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USA Rugby’s Congress assembles this weekend in Austin, Texas, and two expected hot topics are PRO Rugby and the performance of the national governing body’s Board of Directors.
The former makes sense because this is the first Congress assembly since the uncovering of PRO’s horde of unpaid employees and vendors, and the latter because some well-known members of the rugby community have been displeased with the current state of American rugby, circulating a letter calling for Congress to hold the Board to account, but also because this is the first congressional meeting since the uncovering of PRO’s horde of unpaid employees and vendors.
It’s also worth noting that the last Congress meeting was held at the end of August of last year, and USA Rugby CEO Dan Payne hadn’t yet been on the job he inherited from Nigel Melville, who held office for nearly 10 years, for a full month. Since then, we’ve learned USA Rugby is suffering a $1 million dollar shortfall in 2017.
In addition to financial hardship, Payne inherited USA Rugby’s sanctioning agreement with PRO, a document which Rugby Today recently came into possession of.
Months after the end of the season, tensions between USA Rugby and PRO resulted in a row between Payne and PRO owner Doug Schoninger. The dispute revolved around two central motives – Payne wanted Schoninger to make those he owed, many of whom are USA Rugby members, whole, and Schoninger wanted the three-year sanctioning agreement extended, something he says Melville promised he’d do before leaving office.
(With neither side budging, Schoninger notified players on Dec. 20, 2016 they were being terminated. Per their contracts, players were to receive two more paychecks after being told they were let go. But only one round of payments was sent out to most, if not all.)
An examination of the sanctioning agreement, signed by Schoninger and Melville, provided some interesting discoveries. The most glaring of them is that, contractually, there were some protective parameters in place that, if executed, may have prevented players, coaches and others from going wrongfully unpaid.
At least six months prior to the first match, PRO, referred to in the agreement as N.A. Rugby Union LLC, and USA Rugby were to, “agree on an amount of financial resources that would be sufficient for N.A. Rugby Union LLC to fulfill its obligations under this Agreement and the evidence required to demonstrate that N.A. Rugby Union LLC has sufficient financial resources to fulfill its obligations under this Agreement (for example and without limitation, a letter of credit, dedicated bank account with sufficient funds that cannot be withdrawn for purposes other than those covered by this Agreement, commercial arrangements relating to the Competition, etc.),” per the 14-page document.
In laymen’s terms, the sanctioning agreement signed by both USA Rugby and Schoninger gave USA Rugby the right to help determine how much money Schoninger needed to pull off a pro league and what evidence he would have to provide to show he had it. Furthermore, it explicitly described as potential sufficient evidence what is essentially an escrow account in which PRO would have to deposit an amount of money to cover the league’s operating costs. If such an account existed, it could potentially be liquidated to pay off outstanding debts.
However, there is no evidence that this part of the agreement was actually executed. If it were, numerous members of USA Rugby may not have been hung out to dry.
Another discovery is the actual detail of the agreement’s exclusivity. Schoninger expressed his dismay over talks of the Pro 12 expanding with an American team. He also complained about the group of American clubs’, including the Austin Huns and Glendale Raptors, movement to professionalize, and that USA Rugby was not protecting his exclusivity against them.
Turns out, the sanctioning makes PRO the “exclusive domestic club 15-a-side professional rugby league within the United States of America.” That description certainly doesn’t fit the Pro 12, which operates in Ireland, Italy, Scotland and Wales, and the Huns and Raptors aren’t a part of a league. Rather, they’re participating in a series of friendlies with likeminded clubs with no standings or championship.
It’s also noteworthy that the exclusive sanctioning rights were sold to Schoninger for $1,000. If renewed, he’d have to pay $1,000 for the next three years. That’s in stark contrast to the six-figure agreements USA Rugby has made with William Tatham, Jr. regarding professional 7s.
Melville, who was the public face of USA Rugby for an entire decade, is certainly responsible for the sanctioning of PRO, the agreement which bound them together, and any clauses within the agreement which weren’t activated to protect USA Rugby’s members, as well as, at least partially, the financial shortfall now facing the union, but he didn’t act alone. The Board had its hands on these decisions and outcomes, too.
Rugby Today reached out to several current Board members regarding PRO, many of whom served when the sanctioning agreement was executed, but all of them declined comment. However, the former chairman of the Board, including during the execution, and current member of both World Rugby’s executive committee and council, Bob Latham, was open for an interview.
Some in the American rugby community have espoused the belief that the Board gave too long a leash to Melville during his tenure, often rubber stamping his initiatives. According to Latham, that is an inaccurate characterization.
“Absolutely unfair. It was a very professional board, and everybody understood their responsibilities and obligations, and there was no rubber stamping,” he said.
Of the PRO sanctioning agreement specifically, he said, “It received the endorsement of the full Board, and everybody considered it.”
Latham defends the Board’s decision to ok the sanctioning agreement, saying no one could have seen Schoninger’s lack of payment to players and coaches coming.
“I love the hindsight of, oh, well, he hasn’t paid this, he hasn’t paid that, and, oh, this is a terrible mistake. I mean, was anybody saying that at the time? Everybody thought it was a great idea. It’s still a great idea. I hope it works,” said Latham.
“I don’t know what’s causing him not to play players. It’s nothing USA Rugby’s doing, or meet other obligations, but I think the first season of the league was a good thing. It gave players a place to play, it gave coaches a chance to coach, referees a chance to ref, fans a chance to see a higher quality of rugby, including some well-known players. It’s all great to say this guy’s not doing what he should, and how could nobody have caught this, but sometimes people don’t necessarily perform as you’d like them to, but you can’t see that coming. To me, it’s as simple as that.”
However, Rugby Today was able to uncover a FINRA report showing Schoninger owed more than $140,000 to the IRS, something which USA Rugby’s vetting process didn’t find.
“I will say this, and I’m not equating this, but if I had an overdue water bill or something, whatever issues he had, I don’t know of anything that would have caused anybody to put the brakes on this,” said Latham.
“When a guy is putting up tens of millions of dollars, the fact that he might have left $150,000 somewhere unaccounted for is kind of not a material number, not because of the dollar figures the people on the Board are dealing with, but because of the dollar figures that are on the table. I think everybody can agree that this guy spent a lot more than $150,000 getting the league off the ground, so if there was a $150,000 debt out there it wasn’t because he couldn’t pay it.”
The fact that the FINRA report showed Schoninger owed the IRS, in addition to a law firm, isn’t evidence that he didn’t have the money to afford the league, but one might infer it revealed a pattern of Schoninger believing he has the discretion to choose which bills he will or won’t pay.
Latham went on to say he has no regrets regarding the sanctioning of PRO.
Another interesting discovery from the sanctioning agreement is that the clock on the three-year agreement actually started when it was executed on April 22, 2015. It is set to automatically renew every three years. However, either party can choose to not extend so long as they notify the other party 180 days or more before the end of the current agreement.
Basically, it means the current agreement ends April 22, 2018, and if USA Rugby wants out of this troubled relationship, it has until mid-November of this year to signal its intentions to not renew.
The revelations of the sanctioning agreement, the timing of the assembly and the shape of USA Rugby as a whole could add up to some difficult questions and tense moments at the Congress meetings in Austin.