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Matt Punch and Bob Gosford report from the Northern Territory

All eyes in the (rugby league) world will be on the Parramatta Eels v South Sydney Rabbitohs match tonight as the Eels try to re-start their faltering 2016 season.

The Parramatta Eels and the NT government have both provided fans of the slow-moving-train-wreck school of governance with no end of sport over the past four years. And the links between the club and the NT government extend beyond self-inflicted mishaps.

Parramatta was the wooden-spooner in the National Rugby League competition in 2012 and 2013 and didn’t improve much on that in the years following. 2016—until the salary cap scandal broke out in recent weeks—saw them travelling well in 5th spot, with a 6 and 3 win-loss record.

The Northern Territory Country Liberal Party government kicked off well in August 2012 with a come-from-behind win that promised much but its time in government—as has been chronicled here and elsewhere–has been scarred by bitter in-fighting on and off-field and poor results.

August 2016 will be a crucial month for both Parramatta and the CLP. By then we’ll know if Parramatta will fail to make the NRL play-offs yet again—as it has since 2009–and whether the CLP will become yet another one-term government.

We will also have a better idea by August as to the value for money that NT tax-payers are getting for an extraordinary deal that has seen the NT government pump $4 million over four years into Parramatta for two rugby league games a year (one pre-season) and associated community engagement, coaching clinics and school visits.

NT Chief Minister Adam Giles is a big fan of the Parramatta Eels and while the August 2013 arrangement between Parramatta and the NT government is said to be a purely commercial deal, that promotes NT tourism and business in what they claim to be the country’s third-biggest market, western Sydney. However the value of the deal to the NT is questionable, particularly in light of current events.

Parramatta may be the most incompetent and unstable sporting franchise in Australia. When the NRL announced it was proposing to strip them of 12 competition points and fine them $1 million for salary cap breaches, NRL CEO Todd Greenburg stated:

“In the last seven years, this club has had 25 directors, six CEOs and four head coaches …They have breached the salary cap rules in five of the last six years. As we sit here today, our preliminary findings suggest that the club is again over the salary cap for 2016. This has to stop. It stops today.”

An unkind observer might note that the Parramatta Eels are the only show in town with more reshuffles and coups than the NT’s Country Liberal Party.

The internal turmoil at Parramatta is well-known to the NT government. In late 2015, Chief Minister Adam Giles threatened to drop the deal with the Eels because of governance concerns–what he then described as the “negative aspects that have often been spoken about with the Parramatta Eels”.

Giles soon back-flipped on those comments and despite governance at Parramatta lurching into unmitigated chaos–the Chairman, CEO and three others are now suspended–the NT government appears to have circled the wagons around the continuing partnership with the Eels, denying that the deal with Parramatta was under review.

In a marked contrast to Giles’ comments to the Sydney Morning Herald in August 2015, NT Sports Minister Nathan Barrett told The Northern Myth this week that:

We want to see the deal extended and we’re in negotiations right now for an extension … It has nothing to do with the governance arrangements. The governance arrangements are a matter for the club and the NRL and I will leave that with them.”

Part of the reason for the NT government’s nonchalance may be that they’re in too deep financially to wriggle out now.

To put the NT government’s $1 million annual payments into perspective, it is useful to look at the Eel’s current major sponsorship deal with Dyldam, property developers from Sydney.

Dyldam coughs up for jersey sleeve sponsorship, the shirt-front on the Eels jersey and naming rights for the team. How much does all of that cost Dyldam? It is difficult to get a precise figure but in 2013 Sports Business Insider reported that Dyldam and UNIBET were two new major sponsors for the Eels from 2014, “in a deal worth over $1 million a season”.

It is not clear how the money is split between Dyldam and UNIBET, but Fairfax journalists Adrian Proszenko and Daniel Lane concluded that Dyldam was paying less than the NT government is each year.

Proszenko and Lane said that “It would be a disaster for the club” if the NT government ended the highly lucrative arrangement.

From an NT taxpayer’s perspective, the real cost to the NT of the arrangement is even higher–and may be set to grow.

The NT government spent between $2.8 and $3.3 million upgrading Anzac Oval in Alice Springs through 2013-14, in large part to bring the facility up to NRL competition standard to host the annual pre-season game for the Parramatta Eels. This year’s game attracted a modest crowd of about 2,800. The Darwin mid-season game attracts a larger but nonetheless underwhelming crowd, usually around 8,000.

Despite the significant investment in facilities in Alice Springs, the NT government is now looking to move the annual Eels pre-season game elsewehere. Sports Minister Nathan Barrett told The Northern Myth this week that:

I’m looking to move the trial game from Alice Springs to either Katherine or Nhulunbuy and I’m seeking to have an additional points game in the Northern Territory next year, so that’s part of the negotiations that are under way.

On The Northern Myth’s estimation neither location–Katherine is a small town and Nhulunbuy was even smaller before the town’s population all but halved in recent years–has the facilities or population to sustain even a pre-season match.

Significant investment—as with Alice Springs we are talking millions of dollars—will be required to bring the local facilities up to NRL standards.

Last week Parramatta CEO John Boulous (now suspended) told The Northern Myth:

The Parramatta Eels currently have a current commercial partnership with the Northern Territory government which is executed through the Department of Sport and Recreation. It is entirely separate from the NRL salary cap and third party agreements.

We are proud of our association with the Territory, and the role we play working with stakeholders and the community to grow the game of rugby league and deliver meaningful messages and outcomes.

The problem for all concerned is that the current Eels scandal may the first time taxpayer money–in this case NT taxpayer’s money–has been caught in a sporting salary-cap scandal. Investigations into affairs at Parramatta are on-going.

No one from the Eels, the NRL or the NT government has been able to guarantee to The Northern Myth that NT taxpayer dollars weren’t used by the Eels for salary cap rorting. The NRL has yet to respond to questions from The Northern Myth.

Notwithstanding that there is no clear link between the alleged salary cap rorting at Parramatta and the NT government, there is plenty of cause for the government to be concerned that their funding could have been misused by the Eels.

The NRL’s 3 May 2016 press release outlined three key elements to the allegations of salary cap rorting at Parramatta:

In broad terms, the Integrity Unit investigation has made preliminary findings that the Parramatta club breached the salary cap rules and code of conduct by:

– Paying players undisclosed remuneration from its own resources

– Procuring third party agreements for players in breach of the salary cap rules

– Conspiring with club suppliers to inflate or issue fictitious invoices to raise cash that was then relayed to players

The first allegation must be of greatest concern to the NT government. The NRL is saying that Parramatta made undisclosed payments to players directly from the Club’s own funds.

The NT government initially told The Northern Myth that “biannual” payments are made under the partnership agreement to the “Parramatta NRL Club Pty Ltd”.

When The Northern Myth conducted the usual corporate searches we were unable to identify any company called Parramatta NRL Club Pty Ltd. On checking with the NT government, they said that the entity to whom payments were made was the “Parramatta National Rugby League Club Proprietary Limited”.

Again, corporate searches confirmed that no such entity exists. The Northern Myth sought clarification from the NT government by way of an ABN or ACN—both unique identifiers—in order to clarify the identity of the entity to whom payments were made. The NT government responded by stating that it did not provide those details in relation to “commercial-in-confidence” arrangements with third parties.

What we think the NT government meant is that the payments were going to the Parramatta National Rugby League Club Limited.

The Parramatta National Rugby League Club Limited is the NRL licensed entity–in effect–the footy club. It is also a wholly owned subsidiary of the Parramatta Leagues Club Limited, and has been propped up financially by the Leagues Club for some time.

Unless there are some extraordinary and hitherto unknown conditions in the partnership agreement mandating that the NT government’s payments are to be held in separate accounts by Parramatta National Rugby League Club Limited, and then applied to certain purposes, we can’t see how there would have been a ring-fence around the NT’s payments once they were paid out.

We have been unable to find any line items in the consolidated group accounts of Parramatta Leagues Club Limited that separately report on the payments by the NT government. The most likely outcome seems that NT government’s payments went into the general accounts of Parramatta National Rugby League Club Limited.

If NT taxpayer funds became inseparable from the rest of the Eels money, then it appears that NT taxpayer funds formed part of what the NRL called the Eels ‘own resources’ – which the NRL alleges were then used to make undisclosed payments to players in breach of the salary cap.

As yet, we have not seen a copy of the agreement between the Eels and the NT government. Further questions arise – have the Eels breached the agreement with the NT government? What conditions did the NT government put on the $1 million paid to Parramatta each year?

No doubt more details of the commercial partnership between the Eels and the NT will emerge in due course, particularly in the course of the NRL investigations.

More could come out, for example, as Liquor and Gaming NSW (the licensed club regulator) delves into the Parramatta accounts. It has been reported that they will scrutinise possible wrongdoing at both Parramatta corporate entities, including checking whether money held by the footy team entity has been used for legitimate purposes. Logically, this must include examining the receipt and use of the NT government’s money.

Parramatta Eels directors (who are directors of both entities) may also come under scrutiny from ASIC. Have a look at this clanger in the consolidated accounts of the Eels as at 31 December 2015:

Subsequent to the end of the Club’s financial year, the Club received notification that the NRL [sic] would be commencing a review of the compliance of the Parramatta National Rugby League Club Limited (PNRL – a subsidiary of the club) with respect to the NRL salary cap rules…PNRL Board and management have and will continue to fully cooperate with the NRL…Nothing has come to the attention of the directors that would suggest that this investigation would result in material financial penalties to PNRL.

For those counting the beans and taking into account the NRL’s proposed fine–not to mention the loss of sponsors and the subsequent knock-on effect on gate, merchandise and gameday revenue-–that could be a multi-million dollar error (or misstatement) by the Directors.

Interestingly enough, it may be in the Territory where we start to get answers first.

The deal between the NT government and Parramatta may well be scrutinized during budget Estimates hearings in the NT Legislative Assembly in coming weeks.

Pity the poor public servant from the NT Department of Sport and Recreation who has to explain how the NT government managed to get themselves entangled in an NRL salary cap scandal.

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Declarations: Bob Gosford attended the February 13 pre-season game at Anzac Oval in Alice Springs on a complimentary ticket. Bob Gosford supports the Cronulla Sharks. Matt Punch is an insufferable St George Illawarra Dragons fan.