Rugby: Western Province Rugby Union accused of ‘widespread misconduct’ and using a legal loophole to obtain liquidation
- Antoinette Muller
- 01 Dec 2016 11:26 (South Africa)
Western Province Rugby Union, which last week obtained a court order for provisional liquidation, has been accused of unethical business practices and manipulating their finances in order to do so. By ANTOINETTE MULLER.
Aerios CEO, Costas Constantinou, last week became the man at the centre of a storm after it emerged that his company will be taking the Western Province Rugby Union (WPRU) to court over their decision to liquidate their commercial arm.
Constantinou believes the union is manipulating its finances to appear less than desirable and says the union has been guilty of widespread misconduct and unethical business conducted all while using a legal loophole of liquidation to get out of a contract with his company.
In a wide-ranging interview with Daily Maverick, Constantinou claimed that since the two parties started doing business together in 2011, WPR has been guilty of reneging on contracts and a case of double-timing rights deals from South African Rugby Union (SARU) CEO Jurie Roux.
WPR was granted provisional liquidation and its president, Thelo Wakefield, somewhat surprisingly, is on record as stating that “unfavourable” commercial contracts have led to the decision to liquidate. Wakefield has previously tried to suggest that the two commercial contracts were the work of former CEO Rob Wagner and that the board might not have had much input.
“What is happening here is far bigger than us as a company losing money,” Constantinou told Daily Maverick last week.
“This is about abuse of power and complete disregard for the little guys. What is happening at the union will have a big impact on the nearly 100 clubs who make up the union. It’s a sin,” he says.
The company filed court papers last week, but the issues between the two parties go back much further than that. The two parties first started doing business in 2011, with Aerios taking over the selling of advertising inside of the stadium and giving WPR their slice of the pie.
“We offered them almost five times the kind of revenue that they had been earning up until that point. We also promised to install all the equipment required for this kind of advertising. At the time, that was heavenly for them,” Constantinou says.
But before Aerios could sign on to the contract, Constantinou claims, there was a problem. MegaPro were WPR’s advertising partners at the time, but the union wanted out of the contract. MegaPro, in turn, wanted to do a forensic audit on the union. WPR wanted to settle and needed the cash to do so. Constantinou says his company fronted up the fee and gave WPR a substantial financial injection (of an undisclosed amount) to help ease cashflow problems.
Everything worked reasonably well at the start of the relationship, but things began souring in the years that followed.
Constantinou states: “At the time, there were a few deals that were in place but which were ending in 2013. By 2013, we wanted them to stop dealing with all advertising, including that of sponsors, and let us take over those deals. The agreement was that even when we take over, they would never get less than what they were already earning.
“When 2013 came around, we found out that they had renewed their sponsorship deals with the same advertising agreements in place. We had a scrap with Rob Wagner, CEO at the time, over this. Eventually, he gave us his undertaking that he would not do this again,”.
Slowly but surely, according to Constantinou, the relationship began to stabilise and even grow. By 2014, the union wanted to do something to get more bums on seats and entice young people to get back into the stadium. Aerios pitched a number of innovations to the union, including installing Wi-Fi and developing an app that would allow fans to interact and engage while watching the rugby. The proposal also included a pitch for digital rights to live-stream matches in and outside of the stadium in order to increase reachability.
“This contract took nearly two years to negotiate. We eventually agreed and started putting in Wi-Fi. In exchange for our investment up front, we would get certain digital rights as well as the rights to sell advertising rights within the app,” Constantinou says.
It all sounds simple enough, but it would turn out to be the start of all the problems and the reason, Constantinou believes, why WPR has opted for liquidation.
“We told WPR that they needed to explain to SARU and SuperSport what rights were given to us. We invested millions up front with the understanding that we would benefit in the long term.
“We started off 2016 all guns blazing and eventually WPR told us, instead of having our own cameras in the stadium, we should just use the SuperSport feed. That suited us fine. We started testing, but as soon as we started to push this out, SuperSport told us that they own the rights,” Constantinou explains.
Constantinou says that SARU CEO, Jurie Roux, double-sold the rights without even considering the implications. As soon as Aerios started streaming, the broadcaster voiced its displeasure. Roux, he says, then offered Aerios the SANZAR highlights package, but as soon as those went out on the app, SuperSport threatened to cut the feed. In an attempt to try to resolve the dispute, Aerios pushed for a meeting.
“When we sat down in that meeting it looked like it was completely coerced. The first thing Roux said to Thelo Wakefield when we sat down is whether he knew what rights he had given us. Wakefield then immediately said that it needs to be investigated. This was after two years of negotiations.
“I asked if he was joking. After two years of negotiations, you call us to resolve this and you don’t know what rights you’ve got? Wakefield looked at me and said: ‘I don’t have to answer to you’.”
Constantinou believes that this set in motion the series of events that followed and which ended with the union liquidating its PTY arm. In the months that followed, WPR started breaching contracts “left, right and centre”. Aerios filed an application to the court to get them to stop, which was ignored by the union. A second contempt of court application was filed before WPR conceding and started complying again.
Another meeting with WPR had been held in October when an overarching statement of disputes was discussed and “massive concessions were made”, according to Constantinou. WPR said that they would be seeking approval at a board meeting on November 7 and that is when the news of the provisional liquidation emerged, something that came as a huge surprise to Constantinou.
According to him, WPR had made several payments to his company this year, including R2-million days before the provisional liquidation.
“A company able to make those sorts of payments over such a short period hardly strikes one as a company suffering a cash flow problem,” he said.
He believes that WPR was possibly advised by SARU to opt for the liquidation route because it was the only way to get rid of Aerios and stop SuperSport from suing them (SARU).
Another reason Constantinou believes WPR are trying to get out of the “unfavourable” contract is because advertising has become “significantly more valuable” due to the work done by his company.
“They are looking for a way to hijack our business,” he says.
Constantinou also made “an impassioned plea” to stakeholders, former players and the nearly 100 clubs that form the union to bring about change and “save the sport”. He also believes that while WPR say that the stakeholders are complicit in the decision, he does not believe that this would be the case if they fully understood what was going on. He also says he cannot understand how a company can request liquidation and, in the same breath, say that its stakeholders are willing to pour money into a “new” entity.
“Why not just put money into the existing entity? If WPR asked for our help with cash flow, we would have helped them just like we helped them before.”
Daily Maverick contacted WPR to obtain their response to the claims that the union’s PTY arm is “faking” liquidation, to which CEO Paul Zacks said:
"Given our interactions with Aerios over the recent past, it comes as little surprise that their representatives have chosen to present pejorative, defamatory remarks against individuals in public. It is however, particularly disappointing to see such comments in the public domain at this time, especially given the numerous efforts Western Province Rugby made to engage with Aerios to resolve these issues, with Aerios simply pursuing commercial advantage at every turn.
"The recent statements and claims put forward by Aerios in the media, in an unfounded public relations offensive which is clearly an attempt to justify their actions over the past year in particular, contain a number of factual inaccuracies. As this matter is sub judice, the true facts and circumstances in relation to the disputes put up by Aerios will be dealt with formally and on affidavit by way of the legal process on Monday, 12th December 2016."
Zacks’ claim, however, seems to contradict evidence of a meeting that took place on 25 October this year where concessions were made by Aerios to help ease the union’s struggles, subject to board approval.
Constantinou said that Aerios did not even receive a notice of liquidation in a bid to resolve matters. DM
Photo: Aerios CEO, Costas Constantinou.