If bank or DCC had said no, Otago was done

It is 10 years since Otago rugby delivered a stark message: the union is bust, and liquidation is the only answer. What followed was a fraught few weeks that involved deals being cut and debts being wiped. A rugby union was saved, but the saga left a sour taste in many mouths. In a series starting today, sports editor Hayden Meikle looks back on a tumultuous time and Otago’s journey over the past decade.

Lots of people were involved in an Otago rugby saga a decade ago that nearly became the most extraordinary financial collapse in the history of New Zealand sport.

For the purposes of this series, we are focusing on three key men.

We start today with Wayne Graham, the Otago Rugby Football Union chairman in 2012 who became the face of the drama.

In part two, we hear from Jeremy Curragh, the "fixer" sent south by New Zealand Rugby to see if he could dig Otago out of an awful hole.

The series will finish with the thoughts of Richard Kinley, who joined the ORFU as general manager later in 2012 and is still running the show 10 years later.

But first ...

THE BACKGROUND

It could be a different planet as much as a different millennium.

Picture these scenes and contrast them with a sporting landscape that has changed just a little.

The 1990s were halcyon days for Otago rugby. Its flagship provincial team won the NPC for the first time in 1991, and added a second national title when one of the great domestic teams stacked with All Blacks romped to victory in the 1998 final at a sun-drenched Carisbrook packed with 40,000 fans. Yes, 40,000 fans watching All Blacks in the NPC.

A vibrant premier club competition had 12 teams, and the grounds of Dunedin were crammed on Saturdays with vast numbers of club, school and social players.

The heart of the union was Carisbrook, the beloved House of Pain, and after extensive work on the facilities and turf, it was briefly but widely regarded as the best rugby ground in New Zealand.

Dunedin, with its rugby-loving students and such a strong sporting legacy, embraced the All Blacks more than any other city when international fixtures came south. Bledisloe Cup tests in 1993 and 1997 — played in the afternoon with heaving crowds — were so popular, the term "Rugby City" was born.

The 1999 Super 12 final, the "Party at Tony Brown’s", capped an unforgettable decade for Otago rugby. Our teams were brilliant, everyone was excited about rugby, and there was plenty of money to throw around.

But it was not long before Rugby City was about to come falling down.

TROUBLE A’BREWING

The House of Pain seemed to turn into the House of Drain very quickly.

More than $20million had been spent on improving Carisbrook in the 1990s, but that turned out to be a quick fix, and by 2003 the New Zealand Rugby Union delivered the bombshell that Dunedin was finished as a host for "Category A" tests — Wallabies, Springboks, Lions — because of the stadium’s low premium seating capacity and poor facilities.

The other problem was that, unlike almost every other rugby union at this point, the ORFU still owned its ground, and it treated Carisbrook as an asset (which it was, of course) against which it could borrow money.

Carisbook had soul, but it became a black hole in financial terms. Rugby crowds dropped, and the All Blacks deserted Dunedin. The ORFU kept borrowing more money. The costs of running the professional game — Otago still operated the Highlanders at this stage — skyrocketed, and the union’s staff ballooned to nearly 40.

By 2006, the union was nearly $6million in debt, and spending way more than it earned. Things were looking very grim.

The light at the end at the tunnel, the ORFU thought, was the sale of Carisbrook and some rental housing to the Dunedin City Council in 2009, part of the deal the city made to build a fancy new stadium near Logan Park.

Nobody seemed particularly happy with the $7 million tag on Carisbrook. Plenty of ratepayers thought it was a waste of public money — indeed, the council lost nearly $3.5million on the deal when it sold the ground to Calder Stewart — while the ORFU felt it was worth more, and was not delighted to still be $1.2million in debt.

Otago severed ties with the Highlanders in 2010, and shedding the demands of operating a professional franchise made it simpler for the union to focus on its core business.

But that business was still built on an unsustainable model. Otago rugby was technically insolvent — and it was not alone. Provincial rugby was, in financial terms, a disaster zone, and Southland, Tasman, Counties-Manukau and others had all been bailed out to various degrees.

Unfortunately for Otago, it was about to become the biggest union to fall, and that fall would not be pretty.

THE CHAIRMAN

"If I’d known what I found out within a couple of years, there’s no way I would have wanted to be involved."

That is Wayne Graham in March 2022. But he was very much involved in March 2012 in arguably the most dramatic period in the history of Otago rugby as the union came perilously close to bankruptcy.

Graham had bled for Otago rugby — literally. The hard-nosed loose forward known as "Grizz" played 112 games in the blue jersey, and later coached Otago to the 2005 NPC final.

Then, when the union itself started to bleed, he was charged with leading the rescue operation.

Graham had been elected chairman in March 2010. He said he did not know the full extent of the Otago Rugby Football Union’s disastrous financial situation until murmurs of concern turned into alarm bells, and he and the board decided to get the auditors in to see just how bad the situation had reached.

"We’d smelled a rat. But as board members — we were just volunteers, remember — we were listening to CEOs and accountants and hearing that we would be OK because we’d get enough money to get by.

"In hindsight, we should have seen it coming. I suppose we were naive, and should have known how bad the debts were.

"When we dug into it, it wasn’t good. And then the shit hit the fan."

That is one way to put it.

THE MEETING

The ORFU, Graham announced at its annual meeting in 2012, was $2.35million in debt. It posted a sixth straight financial loss, $862,000, with a forecast loss of $750,000 on the way, and it would likely be put into liquidation within days.

That meant Otago unable to field a team in the national championship, union staff losing their jobs, professional players missing out on wages, hundreds of small creditors losing money, uncertainty over how community rugby would be funded ... oh, yes, and that shiny new stadium, opened just a year earlier, losing one of its anchor tenants.

New Zealand Rugby boss Steve Tew was at the meeting and uttered the line that would forever be attached to the crisis: "The hole is too big".

"It was devastating," Graham recalled.

"It was a terribly stressful month or so. It was a nightmare. We worked day and night, trying to solve it.

"If it wasn’t for the generosity of some people, and the goodwill of some businesses, we would have gone under. That would have been the end of Otago rugby.

"So there was a fair bit at stake."

Critics of Otago rugby said then — and doubtless say now — the union only had itself to blame for its woes, that it overspent on players, employed too many staff, and borrowed recklessly against the value of a crumbling stadium.

Graham concedes overspending exacerbated the financial issues. But he maintains the biggest contributing factor was the sale of Carisbrook to the DCC for $7million as part of the deal to get Forsyth Barr Stadium to replace it.

That did not clear all of Otago rugby’s debut, which had risen to a mind-boggling $8 million.

"The union had dreamt that Carisbrook was an asset and it was worth $16million or whatever they had it valued at. The reality was it was a liability.

"Everyone loved Carisbrook. It was the jewel in the crown — but it was actually far from that. It was a bucket with a hole in it, and money just disappeared.

"So when the deal was done — before my time — with the new stadium, a whole lot of commitments were made. Deals that, financially, should never have been agreed to.

"That certainly initiated the problems. Plus the spending. There were players on $100,000-$120,000, that sort of thing."

THE RESCUE

Otago rugby was dead in the water early in March 2012.

But with Graham frantically trying to pull the strings on a rescue operation, alongside New Zealand Rugby-appointed change manager Jeremy Curragh, the union twice delayed the decision to go into liquidation.

Then, on March 14, after a seven-hour meeting of the Dunedin City Council, the deal was done.

Otago’s largest creditor, the BNZ, wrote off the $1.2 million it was owed (it later emerged the bank had sorted an alternative commercial arrangement, presumably sponsorship, with New Zealand Rugby), and the council forgave debt of $480,000.

"If the bank or the council had said no, it was history," Graham said.

"Getting them sorted was the light at the end of the tunnel."

Not that Otago rugby felt particularly inclined to thank the council at the time.

This will ruffle feathers — especially with people who were furious public money was used to bail out a rugby union — but Graham thinks the ORFU should not even have been in debt to the DCC.

"That debt was part of the stadium deal. It was interest owing on Carisbrook.

"Otago rugby was wearing that cost, and it shouldn’t have been. There were a whole raft of things that had been agreed to that were just ludicrous, and were bleeding the union dry."

While the major debts were resolved, Otago still had to deal with plenty of little ones. No fewer than 180 creditors were owed a total of $680,000.

Graham, a prominent member of the business community, had to look people in the eye and tell them he was not sure Otago rugby would ever be able to pay them what was owed. (Eventually, more than 150 creditors were repaid in full.)

"A lot of them were friends of mine. I had to go and say, look, we can’t pay you the $3000 we owe you, but we can pay $1000, and we can tick that one off.

"Those deals were done daily through that period. It was a long list.

"Thankfully, people were good about it. They were disappointed, but were keen to put a line through it and move on. And we got through by the skin of our teeth. "

THE AFTERMATH

It was not a particularly pleasant time to be involved with Otago rugby.

The union’s image had taken a battering, and people who were already disturbed by what they believed to be a bail-out of a sporting organisation that had frittered away money were not shy in unleashing their anger. Graham, naturally, copped the majority of the opprobrium.

"It was terribly stressful. Some of the worst weeks of my life.

"I was not a very popular person in some circles. But all I was trying to do was save Otago rugby."

A man who had devoted so much of his time to the sport was now sick of it, especially at the elite end.

"I got completely disillusioned at the time with how the game was run professionally.

"The Highlanders were getting millions poured into them, and Otago was going to the lady who made sandwiches for morning tea and asking her to take a dollar when she was owed three."

At the press conference that followed the marathon DCC meeting, then-Mayor Dave Cull aimed a broadside at Otago rugby for getting into such a state.

Cull, who died last year, said the ORFU had "cocked up, and they cocked up on a chronic basis. Pretty reprehensible, really."

Graham said that was tough to hear. Worse was to come when Cull questioned the board’s performance during a Radio New Zealand interview the following day.

Graham and deputy chairman Laurie Mains sued for defamation, and a settlement involved an apology and legal costs.

"I don’t really want to go there," Graham said.

"But we got an apology for his comments. After all I’d done, he referred to me as being dishonest. I asked for an apology, which eventually I got.

"After being through what I’d been through, and what our board had been through, that was the last straw."

A condition of the deal that saved Otago rugby was that the board step down, and Graham duly left his post in May 2012.

He was quite happy not to return to rugby governance but said he was proud of the role he played in bailing Otago out.

"Yeah, I am. It’s difficult, because I guess some people blamed me for what happened.

"I was the chairman, yes. But a lot of people didn’t understand the intricacies of what had happened over the previous 10 years to get us into such a bad situation."

FRIDAY

Jeremy Curragh, the unsung hero of Otago rugby, and the deal that saved the union.

hayden.meikle@odt.co.nz