Sunday 26 May 2019

Severe cash flow crisis saw CEO make €100,000 loan to Cricket Ireland


Warren Deutrom: ‘It was a very trying time, there’s no doubt about that . . . It was very stressful’
Warren Deutrom: ‘It was a very trying time, there’s no doubt about that . . . It was very stressful’

John Greene and Ger Siggins

A severe cash flow crisis prompted Cricket Ireland's chief executive to advance a short-term loan of €100,000 to the association last year.

Warren Deutrom, who has been CEO of Cricket Ireland since 2006, made the loan available to the association in October 2018 so that staff, and some creditors, could be paid. The loan was repaid on December 7 last.

At the time the loan was made, it is understood that Cricket Ireland was attempting to recoup almost $1m it was owed.

According to documents seen by the Sunday Independent, "the loan was properly documented in a loan agreement at the time". However, the board was not informed until recently, after details of John Delaney's controversial loan of €100,000 to the FAI became public.

Deutrom is one of the country's most highly regarded sports administrators and is also hugely respected internationally. There is no suggestion of any wrongdoing.

Details of the loan are recorded in Cricket Ireland's financial accounts, which will be presented to members at its annual general meeting in Co Louth next weekend.

A briefing note prepared ahead of a board meeting on April 10 sets out the details of the loan and paints a stark picture of the deterioration in the association's financial situation.

"It was a very trying time, there's no doubt about that," said Deutrom yesterday of the period when Cricket Ireland found itself in need of cash. "It was very stressful."

Cricket Ireland's chief financial officer Andrew May, who took up his position in early September, wrote an internal memo in early October that the organisation was "running the risk of serious reputational damage" as pressure mounted from some creditors.

In the note to board members, Bill Cunningham, the chair of Cricket Ireland's finance committee, says that while previous board meetings had discussed cash flow issues, "pressure on cash" became "acute" in "October and throughout November 2018". He cites delays in payment of money due from broadcast rights and "the reluctance by Bank of Ireland to finalise a loan facility in the absence of confirmation from ICC [the International Cricket Council] about future cash payments".

According to a source, Cricket Ireland was in contact with banks and the ICC "on a nearly daily basis" in September and the first half of October 2018. The ICC, however, could not provide written assurances to creditors or to banks on future funding levels until after its board meeting in late October, leaving Cricket Ireland in a catch-22 situation.

"What you try and do is you try and act as professionally and as rationally as you can," said Deutrom yesterday. "You try and leverage as many of your relationships as possible to ask people to whom you owe money to be understanding and to ask people who owe you money to pay you as quickly as possible, so that they too understand the gravity of the position. There's always a balance to be struck, you have to be careful not to portray any sense of panic because that sense of panic communicates itself to people within the game."

Around that time, Deutrom also asked the senior management team to defer their salaries for a week to help alleviate the crisis, which, he says, "they were all very happy to do".

In his note to the board, Cunningham says that Deutrom offered a short-term loan of €100,000 "having exhausted all other potential sources of funds, including ICC, Sport Ireland and Bank of Ireland".

The loan was made on October 17, on the day Deutrom was preparing to travel to Singapore for that ICC meeting. Three days later, the ICC confirmed in writing that Cricket Ireland would receive $6m in January.

Before the loan was made, Deutrom had consulted with Ross McCollum, the chairman of the board, and Cunningham. John Treacy, the CEO of Sport Ireland, had also been informed of the state of Cricket Ireland's finances at that time.

Sport Ireland has advanced grants totalling almost €1.2m in the last two years to Cricket Ireland. Unlike the situation which pertained until recently in the FAI, the Cricket Ireland CEO did not sit on the board. Furthermore, Cricket Ireland did not breach any of its grant conditions with Sport Ireland, having notified them of their difficulties.

It's understood that Sport Ireland worked closely with Cricket Ireland during this time, and made overtures for emergency funding on their behalf. However, the Sunday Independent understands that Sport Ireland was not in favour of the loan being made, advising strongly against it.

Cricket Ireland then sought advice from Beauchamps Solicitors and established that it was, according to Cunningham, "legally permissible" for Deutrom to provide the loan, which was then properly documented in a formal agreement.

Deutrom raised the matter again last month with John Treacy, McCollum, Cunningham and with Anne Nolan, chair of Cricket Ireland's governance committee. In the briefing note, Cunningham says that this was done "following the disclosure of a loan made by John Delaney, the chief executive of the FAI, to that organisation and the negative publicity which this matter attracted".

Senior figures in Cricket Ireland feared parallels could be drawn between the two situations, even though it felt it had taken all the appropriate steps - especially in informing Sport Ireland and their legal advisors.

Cricket Ireland again took advice on the loan and alerted the company's auditors. The advice received was that because Deutrom was not a board member and the loan had been repaid before the end of the financial year (December 31) "no disclosure would be required in the financial statement". However, they were also advised to alert the board.

Separately, Cunningham says that on becoming aware of the loan John Treacy had advised Cricket Ireland to make a full disclosure in its financial statements for 2018.

In the wake of The Sunday Times revelations about the FAI, Deutrom wrote a lengthy memo to Sport Ireland outlining the timeline of events.

Cunningham's note concludes that "in my view, supported by the advice of both the company's solicitors and auditors, the loan made by WD [Deutrom] to Cricket Ireland was above board and legal, made in the best interests of the company, all appropriate procedures were followed and the relevant parties made aware of it."

During Deutrom's term as CEO, he has overseen a radical overhaul of the game and its administration in this country, so much so that Cricket Ireland is regularly held up as an example for other sporting organisations to follow when it comes to governance and structures. It has been a lesson too for others in terms of growing a sport at grassroots and international level. It is thought there is a large degree of sympathy in Sport Ireland over the situation Cricket Ireland found itself in.

When Deutrom took over at the end of 2006, the organisation was a modest €260,000 in the black. The following year saw Ireland's first appearance in the World Cup, triggering enormous opportunities, but also bringing in extra costs such as having to professionalise the playing staff.

Financial pressure has been mounting in the organisation as it struggled to keep pace with its growing number of on-field successes, which ultimately led to Ireland being granted prestigious Test status in July 2017. Ireland's historic first Test was played last May against Pakistan in Malahide.

"What I don't like doing is blaming others," said Deutrom yesterday. "We have to take responsibility for the position that we were in. We can't take all the praise, and then blame others for where we are.

"But, in this instance, key things that went against us . . . and I'm thinking about rain on day one of the Test match, of €100,000 that should have been revenue we were only able to get 25 per cent because that's all the insurance market was prepared to give us."

Deutrom has previously admitted that the inaugural Test match cost over €1m to stage. And the full refund to the 5,100 spectators for day one hit hard.

It's also understood there was also a dispute which had nothing to do with Cricket Ireland but which delayed payment of additional revenue around the international team.

"In this instance it did feel like incredibly cruel luck," says Deutrom. "All of these factors were happening at one time, and all at a time when we'd never been spending more money to ensure that our events were as robust and successful as possible.

"If you think about it [in 2018] we had our first Test match - even though day one rained off, which contributed to our issues, we had an excellent four days of cricket which went to the final day and potentially could have led to Ireland being a winner of its first Test; we had two fabulous days against India, two sell-outs; we had two brilliant days at Malahide under glorious skies; we've opened our high performance centre at Abbotstown . . . There was so much to be incredibly optimistic about that it would have felt incredibly unfair if all of that fell down over what was effectively a short-term cash flow issue, which was largely out of our control."

Sky Sports and RTÉ bought the Irish and British rights to show the Test and two subsequent Twenty20s against India, while sports marketing agency Pitch International paid for the rights to sell the game worldwide.

Cricket Ireland - which trades as the Irish Cricket Union Company - reported deficits in its accounts for 2016 (€84,766) and 2017 (€58,547) and the Sunday Independent understands that it will next week report another deficit for 2018 after a difficult year. The cost of competing in major international fixtures at home and away against high-profile teams like England, Pakistan and New Zealand is taking its toll. For instance, the tri-series with New Zealand and Bangladesh in Malahide and Clontarf two years ago cost over €700,000 to stage but returned only €342,575 in revenue.

The Malahide club ground where Ireland play its biggest games has very little of the infrastructure needed for international cricket, so temporary grandstands have to be built, marquees erected and pre-fabricated changing rooms and media centre installed. Broadcasters, too, have to be accommodated in what is a village ground for the rest of the year.

Deutrom previously admitted that he had "risked the house" on building and selling out a 10,000-seat capacity pop-up stadium for the one-day game against England in September 2013.

Cricket Ireland last year announced it would build its own stadium on a site that is currently part of the National Sports Campus in Abbotstown, citing a hugely increased fixture list. None of the other international-standard grounds at Clontarf, Stormont and Magheramason have permanent structures suitable for hosting major fixtures.

Last year the board approved a budget of €9.3m, an increase of 50 per cent on 2017.

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