Melbourne Storm salary cap breach


The Melbourne Storm salary cap breach was a major breach of the National Rugby League's strictly enforced salary cap by the Melbourne Storm club over a period of five years. The discovery of these breaches in 2010 by the NRL resulted in it stripping the Storm of all honours achieved as a team between 2006 and 2010. This included the 2007 and 2009 premierships and 2006, 2007 and 2008 minor premierships. Melbourne also had its 2010 World Club Challenge title revoked, more than one year since the initial penalties were first announced.

Investigation

Following claims by a whistleblower that the club was keeping a second set of books, the NRL conducted an investigation in late 2009 and early 2010. After initially denying the claims, Storm officials confessed on 22 April 2010 that the club had committed serious and systematic breaches of the salary cap for the last five years by running a well-organized dual contract and bookkeeping system which left the NRL ignorant of $3.78 million in payments made to players outside of the salary cap, including $303,000 in 2006, $459,000 in 2007, $957,000 in 2008, $1.021 million in 2009 and $1.04 million in 2010.
As a club's compliance with the NRL salary cap is supported by statutory declarations, the club's owners requested that fraud and perjury charges be laid against those responsible and stated that any person who knew of the breach would be expelled from the club. The Victorian Fraud Squad began preliminary investigations on 23 April, and the Australian Securities and Investments Commission also made preliminary investigations and indicated an interest in investigating breaches of the Corporations Act. Storm executives had arranged for inflated invoices to be submitted to hide the payments to players. This involved submitting invoices of up to $20,000 above the real value of the services rendered with this amount paid directly to players by the third party suppliers, although there was no suggestion that the suppliers were involved in submitting the inflated invoices.
As a result, NRL Chief Executive David Gallop stripped the Melbourne Storm of their 2007 and 2009 premierships and their 2006, 2007 and 2008 minor premierships, fined them an Australian sporting record $1,689,000, deducted all eight premiership points they had already received in the 2010 season and barred them from receiving any more premiership points for the rest of the 2010 season.
The Storm initially accepted this decision without question but later appealed the loss of their two premierships and premiership points for the 2010 season. The court action was later dropped with the Storm paying the NRL's legal costs. The Storm were also ordered to cut their payroll by $1,012,500 to meet the 2011 salary cap by 31 December 2010; failure to do so would have resulted in the club being suspended from the 2011 NRL season.
On 23 April the NRL seized a secret dossier hidden in the home of acting chief executive Matt Hanson. The dossier contains letters of offer to three of the Storm's star players and another unnamed player guaranteeing illegal payments in the form of goods from third parties. For one player with a $400,000 contract lodged with the NRL, the letter of offer was valued at $950,000, and contained a $20,000 gift voucher for a national retailer and a $30,000 boat. Other offers included a new car for a player's partner and $30,000 in home renovations. The offers together amounted to $700,000 of which the four players had already received $400,000. While Waldron had signed all the letters of offer only Inglis and Slater had signed theirs, albeit the letters were written in a way that the players may not have realised the extra payments were outside the cap.

Suspects

Former CEO Brian Waldron, suspended chief executive officer and former chief financial officer Matt Hanson and current chief financial officer Paul Gregory are alleged to have been the main culprits behind the breaches. Former chief financial officer Cameron Vale, who is now with the Australian Baseball League, was said to have been the whistleblower on the situation, a claim he denies.
On 23 April 2010 Brian Waldron resigned from his position of chief executive of the Melbourne Rebels rugby union club after just six weeks of taking over the expansion team entering the new Super Rugby competition. The AFL investigated, and cleared, the St Kilda Football Club's players' payments during Waldron's three-year time at the club alongside now-former Storm CEO Matt Hanson.

Reaction

The news was referred to by The Age newspaper as "The biggest scandal in Australian sports history". Club supporters had mixed reactions and feelings towards the situation as the club was left with "dishonour and shame". No club had ever been stripped of a competition title in 102 years of professional rugby league in Australia. One fan dumped his jerseys and other memorabilia at the team's Carlton headquarters on hearing about the incident, while others simply broke into tears. There was a general feeling that former CEO Brian Waldron was to blame for the entire scandal and not the players.
Then-Deputy Prime Minister Julia Gillard, who is the club's number one female ticket holder, said that supporters would be shocked and saddened, but hoped that they would stand by the club as it rebuilt. Storm chairman Dr. Rob Moodie apologised to the fans, many of whom publicly removed their Storm colours and dumped them in disgust.
Several sponsors, most notably ME Bank, Hostplus and Skins immediately withdrew support from the club while Harvey Norman, Jayco, Suzuki and KooGa continued their support, with their logos featuring prominently in a hastily reconfigured jersey. In contrast to those sponsors who distanced themselves, Jayco and Suzuki increased their existing support to compensate for the losses of other sponsors.
Betting agencies received an "old fashioned betting sting" as some punters found out about the salary cap allegations before they became common knowledge. At the time, the Storm were inside the top four of the NRL ladder with four wins and two losses, $4.20 favourites to win the title and $251 to win the wooden spoon. TAB Sportsbet has claimed it will be due to pay out at least $500,000 before betting was suspended.
Melbourne sports industry experts John Poulakakis and Martin Hirons were reported in The Age, saying it could take little more than four weeks to two months to recover the $2 million it is believed to have already lost in sponsorship.
By 30 April the Age was reporting a surge in club membership of 700 over the five days since the scandal erupted, with members who had previously revoked their memberships contacting the club to have them reinstated.

Aftermath

The matter was referred to ASIC and the Victoria Police on 15 July. The matter was also referred to the Australian Tax Office and the Victorian State Revenue Office the next day.
Despite having to play out the remainder of season for no points, Melbourne remained competitive in 2010, and continued to win games, finishing with a record of 14 wins and 10 losses. Had they been allowed to play for points, they would have finished equal 5th. Their final game of the 2010 home and away season was a 34-4 win over the Newcastle Knights.
On 6 May 2011 the Victoria Police concluded its fraud investigation into the matter saying that "It can no longer expend further resources on this matter" and that "No fraud has been committed".
On 11 May 2011, the National Rugby League released its report on the breaches. The report did not detail any new breaches or any new penalties, however, it was recommended that Melbourne's 2010 World Club challenge be revoked. It also confirmed the guilty parties and vindicated all players and coaches.
Melbourne remained successful in the years following the discovery of the breach. The club won the minor premiership in 2011, before losing the preliminary final to the New Zealand Warriors by 20-12. In 2012, the Storm won the Grand Final against the Canterbury-Bankstown Bulldogs by 14-4; the Storm then defeated Leeds to win the 2013 World Club Challenge. They then won another minor premiership in 2016 and lost to the Cronulla-Sutherland Sharks in that year's Grand Final. In 2017 they again finished on top of the ladder, but this time went onto to win its third legitimate premiership, defeating the North Queensland Cowboys by 34-6 in the Grand Final.
Also in 2017, Melbourne held a gala dinner for the 10 year reunion of the 2007 premiership side who were stripped of the title. Coach Craig Bellamy spoke to the media saying "They can say what they like and erase what they like, but they are not going to erase these guys memories of what they did in 2007". In 2018, they won their third World Cup challenge title, again beating Leeds Rhinos.
In 2016, the Parramatta Eels were also caught breaching the salary cap. It was revealed in March that third-party payments had been made by several companies to several players, which is strictly prohibited in the NRL. The main point of difference between the two episodes was the manner of the punishment: while the Melbourne Storm were not allowed to play for points for the remainder of the season, the Parramatta Eels were permitted to play for points as soon as they fell back in line with the cap. It was acknowledged that this change was made due to the demoralising nature of the Storm punishment, including fans having to witness a team running out week after week with nothing to play for.
In 2018, the team the Storm beat in the 2007 grand final, the Manly Sea Eagles, were caught breaching the salary cap over a period of years in 2018. The Eagles were fined $750,000, but had no points deducted.
In July 2018, Melbourne player Billy Slater spoke to the media about his possible retirement, and midway through the discussion said "I've been fortunate to play in many grand finals. I've won four and that won't determine whether I go on next year". Slater's statement, while accurate, does not reflect the fact that two of the premierships he won were later stripped by the NRL.
In March 2019, Melbourne player Cameron Smith called for a new investigation to be conducted with the potential for both the 2007 and 2009 stripped premierships to be reinstated. Smith was upset at the fact that the Cronulla Sharks were allowed to keep their 2016 premiership despite being over the salary cap between 2013 and 2017 to a total of $700,000. Even though the amount that Cronulla were over the cap was a lot less than the Melbourne salary cap breaches which was $3.7 million, Smith felt that Melbourne had been hard done by. In the week that followed, NRL CEO Todd Greenberg ruled out the possibility of the 2007 and 2009 stripped premierships being reinstated.
On 1 August 2019, Cameron Smith spoke to Matthew Johns in an interview about the club's stripped premierships and how Smith said those premierships victories were still considered valid to him. Smith said to Johns "You’ve got different opinions... they are ours, We’ve still got the memories, we’ve all got the rings, I get it, people will say ‘how can you think like that?’ but that's just the way it is".