Analysis: Dan Payne @USARugby CEO Q&A. $1MM Revenue Shortfall?? 10

Payne discussed a $1MM revenue shortfall we will see in 2017 vs 2016 due to Brexit;  I assume it’s the cratering of the Pound Sterling vs. the US Dollar (i.e. from $1.50 t0 approx. $1.228 where it sits today), as well as a loss of a grant from World Rugby.
My comment to this is, “It’s business, and we better figure out a way to find that $1MM and more if we want to grow this game”.  What I heard is we have a budgetary shortfall from 2016 to 2017 of over $1MM and it will not be replaced. More…

Romania 23 – USA Eagles 10. The real reason Romania won; Top Tier Competition, Strategic Plan. 6

As a rugby playing nation, the USA is bigger.  Romania is better.  Their structure is admirable… look what they do with so few players.  There is nothing fancy to this…USA Rugby – get a strategic plan addressing our top-tier, professional/semi professional competition.  Keep it clean, and easy to explain.  Demand excellence from everyone, on the field, off the field, and in the Boardroom.  Find Board members that can think about rugby globally and locally, and actually love the sport.    More…

A Letter to USA Rugby Congress re: RIM, PRO, Eagles, etc.. 5

To: The USA Rugby Congress

Dear Congress:

I would like to thank some of you for communicating with me over the past nine months regarding our collective frustrations.   I’d also like to thank David Yeoman for nominating me to the Board of Directors.  I was disappointed not to get the appointment and am left wondering why we have selected yet another ‘resume’ for USAR’s Board of Directors and another person with no rugby experience.

Sharing my Experience

Some of you have asked me to share my experience with you so you could take it to Congress collectively and I certainly hope you do.  Ultimately,  there should be real concern about Rugby International Marketing, LLC (aka “RIM”), which I implore you to explore.

I’ve worked hard with several others in the nine months following the laissez-faire attitude I witnessed in the media by USA Rugby officials after the 50 point 2nd half drubbing by South Africa at the World Cup.

Suffice to say, few people have been or are complementary or trusting of USA Rugby and its recent leadership or vision.  When I say no one I mean no one has communicated personally with me in any way that their experiences with USA Rugby over the past 5-6 years has been positive.  Dan Payne is a welcome addition at this stage as USAR’s CEO, and at least there will be increased communication to our Union’s constituents despite this CEO role having been downgraded in it’s responsibility.

The Melville Era and the Faux Successes

You know my thoughts on the leadership of Melville and the marketing of marginal growth gains (that would have happened irrespective of any USAR involvement) to create the illusion of success (i.e. Rookie Rugby, 7’s, etc…).  There are so many issues that need mending: The state of American Clubs, the impending issues surrounding the sanctioning of American professional rugby, the structure  and lack of parity for the Women’s game, multiple ‘breakaway’ entities (i.e. CRC in the college ranks), and fraternization between USAR staff and female players at the elite level (of which Melville and the Board knew of and took no action) are to name a few.

Rugby International Marketing, LLC (aka “RIM”)

It is my assessment that of all the issues surrounding USA Rugby at this time, none is more important to Congress, our Board and possibly the future success/failure of USA Rugby than the concept of Rugby International Marketing, LLC (aka “RIM”). I urge you to ask the tough questions, get the information you require and mobilize the Congress to stem this tide of dilution of USAR’s assets through the sale of RIM shares to outside (and overseas) entities.

The success or failure of RIM will directly impact the success/failure of Dan Payne’s administration and USA Rugby as a whole. RIM is responsible to provide the funding for USAR’s programs and teams.  RIM is literally selling USA Rugby’s future value to outside entities, including overseas.

In my conversations both in USA Rugby circles and globally, there are significant doubts about RIM.  The entity was clearly created by Melville and several close associates (certainly several USAR Board members), to provide him with a follow on job to his USAR CEO position as CEO of RIM. He would still have his hands in the commercial aspect of the game in the USA. In announcing Melville’s appointment as the RIM CEO, USAR Board Chairman Bob Latham said:

“I am pleased that USA Rugby will continue to be the beneficiary of Nigel’s many talents as he focuses on the commercial side of the game as CEO of RIM. The commercial opportunities that RIM generates will directly benefit USA Rugby.”

The new USA Rugby CEO will oversee the continued development of the organization and the sport of Rugby in the USA. The Chief Executive will serve a diverse rugby community and report to the USA Rugby Board of Directors, providing leadership to USA Rugby so that the outcomes from the strategic plan and annual operational plans are delivered.

“We look forward to bringing in a new person to lead the operations and management of USA Rugby – someone who can continue to grow and develop the sport and insure the relationships that Nigel has created stay in place,” said Latham. “Of course, Nigel won’t be far away and there will likely be a great deal of interaction between Nigel in his role at RIM and the new USA Rugby CEO.”

On the surface, RIM sounds like an excellent vehicle to raise funds in a professionally managed entity, and it certainly has that very American ‘for profit’ label, which surely can attract attention.  With Melville literally abandoning this post, RIM has appointed a new CEO, David Sternberg. Now that Melville is no longer in the picture, I wonder what Latham and RIM’s Chairman, Chad Keck, are now saying?  I am at a continued loss as to why Latham and others continue to sing Melville’s praises as he abandoned the job and company he personally created.

It is my understanding when RIM was initially presented to the Congress, there was very little understanding of the concept and was essentially a program that was ‘sold to the congress’ by Melville and the Board.

If, as I believe we all suspect, RIM was approved with limited information, and the RFU investment was presented as a fait accompli by the USAR Board or then CEO (Melville), Congress has a duty to review this process and ask itself and its board to review RIM.

This situation is now magnified with the sale of additional RIM equity to yet another UK based organization, CSM.COM.  With each sale of RIM equity, USAR’s assets are being diluted and no one outside of very few people involved with RIM and USAR has any knowledge of the RIM strategy, the effect on USAR over time,  and why ‘we’ are choosing to sell off our assets to competing rugby unions and entities outside of the United States.

Here is a point of interest: The group MD of CSM is Sophie Goldschmidt.   She was Chief Commercial Officer of RFU through Rugby World Cup 2015.  When the RFU investment was announced, Goldschmidt was also confirmed as the RFU’s board member on RIM.  She was also quoted endorsing the investment and returns to the RFU.

With the CSM acquisition of additional RIM equity (no details released so far, please ask), this will be the second time that Ms. Goldschmidt has invested in RIM.  What does she know that others don’t?  The people involved have been successful in British sport, and they obviously see an opportunity that makes them choose to invest in RIM.  Can our Congress be educated on these opportunities?

Why the background to RIM and this “investment opportunity” cannot be shared with the USA Rugby Congress and stakeholders is a major concern to me, and should also be a serious concern to the Congress and all stakeholders.  In fact,  I believe it is the MOST IMPORTANT concern for Congress at this time.  

Questions for the USAR CEO and USAR Board  

Following are a list of questions/issues that based on my experience and learning the past 9 months must be asked of our Board and Leadership. I would urge you to write a formal letter to the Board and request formal answers for your Congress.

  • Why was the decision made to divide USAR and RIM and to downgrade the position/responsibilities of USAR CEO?  This model clearly was made to keep Melville in the mix; but with him gone, does this model still make sense?
  • Was it made clear to Congress that RIM would be operated completely separately from USAR?  That RIM would be assigned all commercial rights of USA Rugby?
  • What was presented in terms of board structure and shareholding of RIM?
  • We now know there are three Board positions at USAR and RIM that are held by the same individuals.  Is there a conversation of potential ‘conflict of interest’?  Is this common?
  • How was the formation of RIM approved by USA Rugby Congress?  Ask for copies of the minutes of the meetings where RIM was presented, discussed and/or approved?  Could we please see copies of any presentation materials or handouts that were distributed to Congress with regard to RIM?
  • Do you believe Congress members understood what they were asked to approve?
  • We now know that the RFU has invested $2MM for a 10% stake in RIM.  Were Congress given advance notice of the RFU’s investment in RIM, or were they informed post investment?  What was the discussion about giving the RFU a board seat on RIM?  Did Congress debate the RFU investment and board seat in RIM?
  • What is Congress’ role with respect to RIM?
  • Did Congress approve the RFU investment and the RFU board seat in RIM?  Such an important question,  it should be asked a second time more explicitly – Did the Congress of USA Rugby approve the sale of 10% of its own assets and 20% voting rights of its own assets to England’s Rugby Football Union – a competing union? Are there any minutes accounting for this discussion?
  • I am perplexed on why USAR and RIM are two separate entities.  This is the first arrangement of its kind of any of the major rugby playing nations.  How does RIM make money (or more money) than if all the assets and commercial activities remained under USAR?  What will use of investor monies accomplish compared to what has been given up (I.e. RIM equity/Sale of USAR assets).
  • Is there currently any conversation regarding RIM and USAR’s soon to be released ‘Strategic Plan’.  Is RIM here for the duration?  Why does RIM exist?
  • What are RIM’s revenue predictions?  I spoke with a Board member who advised me that “Melville requested the Board not to get involved in fundraising”, hence the constant lack of funds available for USAR’s programs. Review of recent USAR financial statements clearly show the anemic fundraising efforts. What changes now that this responsibility is thrust on RIM?
  • Is it true that RIM shareholders will be paid a ‘distribution’ proportional to their equity share? Does this mean that for every $1.00 that is distributed, USA Rugby will get 90%, I.e. $0.90 (prior to any other sale of RIM equity) and England Rugby will get $0.10?  If CSM is an investor, then USAR’s distribution is reduced proportionally.  Is that correct?
  • Despite a RIM Board member discussing with me that he would not be investing in RIM due to the potential conflict of interest I raised, there still is no information on investment opportunities in RIM.  Is there a prospectus?  Who makes the decision on soliciting investment?  Why only UK entities so far?  Who can invest in RIM?  Who are the current, past, and potential future shareholders in RIM?
  • Does USAR have any true cost basis in RIM?
  • Is there possibility for personal financial gain for the Board members/former CEO that created RIM.  If yes, this would be an egregious ethical violation on behalf of those individuals.
  • Will CSM get Board rights at RIM as the RFU did with their investment?  If so, this means that 2 of the 5 voting members of RIM will be from the UK.

Other questions to ask: 

  • Why did Melville grant ‘Grand Prix Sports’ an extension on its exclusive rights to market professional 7’s in the USA until 2028?  What were the terms/conditions of the extension?  Clearly the market for professional 7’s in the USA has significantly increased in value since Grand Prix was first awarded this status approximately 10 years ago.  Was this market value increase captured in the new ‘deal’ with Bill Tatham and Grand Prix?
  • Why is USAR’s new Board member yet another person with no rugby experience?  We understand that the IOC requires one Board member to have no experience in the sport, but we seemingly already have that with some of our other Board members. Wouldn’t a person with Barrett’s pedigree be more suited to sit on the RIM Board vs. USAR Board?
  • Is there any accountability on Board member performance.  What makes a good board member. Has there been a review?
  • There is a rumor circulating that certain individuals may be getting ‘gifted’ shares in RIM. Please inquire about this. If true, why would anyone be awarded these shares, versus the countless people who have personally committed hundreds of thousands of dollars over the years to assist USAR to get to the point we are now.  Names like Smith, Prusmack,  and Watkins come to mind. There are numerous others deserving of ‘courtesy shares’ at RIM.  Each share of RIM that is remitted from USAR’s ownership (either by sale or gift) means less money for USAR programs.

Time for USAR Congress to Act

The primary issue here is accountability.  If Congress was well briefed and went ahead and approved the set-up of RIM and the initial RFU investment, then Congress must hold itself accountable for its failings and needs to find a way to repair/limit the damage or live with the outcome.  However,  we know that this was not the case.  Congress had very little knowledge individually or collectively about the RIM entity.

This is the time for Congress to act, and hold our Board and former CEO accountable for their decisions.  Ask the tough questions, demand accountability, and get whole with RIM and its relationship to USAR.  This idea was concocted by very few individuals with no oversight or accountability.  It was blown by Congress as a subtitle in a Board meeting.  The promised ‘Rugby Channel’ has been a massive disappointment from the consumer end and I assume the commercial end.  We wasted the chance to host another test this year (i.e. commercial opportunity loss, and of course another match for our elite men’s team to develop with our new coaching staff).  And notably,  we continue to disregard our Women’s Program in an array of ways, including little to no support by the Board in attendance at our two international events during 2016.  I’m not seeing how any of this makes sense. However, the possibility that various individuals could possibly profit by putting in place an entity to take advantage of their privileged positions as USAR Board members is ethically wrong, and if true should be handled accordingly.

I urge you to get any number of your fellow congress people together and put these ideas/questions to the new USAR CEO and the Board. Insist on a formal response.  Congress is the check and balance for our governance.  It is time for those checks and balances to be implemented.

I’ve spent nine months studying this environment since the debacle in London in October. Since then, our Men’s elite team has set a World Rugby record in terms of loss to a lower ranked nation when we fell to #42 Brazil this January.  As someone who possesses years of playing experience from U-12’s thru the elite level and continues to care about stewarding the game for future generations, I recommend not rubber stamping the continuity of RIM, the new Board member, or any other issues without getting the answers you require.

Get other congress members involved.  Make a difference.  This is important.


Tony Ridnell