories today.

    Am I so very wrong is seeing the insurance “debacle” (as even ABC News continues to categorise the story in news bulletins) and the Storm rorting kerfuffle as being virtually identical moral and governance issues on which News Ltd is taking a diametrically opposed approach?

    Clearly by News’ standards the response of chief executives to fraud or malfeasance orchestrated by third parties (allegedly) on a systematic basis is resignations at the very top. Whether they knew about the problem or not?

    Bye bye, Mr Hartigan? Or do I mean Mr Murdoch?

    Perhaps Cabinet should have sought to sell off its interest in running the country at breakneck pace before the problem broke? Or does the suggestion the wrongdoing took place for five years at least (according to the investigations conducted by NRL-salaried officer Schubert on behalf of the 50% News-owned NRL) constitute a get-out-of-jail-quick card?

    I’d post this comment on The Australian’s site, but why waste my time?

  3. Fowls

    Corporate governance issues aside, who really cares outside NSW and Qld? The club may be called Melbourne Storm, but in Melbourne they only have a handful of supporters, they have never had any Victorian players, they have never had any resonance with the Melbourne public. And it’s the most god-awful, boring, skill-free, troglodyte game anyway, with misogynist, bogan supporters, so why would the rest of Australia ever want to embrace it?

  4. Greg Angelo

    Any competent company board has an audit committee with the specific responsibility of ensuring compliance with policy and procedures. If the corporation fails to comply with its own policy and procedures, responsibility is squarely with the directors of the company as they are responsible for selecting the chief executive officer and oversight of governance standards.

    Leaving aside the issue as to whether the game of football is for troglodytes, the issue of governance goes right into News Corporation as the effective owner of the club. What policy does News Corporation have in relation to its executives being involved in related companies and what is its internal governance process in relation to fraud and misrepresentation? I would be extremely surprised if Herald-Sun or the Australian took an active interest in the governance failure dimensions of this particular situation.

    It would be appropriate for the NRL to subject all of its teams to an immediate audit and seek statutory declarations from each team member and its board members they are not aware of, nor participated in, any salary cap breaches over the past five years. This would really set the cat among the pigeons and am equally sure that they won’t do it because there would be almost certainly skeletons in various closets around SinCity.

  5. Brad Sprigg

    A company owned by Rupert Murdoch did something unethical. I’m shocked!

  6. macadamia man

    On the subject of News and ethics (even in public) this may raise a titter of recognition or two:

  7. Pieman

    If this is to stop they have to sanction everyone that was involved or knew of it…players included. And in time amend the policy to reward player loyalty and junior development….

    And by the way there is already a game to play online.


  8. klewso

    It was only 5 years.

  9. klewso

    “Ministerial/executive accountability”, “bats in the ceiling”, “approximate parity in executive/politician’s pay” – which “standards” are we going to see “applied”?
    “Id Like to Know, Right”!

  10. John

    Fool me once, shame on you. Fool me twice, shame on me.

  11. John Ryan

    Gee I wonder what game you support Fowls,I support Rugby League I don’t regard my self as a Bogan or a woman hater,I just like watching a good game of Rugby League.
    As they say shit happens,the NRL and courts will sort it out and in 10 years it will be forgotten,as long as the Storm stay in Melbourne and they are given the chance to get it right life will go on.
    I will await the reaction when an AFL club gets caught out

  12. Frank

    So News Corp have been duped. In good faith they invested in a program and unscrupulous individuals have rorted and cheated the system. Sounds like just the sort of issue that Newscorp usually highlights and then bays for the head of the organisation involved. Maybe not this time.
    Is this Newscorp’s “botched” Management program?

  13. Jim Reiher

    I wonder if the very people who think Federal Labor, and Garrett in particular, is responsible for the Pink bats scandle, will agree that News Ltd and its leadership is responsible for this scandle? I doubt it. They will be entirely hypocritical in their estimation of the two issues.

    But then, they want to ridicule Labor on the insualation issue, and they want to avoid ridiculing the conservative News Ltd on the other….

    So the top is to blame on number 1, and the people lower down are to blame on number 2.

    Fools: “those who want to have their cake and eat it too”.

    as Macadamia Man said: “great juxtapositon of the two top stories”.

  14. billie

    Nobody in Melbourne cares about rugby.

    What is NEWS CORP hiding by revealing these rorts?
    – the overwhelming success of the hospital’s reform
    – the success of the [maligned] ceiling insulation program
    – something else below the radar

  15. deccles

    I live in Melbourne. I care about rugby (union). League I couldn’t give a toss.

  16. Venise Alstergren

    DECCLES: Is there a difference? I’m not a footy supporter so I honestly don’t know.

    BRAD SPRIGG: I so agree with you. As if any company owned by Rupert Murdoch could even think unethically!

    🙂 🙂 🙂

  17. Adam Paull

    It constantly amazes me that people will actively hunt down an article on the internet just to leave comments that say they couldn’t care less… The very fact that they are wanting the world to read their valuable opinion proves otherwise! The fools!

    They must be very busy people telling the world everything that doesn’t interest them…

    For the record – I think Rugby League is a great game rich in history and tradition, played by tough men with great displays of skill and stamina and followed avidly by people from all walks of life… just like AFL. The fact that a tiny country like Australia can, over the course of a hundred years or so, develop a massive following for not one but two original and virtually unique-to-the-world sports is fantastic, and this constant bitching about which is the better game is utterly pointless. If you’re such the fan of your code as you say you are then you can’t help but admire the players of the rival “footy” because their professionalism, athleticism, bravery and determination are absolutely identical.

  18. alan tidwell

    Buck stops with New Ltd, more like the buck vanishes in a dark hole never to be seen again.

  19. Julius

    Apart from playing petty games of Gotcha when News Corp’s attitude to issues doesn’t always appear to be consistent, especially when its own interests and conduct are concerned, is there anything worth commenting on here? If News suffers a material loss shareholders’ equity because of some tiny part of its empire misbehaves then shareholders have a right to complain.

    But, apart from that, who cares? Compared with what has popped up over the years at the ANZ, NAB, BHP, RIO, not to mention the AWB scandal, the issue is one that was worth only a few seconds of Hartigan’s time per month in attention to Melbourne Storm….

  20. The Keeper

    It will be very interesting to see how this unfolds. News Corp denies having any knowledge of the salary cap rorts which means that someone has defrauded the company of $1.7 million. They have a duty to their shareholders to make every effort to recoup this money and press charges against anyone involved.

    Will they pursue it in court? I doubt it. It is highly unlikely that News Corp did not know what was going on. Are they trying to tell us that Brian Waldron is some sort of modern day Robin Hood? Why would anyone take the huge risk of stealing $1.7 million from they’re employer only to use it to give other employees a bit of a pay rise? It is just not plausable.

    While on the subject of the Storm, who does Craig Bellamy think he’s fooling? Player retention and recruitment is one of the most important parts of an NRL coaches job, of course he knew what was going on. If he does end up getting the sack he should take up politics because after his efforts this week I’m sure Tony Abbott would love to have him.

  21. Holden Back

    So which roofs did Melbourne Storm insulate?

  22. Silver BB's

    Julius : Do a Google search for
    “News Corp. to pay $500M settlement to Valassis”
    “The Cost of Valassis’ Suit vs. News America ”

    They buried the law suit from public view by settling.
    $500 Million isn’t should qualify on this count :

    “because of some tiny part of its empire misbehaves then shareholders have a right to complain.”

  23. Liz45

    Jim Reiher
    Posted Friday, 23 April 2010 at 4:35 pm | Permalink

    “I wonder if the very people who think Federal Labor, and Garrett in particular, is responsible for the Pink bats scandle, will agree that News Ltd and its leadership is responsible for this scandle? I doubt it. They will be entirely hypocritical in their estimation of the two issues.”

    Hear! Hear!

    I think the shock, horror of Hartigan is due to the breaking of the 11th Commandment – ‘Thou shalt not get caught’? Amazing how this person is so busy pouring buckets on the heads of others(Garrett for example)but conveniently removes himself when it comes home to him? Now why doesn’t that surprise me?

    I stopped supporting NRL when the shameful and disgusting Bulldogs disgrace happened several yrs ago, and nothing has made me change my mind since that time – in fact, it’s only got worse. How decent men can keep on supporting misogynists and participants in revolting behaviour/attitudes towards women says a lot about them – obviously, not many decent men support NRL? My local team The Dragons have not engaged in this behaviour, in fact, are one of a very few clubs that have signed a ‘pledge’ to uphold respect for women? The revolting attitudes to women are in both codes of football – from the top down in some cases! How Matthew Johns got another job in the media is proof of that! It disgusts me!

  24. Venise Alstergren

    ADAM PAULL: If your comment is directed at me, you should stick to football. I wouldn’t know a footy competition if I wandered into it.

    However, and in case it had escaped you, the whole competition is-is this rugby, or soccer?-owned by Rupert Murdoch, via News Corporation-to you that means the Herald Sun. It should mean more than that, but footy supporters aren’t noted for their mental brilliance.

    With one blinding exception- A dog who lives on the moon. First Dog, I salute you.

    Anything which involves Rupert Murdoch interests me deeply, do you mind?

    BTW, what are your interests; astrophysics?

  25. toddy

    The whole Storm rort stinks of News LTD trying to wash their hands before they sell the Storm and the Independent Commission takes over the News LTD run NRL. Better to get it out in the open and cop the punishment while they are still in control of the club and have significant influence in the investigation by the NRL. News LTD is a global company worth billions and the ramifications if they were caught up in the rort would be massive. Also, wasn’t Foxtel a major contributor to the rort and who is a 25% share holder? News LTD.
    Is there a journo in Australia who is willing to put future job opportunities on the line to challange News LTD that they did know what was going on?

  26. Liz45

    @TODDY – I think you’re spot on! Let’s see how Andrew Bolt and Piers Ackerman respond to this? I can ‘hear’ the deafening silence! Typical! They’re only good at ‘bashing’ up asylum seekers or sole parents or people in Gaza or?? It’s a long list! But, on this issue? ‘Mum’s’ the word! Rupert must be so proud of them! They must think we’re stupid!

  27. Venise Alstergren

    TODDY: Now there speaks a bit of wisdom. Well done!

    LIZ45: Hi there Liz! I love your comment re Piers Ackerman and Andrew Bolt. I’ll bet there are some mental contortions going on inside their misogynistic heads.

  28. Liz45

    @VENISE ALSTERGREN – Hi Venise, how are you? How is your legal case going? You have my sympathy. The road to justice is exhausting, at the very least? I’ve been there!

    I have an inbuilt ‘antenna’ re these two. I just can’t stand them at all. Watch this space, they’ll be ‘known’ for their thundering silence, both being employees of Murdoch!

  29. John Ryan

    Um what has it got to do with those two wankers,gawd knows I some wonder what goes on in peoples heads on here,I don,t like Murdock at all,nobody asked him to start super league,only Ribot who has a vivid imagination,the money Murdock was throwing around I bet none of you would have knocked it back.
    A lot of people who should have know better made fools of them selves over that,but there seems to be a idea that Rugby League supporters are some kind of woman hating thugs,maybe you who think that should wander around Perth and watch the locals who behave in much the same way,but then there all AFL supporters who are nice kind middle class people such as yourselves.
    I have done a lot of things in my life, seen the worst of people in some jobs I have done, but the hypocrisy of some on here toward people who follow RL is amazing,then you start on the players about attitudes to women,odd how AFL rape and assault cases don,t get a run odd don,t you think,and I await your remarks on the first player to die in an AFL match when he is hit in the head by some blokes knees or ends up with a broken back or neck as in AFL you can be hit from any direction.

  30. napoleon dynamite

    “the huge profile that rugby league enjoys in Australia means News Limited executives should have been paying far more attention to the way the Storm was being run than they obviously were.”

    Is the editor serious, huge profile??? apart from some sydneysiders and a little pocket of New Zealand expats that live in Melbourne, not sure about huge though editor…? Rugby League & Union have been leading a very painful and slow financial death for the past 20 years and cannot even compete (although they have tried) with our main sporting code, the AFL.

    but in all seriousness, this would serve as a warning to more than one club, more than one sporting code in Australia…………………..!

    but, apart from the Rugby fans, which is not a big fan base compared to AFL, who really cares?? it has always been a badly run league with beer guzzling fans with an IQ < 50!

  31. Venise Alstergren

    LIZ: I don’t want to depress you, but our dearly beloved state Premier, the one, the only John Brumby, and his sidekick, Hulls, are vaporising all over the place, rending their hair, and, if I have my facts right, close to suggesting a financial lifeline be flung somewhere.

    Not even they could seriously mean it, unless it’s a hint to Murdoch to give them one? Who knows?

  32. macadamia man


    How well named. Back to Elba with you until you pull your head out of the wind-up vacuum flask, please. . . Can I quickly remind you that the lead “fall guy” / perpetrator of this nasty little scam was an import from the glorious game of Rules who has clearly learned his own “games” right at the heart of the AFL? Keep your dodgy practices and your dodgy practictioners where they belong next time, please . . .and perhaps wonder where the fickle searchlight of fiscal probity in Australian sports will fall next?

  33. daveliberts

    As a South Australian who doesn’t even understand the game, I really don’t care. But it does seem to me that News Ltd really didn’t want this to happen, and the evidence seems to be that the system works (albeit belatedly, but if only a handful of folks were in on the rort then even this seems feasible). Sure News owns the Storm, but they also half-own the NRL and by virtue of this they seem to own the very body which has announced the Storm’s very significant penalties. I’ll leave it for others to determine whether their major investments in both a team and the league are a conflict, but in this case Gallop doesn’t seem too worried about having inflicted the appropriate penalties, even though this has trashed the Storm’s brand at least for the time being.

  34. napoleon dynamite

    @Macadamia – your argument is irrelevant given it has happened to Rugby League, not AFL… look at the regulation of your game, not the perpetrator. I think blaming another code, for starters, might provide some evidence why your game is irrelvant in Australia these days.

  35. godotcab

    What is the prime business of News Ltd? News gathering.

    They insist that they didn’t know what was happening at Melbourne Storm.

    That’s a huge story for much of their audience, right under their noses, at a club they own, and going on for years, with rumours about it everywhere.

    So, Hartigan is either lying, or he is admitting that his company are crap at journalism.

    Either way, News Ltd products have no credibility.

  36. Bellistner

    Has anyone spotted book-smoke emanating from the back rooms of other NRL clubs this past week? Or sudden bulk purchases of shredders?

  37. julieb

    No doubt the Melbourne Storm aren’t worried. All they have to do is a ‘Matty Johns’ – a mea culpa followed by a few months of behaving themselves until everyone forgets your sins- and they’ll be in line for their own TV show. That will pay for their salary cap problems. Akerman and Bolt will keep quiet until they’re ready to start claiming unfair treatment- and in the meantime just continue to badmouth asylum seekers and single mums
    Australia should now be known as the land of the Rort!

  38. Liz45

    @VENISE – It’s interesting to read your comment re Brumby – we wait with bated breath. It’ll also be interesting to see if JULIB’s view of Akerman and Bolt’s responses will be. I don’t buy the rag they write for – nobody would call them journalists, surely!

    I’m still waiting for one NRL person to be convicted of one of the crimes that allegedly was committed against a woman/women? So far, they’ve all managed to escape. Says it all about male dominated sport doesn’t it, particularly Rugby League and AFL too! Equality is still a long way away!

  39. Venise Alstergren

    @LIZ: Hi there, I don’t think equality will ever happen. Religion makes sure it wont!

    I thought JULIEB’s prognostication to be very interesting.

    You have missed nothing by not reading the Hun. But it does so cater for the people who read the comics and the sports news! After that it’s on to the far from salubrious Andrew Bolt. Aka the Bolt from hell.

    Stimulation of the mind is a non-event with this paper.

  40. Venise Alstergren

    PS: It’s owned by Rupert Murdoch, which should tell you all you want to know.

  41. adelaide

    “What about [name withheld] leaving us and getting paid $200,000 by [sponsor withheld] outside the cap by the [team name withheld] that was said by Brian Waldron in a recent report. “This is a joke. All clubs do it. I can’t say any more. “ No wonder a storm is brewing inside the NRL ranks.

  42. macadamia man

    @ Napoleon

    In the kingdom of the one-eyed you rule.

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