I never really bought into the Searle brilliance; if every person with an accounting degree was a business genius then the world would have 30 million Apple corporations.
I think he is, unfortunately, just a man found out of depth, someone who took on too much risk without really realising what he was doing.
Searle has since proven himself worse than that a snake-oil peddler extreme.
He’s a liar who designed the blue print for rugby league going forward.
Yes, many will argue that some very smart people lost money during the Global Financial Crisis.
But the most common loser was the punter with a high-risk tolerance but no appreciation for risk management.
Storm Financial was a great case; the intellectual equivalent to a Lego block with a financial strategy that even cursory analysis saw was flawed.
But they were great salesmen, convincing people with limited financial knowledge to follow them off the cliff at a higher cost than any other financial adviser I’ve ever heard of.
This is the common thread they hold with Searle.
Coming into the collapse of the Titans he repeatedly said that the property trust and the football club were different legal entities.
His implication was that the separation of legal entities meant a separation of commercial consequence.
Of course, both he and anyone with a month’s experience with debt arrangement knew this was at best furphy, at worst outright fraud.
Even Ken Lay at Enron was more upfront than Searle about commercial relationships.
Searle convinced the ignorant layman that in no way would the failure of the property trust affect the football club.
That fairytale was fun whilst it lasted.
Now it has played out that the commercial relationship between the two entities, which was clearly known to Searle at the time of his comments, leaves the Titans on death’s door.
For this act of deception I firmly believe he shouldn’t ever be allowed to be the director of a company again.
But given the Australian Securities and Investments Commission’s stunning inability to even pin decent charges against the worst offenders in corporate Australia I think Searle feels relatively comfortable about his future potential to fleece people on the Gold Coast.
When coming into then-NRL Searle delivered a soliloquy on how the Gold Coast had changed and how it was the best city in Australia for spotting a fraud and shutting them down.
I wonder how much he was laughing on the inside as every journo and footy club CEO swallowed it whole.
Not only did they let him into the inner circle but they gave him the keys to the clubhouse.
Remember this fine upstanding moral pillar was the architect of the Independent Commission. A structure which just so happens to deliver owners of clubs disproportionate amounts of power and representation.
Now tell me, would one Michael Searle be one of those owners of a football club? Oh, what a coincidence.
Once again Searle is taking liberties with the English language with the word “independent”.
But hey, I’m sure rugby-league fans will continue to buy it, given how we’ve lapped it up to this point.
The very odd part for me is that those baying for Gallop’s blood over the whole Titans fiasco are the same blind sycophants that lauded Searle’s brilliance.
They suggested he’d be the best guiding hand for rugby league in the first place.
Gould and co. are like petulant teenagers blaming their parents for not teaching them common sense, rather than thinking that perhaps we are over matched in our current positions.
But hey, long live “independence” and the brains trust of the NRL.
mushi
Roar Guru
I think he was deliberately telling the wrong fact. It is why the test is typically misleading or deceptive not “lied”. The two entities are legally separate this is a statement of fact and a painfully obvious one. As I said in a different thread Woolworths is made up of hundreds of legally separate entities, but they don’t try and infer that the performance of one doesn’t influence the performance of the group. Particularly those entities involved in the cross guarantee of debt. I don't think he's Lay, but more pointing out that losing your own money doesn't mean you’re innocent. To go to Crosscoder’s point about not knowing every fact, we don’t know the extent to which he ahs covered up, profiteered etc I do know that some of his comments were misleading but to what extent? Enrich himself isn't being petty - if this all came off he makes a fortune on the property being that he was the majority owner and he's using the NRL club as part of that revenue stream right? Also you say he has a personal guarantee on the loan so any cent he gets from the NRL is effectively not bailing out the game but really bailing out Mr Searle? His recent actions (not saying from the outset) have been less about the club and more about him.
mushi
Roar Guru
I don’t think you can attribute as much value as people do to Costello, at least not at the back end, compared to the cycle we spent pretty frivolously. Countries can comfortably service a level of debt, our debt phobia (but only at the government level we can hock ourselves up to the eye balls) actually keeps tax rates high and just forces risk further down to banks and then businesses. We ar still big borrowers as an economy we are just inefficient about it. It is this kind of thinking that has you blaming the GFC. Economies move in cycles. If you are even mildly astute at running your business you have to have a risk management plan for a cyclical down turn. Now a big problem with the last cycle was it was a “super cycle” fuelled by liquidity and it imbued a complacency in a lot of business people. I think a big difference in how we view these is I don’t consider them “smart” if they failed through their own decisions – unless of course failure was an risk they knowingly undertook. Australia’s economic conditions should not be mentioned as part of the global downturn. Yes the global conditions definitely affected us but to try and pass off that conditions here are akin to what other develoepd nations ahve faced is a bald faced lie. The GFC (which started in 2007, a common misperception amongst the layman is that it started with Lehman Brothers despite the failings of the mortgage market and bond market closure in 07) is an Australian fabrication as a term and really does cloud just how comparably mild this down turn has been compared to the 80s and 90s whilst the rest of the world is going through the worst conditions since the depression. If you can show me data that has Australia facing it depressionesque I’ll concede that you can blame the global conditions. Yes there was a down turn but it was a mild to stock standard down turn, many would argue that we are due for more economic correction which hopefully will happen against the backdrop of better global conditions. Yes your data shows the gold coast was more affected than other regions, this shouldn’t exactly shock anyone right. If you told me there was a down turn my base assumption, before getting data to support, would be that the Gold Coast is more cyclical particularly in the property market and hence I would expect to see more bankruptcies. This would also be my assumption upon starting a business on the gold coast.
mushi
Roar Guru
Agree with the intellectual property aspect. Though the gold coast have had four names on their jerseys thus far so I wonder how far or a leap it would be. So it may come down to – how much do we value the GC over say another self funding bid
Damien
Roar Guru
Just a final point ( I think ) You get rid of Searle then just say good bye to the Titans. The NRL just gives out the license. They don't own the team or it's intellectual property. That belongs to Searle. I can't see the NRL or anyone trying to start up another team from scratch. Its too much hard work. My call is the Titans aren't going anywhere soon. The NRL will give them conditional support..
Damien
Roar Guru
Thanks Rob, I get that. Searle is a guarantor for $10 million of that debt. The banks aren't going to let that slide if to hits the fan. I suppose its just an matter of personal opinion with Searle's intentions and him being corrupted. I just happen to disagree. I think we have more in common than you think although our differences are sort of the crux of the issue..
Damien
Roar Guru
LOL haven't heard Eddie Groves name for a while. Good call. I don't think that the NRL is going to foot the bill in that he'll get a free pass. He'll have to pay it back. You gotta look at this from the NRL's position. Let the Titans die and there will never ever be another team in the Gold Coast. Never. The Suns have set up shop there so in effect the NRL will just be handing that part of Queensland to the AFL. Also now the NRL has 1 less game a week on TV to sell when negotiating the next TV deal. And this 'attempt to enrich himself' tone sounds petty. He's trying to save the Titans. His decisions put them there but what do you want him to do ? He's out there trying to fix up his mess. For some people its probably easier to just walk. And comparing Searle to Lay is harsh. Their cases are poles apart. Bit like when that Samoan rugby player linked the IRB to the South African apartheid government. And the entities being separate ? Are you sure Searle is deliberately lying ?. These are complex structures. I'll bet that you can have QC's on both sides with a good argument. The thing that gets me about accountants (no disrespect intended) is that when I sign my BAS and when they give me advice on how to do things if from why I understand I get in trouble its not their fault. They cost enough now days and if your accountant got caught up in the floods those bills aren't getting cheaper if you know what I mean. (I actually get along well with mine - just thought I'd throw that in). Crosscoder "seemingly intelligent chap" LOL. Play nice Mushi !!
Damien
Roar Guru
Hi Mushi, I'm not arguing with you on the 25 million debt. You've got it spot on by saying its not 'bad debt'. Thats a way better term than mine. I'm saying that the way the media has presented it, you would think that the 25 million is bad debt. Thats all, which further fuels the flame. I understand why they would go that route because its sounds a lot more dramatic but IMO I think its irresponsible..
Crosscoder
Roar Guru
Point taken.Searle (with a decent business background)got himself into the mess ,and he is either the one to extricate himself or fall on his sword. we can thank Pierre Costello fro providing the monetary base to withstand the effects,although big Jules would suggest her spending assisted.No doubt both had an impact. I would like to add Mushi ,and I do consider it important and indeed relevant ,a report bythe Insolvency and Trustee Service of Australia (ITSA) has broken down the number of personal bankruptcies across Australia according to postcode for the year 2011/12. "The Gold Coast and Tweed Heads contributed more bankruptcies than any other".More than 1,900 GC residents were declared bankrupt last financial year," And again from Dun & Bradstreet CEO Christine Christian reporting on business failures in Australia.She noted" these findings by D &;B Global Business Failures report,which found Australian businesses now present a high insolvency risk when compared with the rest of the world". She further stated"Local business failures have trended steadily upwards since 2008(GFC year BTW) ,growing more than 30%". Then "Despite recent rate cuts ,there is palpable lack of confidence in the current operating environment.This is OBVIOUSLY one of the side effects of longstanding global uncertainty and can often be enough to deter businesses from entering the market ,irrespective of actual conditions." I suggest the examples indeed show,the impact particlarly in the GC region. My point in showing companies reducing profits substantially in some cases,was to show the tough environment(which includes lack of confidence-ask retailers), in the current econom,ic environment.Many expert continue to believe it is a by product of the GFC. And the other part of the reduced profitability,was to show no matter how bright the management may be,market conditions,buyer sentiment,and what happens detrimentally oversees can impac their bottom linet. QED they can not all predict the future.
mushi
Roar Guru
So when you said “Searle is an accountant and his legal expertise would be limited”. This wasn’t given a defence for him being unaware that there was a commercial relationship born both out of ownership and the guarantees? If that is the case I apologise as I misinterpreted the comment and your intent. I do stand by the point though that his training as an accountant made him acutely aware of the commercial interrelationship which he sought to down play by making references to being separate legal entities. Also glad to hear that you spent three years doing the degree. Likewise my career in finance, predominantly in debt markets, which has included structuring deals akin to this, had given me a little idea about how all this works. See my point about the GFC above - it is a misdirection because for Australia the effect has been a moderate cyclical low after one of the longest periods of sustained growth in history. There is a reason only Australia and New Zealand refer to it as the GFC because it happened to the world – the rest of the world just described it by the different stages. Also as we went into on the previous thread on this you keep raising companies that lost money (or more correctly reduced profitability) – not that were forced into a fire sale of assets and potential liquidation. Slightly different outcomes but you misdirect by placing them into the same boat.
mushi
Roar Guru
Another point on the GFC Australia did not experience the GFC. Sorry to all you guys out there doing it tough but we avoided technical recession whilst other countries have had mass destruction of wealth. We sit here in mid single digit unemployment whilst Spain tops 20% and blame the GFC – bollocks. Australia has had a super long economic cycle and experienced a very mild down turn with potential for future small down turns to follow. If you develop a business model that cannot survive a down turn in economic conditions through the cycle then your model is flawed.
Crosscoder
Roar Guru
I didn't use the accountant as the defence, do me the courtesy of reading my point.,I stated he would have relied on legal advice setting up the COE and its structure.Big difference. On that basis if he owns 80% of the club,he himself in effect guarantees 80% of the debt and the co owners the remaining 20%. So your point reinforces mine ,that it äint "so simple,the time taken by the auditors would suggest so. He will be the one,one way or another who comes out of the matter either with head held high or tail between the legs. I spent 3 years studying the subject,which I did not complete (my own silly doing) so have a little idea.. I laugh at the GFC misdirection suggestion,when the effects of that so called misdirection are still being felt in many quarters ,and none more so than on the GC.Of course if one has not been subject to the full effects ,or know someone still suffering those effects one can describe it as a misdirection for point scoring.Of course incompetence plays its part at times. If everyone planned for directional movements the GFC impact around the world would have been lessened considerably.Warren Buffet was one who took a hit.Govts can't even get it right.
mushi
Roar Guru
Hmm sorry when you said I couldn’t get it through my noggin, was thick or just didn’t understand I was misinterpreting what was intended to mean my dear fellow obviously we disagree on this matter. Anyway. As to the exact nature and the next of the relationships sure you can’t garner that from the outside, but the existence of a relationship? Now that is a different story. If you see a man taking two hookers up to his hotel room I don’t know exactly what they are doing and for how long but you still know something is going on. But you are right lets agree to stop the point scoring.
mushi
Roar Guru
Searle has since admitted that there was debt guaranteed by the club. Now I don’t think you need a decade in the banking and finance group of a legal practice to realise that if you’ve guaranteed the debts of something you are now commercially co-dependent. As to him being an accountant being a defence for this that is laughable. Do you know accounting standards would have required him to consolidate this wholly owned trust into the parent company? Unless Searle got his qualifications in the 17th century he would have known that the entities were considered commercially connected. There are many reasons why the Auditors could have been called in not the least of which could be to determine the extent of the connection beyond what has already been admitted to. I imagine they will also be looking to see when these relationships were entered into. As to your GFC misdirection – the favourite weapon in the arsenal of the failures of the past 5 years – no they could not quantify the effect. But then no one can accurately quantify the effect of anything and therefore can be given no praise if they can be given no blame. Which then leads to everyone just being mindless lemmings at the whim of chance? You can plan for directional movements, he did not.
Crosscoder
Roar Guru
mushi Perhaps we should wait until all details are spelt out.I inferred nothing of the sort about you ,I happened to have a opposing point of view(so I am indeed surprised by your comment). I stated on the info I had which ATT was publicised in the "reliable"press,the two entities were separate.Now I wasn't there at the signing of any legal agreement and one surmises neither were you. I will therefore not make an explicit statement someone lied without knowing the full facts.Searle is still there ,if in fact it was shown ATT that that was the case,he would not be still there. If it(the relationships of the entities) were so easily explained,there would be no need for an indepth time consuming audit. If you believe point scoring was achieved with your last line,you are sadly mistaken.
mushi
Roar Guru
My problem with the IC The structure of the IC delivers the ruling power over rugby league from the under 7s to the Australian team to single body which can effectively be controlled by the NRL clubs. Yes many will say that the only process the clubs have effective control over is the election of representatives, this is considered effective control. If you can elect all the board members of a company you have control, if you can elect and remove every member of parliament, you have control. Under this process private ownership delivers power not to a broad community membership base but rather to one individual. This structure was devised by a man willing to lie to buy himself time and then ask the governing body, which in future he will be able to influence has a 1 in Also in the past few years we’ve had Melbourne, Sharks and now the Gold Coast all with CEO’s who have acted with differing levels of poor ethical standards. These are the guys we just handed our game to. Now these types of oligarchies can work so long as the people at the top have the interests of the game, not themselves at heart. Problem is there is no way to test that until the worst case comes to light.
Crosscoder
Roar Guru
I have to respond to the point re the separation of the entities as to Mushi's comment .There is still debate yet to be finalised as to the extent of the interconnections and their legal impact.Searle is an accountant and his legal expertise would be limited..One suggests he would have recieved so called expert legal advice as to the implications of the COE,the way the structure was set up If he did not ,then one suggests he is deserving of a right royal financial serve.. My limited knowledge of the law suggests there could well be arguments both ways,as to the liability of the football club.Isn't this exactly the reason the auditors are delving into the shebang with a fine toothcomb. Else one proffers a decision would have been made already as to whether Searle's position is tenable or otherwise. I do not declare judgement until all facts are out in the air and scrutinised. As to the GFC comment ,yes there were people who could see it coming,but it appears no one really knew the full impact of the Freddie Mac and Fannie Mae in the US and the flow on effect world wide,few had an idea the Aussie dollar would strengthen against the greenback the way it has,the record number of foreclosures and bankruptcy in this country was hardly predicted by all.The impact in the building industry now being felt was not predicted by all.In fact many of the Super funds took huge hits,which affected just about every working man and woman. No one predicted the Japanese tsunami.the Christchurch earthquake,the Qld floods.All having an economic impact. The fact there are so many unsold units on the GC says something. There will always be a certain number of people that pat themselves on the back and say they got it right,but the overwhelming majority who do not have the ability to divest themselves of assets or were caught unaware, are the very ones that represent the major part of the community.Many within the financial community were caught with their pants down so to speak.
mushi
Roar Guru
Crosscoder really I'm very surprised given Searle mislead you to the point where you stated ad nausem that the two entities weren’t in any way related. I think in the previous Titans article you inferred I was illiterate if and didn’t understand the technicalities of these relationships. So are you saying that you are simply easy to mislead and it was your fault, or was he duplicitous?
Rob
Guest
Damien, when you buy properties for X and a couple of years later the bank values them at 2X and lets you borrow 80% of 2X so you contribute what the bank gave you to kick off a football team, then a little later on you get some investors to kick in $5m and then ask the bank for 80% of the "end value" of the COE so that you can construct it but you underestimate the cost to construct so you need more money so to get it you don't pay the builder, the plasterer, electrician, cleaner, caterer, tax man and the orange boy - whose money got invested in the "Football Club". I never said Searle didn't have good intentions but he got corrupted along the way. He hasn't lost a great deal of money because there wasn't much to begin with just "equity mate". To answer your question I would rather a "Club" owned the team not an individual, Michael would probably have been a great CEO if he had owners to pull the reins in, but power corrupts and absolute power corrupts absolutely.
mushi
Roar Guru
On the “property arm of the titans was meant to help fund the titans in the future: Utter BS look at the profiles of the two entities. The “club” was the less signficant entity. This was a property development company that also had a football team. I'm giving Searle the benefit of the doubt on how he saw that going in. If someone ran a widgets factory worth 10m and then goes and buys a shopping centre worth 35m (just using made up numbers here). Are they now a company that is more an operator of a shopping centre or a maker of widgets?
mushi
Roar Guru
25 million of debt… Um saying they have 25m of debt if they have 25m of debt is entirely accurate. You are referring to bad debts, because of the football club they have been able to service the debt on the trust. From what I understand (and this is me piecing together info so understand it may not be completely accurate) this was done through financing cash flows (ie more debt) not through operating cash flows (ie money earned)