“We were looking at suppliers and things just didn’t smell right and unravelled.”
The discovery of an alleged fraud by a single employee raised questions about who signed off credit cards used to make cash withdrawals at SkyCity or checked the invoices she was paying – including to herself.
Answers led to more questions and ultimately, Russell found herself in an unenviable position.
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On one side, here she was – the first woman to be the chief executive of a sporting body that has historically been a man’s world.
On the other side, she had taken over from sports administrators who were household names in the league world.
For Russell, there never was any other option than doing the job she was hired to do.
So she called in the investigators with Auckland Rugby League hiring PwC, a financial powerhouse, to investigate the business she was now running.
The Herald has obtained copies of the PwC report, and related material, which is the product of a $500,000 investigation carried out over 14 months.
The findings are damning with allegations of mismanagement and slipshod governance reaching back as far as 20 years.
In the course of the inquiry, Russell led moves to act on the findings as they emerged. This step appears to have set her on a collision course with the national body, New Zealand Rugby League.
Just weeks ago, NZRL organised and held a meeting with Auckland clubs during which its chief executive Greg Peters raised concerns about the regional body.
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It was an extraordinary move for the national body to step past Auckland Rugby League to raise doubts with its own member clubs.
Peters asked those present: “Do you know that $500,000 is being spent of your money on that investigation? Is that looking backwards? And should we be looking forward?”
Russell’s view, though, is that looking back is an important part of moving forward. If anything, that view has strengthened with the final investigation report raising questions about transactions involving many of those with decades of involvement in the sport.
Chairman’s $80,000 payments – PwC
In a report that delves back as far as 2003, the role of Cameron McGregor looms large.
Cameron McGregor is a life member of ARL and NZRL and served as chairman of ARL for almost 20 years.
During that time, the PwC report said, entities linked to ARL paid “in excess of $80,000″ to McGregor Bailey, the accounting firm in which McGregor was a partner, without clear signposting of his conflicts of interest.
“We note again that the records we received were fragmented and this may not be the extent of payments to McGregor Bailey,” it said. There was evidence, it said, of the accountancy firm providing “a range of accounting and advisory services” to ARL’s “complex” web of entities.
The PwC report said McGregor had “declined to discuss any potential conflicts of interest” with its investigators, “noting generally that he tried to be ‘transparent’ in all his ARL activities and that ‘everything was approved by the board’.”
PwC’s inquiry went back to 2003 when ARL joined NZRL investing in the Duke of Wellington pub in Auckland through a company initially called Quidditch Holdings. Throughout, the arrangement was known as “the Duke Partnership”.
In 2004 and 2005, at least $354,040 was paid by ARL into the Duke Partnership including $223,000 to purchase the hotel.
The PwC report said the payment “appears to have been contrary to ARL’s commercial interests” because it held a minority interest, some of the money appeared to have been paid “only to meet routine cash flow requirements”. In the search for supporting paperwork, PwC could find nothing to show the purpose of furthering ARL’s objectives.
“In the absence of a reasonable explanation”, PwC said McGregor was in a “clear conflict of interest situation” as chairman of ARL and director of Quidditch Holdings.
Questions hovered over the end of the partnership after the pub was sold for a reported $900,000 in 2009. PwC said it was unable to see what ARL had received for the value of its shareholding.
PwC found McGregor’s accountancy firm, McGregor Bailey, did the partnership’s books through to 2015 with billing of $1232 discovered.
The payment was among the $82,567 paid to McGregor Bailey from ARL entities over McGregor’s time as chairman. The report said there was evidence of other payments from multiple ARL subsidiaries prior to 2013 – when banking data stopped – but it did not know how much or for what.
At the other end of McGregor’s time as chairman came ARL’s purchase of the Warriors through the Carlaw Heritage Trust (CHT), the $78 million investment arm underpinned by its ownership of land on which its heralded Carlaw Park once sat.
The NRL club was owned at the time by Eric Watson’s Cullen Investments, which went into liquidation owing $57m a few years later.
PwC’s study of ARL’s short-lived ownership of the Warriors – April 2018 to September 2019 – found it paid at the high end of valuations and raised questions about McGregor’s role in the deal of which he was “the initiator, main proponent and advocate of the purchase”.
It didn’t get answers from McGregor with the report stating “although we requested an interview with him he declined to discuss the events of the purchase and sale of the Warriors, amongst other things”.
ARL lost $4.2m on the deal when it sold its interest in the Warriors in 2019, PwC found, with McGregor in the mix throughout even though he was in a conflicted position through his role as chairman of ARL, CHT and, ultimately, the Warriors.
The PwC report said that in May 2018, after the Warriors was purchased, “the CHT board approved a payment to Mr McGregor’s firm, McGregor Bailey” of $35,000 for 350 hours’ work as “reimbursement of his professional time”.
“It would be difficult for Mr McGregor to assert that he was not aware of the conflicted position he was in,” the PwC report said.
Throughout the deal, the PwC report said McGregor made decisions before or without board approval, including putting in an offer for the Warriors without board sign-off.
There were issues, too, with the ARL and CHT boards having “limited understanding and analysis” of a key element of the deal. PwC said it led to a payment for the Warriors that was “somewhere in the order of $10m more than could be justified” through a valuation carried out by Deloitte, the financial services firm.
The PwC report also raised concern about how McGregor relayed advice from Deloitte. It said McGregor “appears to have misrepresented Deloitte’s financial advice and valuation of the Warriors” by claiming it “approved financial information estimates which they had not” and “failing to report to the CHT and ARL boards all of the details of Deloitte’s advice”.
“Deloitte considered at the time that Mr McGregor had misrepresented their advice to CHT and ARL.
“This misrepresentation was in the context of the discussion and approval by both boards for the final purchase of the Warriors and may have contributed to a lack of understanding of the financial implications, risks and benefits of the deal.”
Questions were raised, too, about McGregor’s claims the purchase would trigger a $3m windfall to ARL clubs – something that was not correct, said PwC.
On McGregor’s assurance of the windfall, long-time league administrator Selwyn Pearson lobbied the clubs to support the deal.
On discovering there was no money, Pearson wrote to McGregor: “I repeat the clubs will not see any money. I mislead (sic) them.” PwC said it found no evidence McGregor knew the money was not available.
PwC’s report said Jo Clayton was a director on the ARL and CHT boards who raised concerns with McGregor about “the manner information is being filtered by yourself” and what appeared to be the rejection of independent advice. “I have grave concerns about some of our processes and its transparency,” she wrote. Clayton later voted against the purchase.
And, in the midst of lining up the deal, ARL received an independent review which was blunt about the lack of knowledge that existed around conflicts of interest. Around this time, PwC also said the board carried out a self-assessment for Sport New Zealand on “its areas of strength and development need”, rating itself 3.72 out of nine for “accountability and ethics” where, it was said, there were “no areas of strength”.
The PwC documentation frequently refers to those leading league in Auckland holding multiple, related positions. The difficulty, it explained, was that a director was required by law to champion the interests of the company he or she was leading – and when a person led multiple, related companies, it could be difficult to work out which interests came first.
At the outset, PwC said ARL was a “very complex structure of entities” over its 20-year existence “with a small number of individuals holding multiple governance and/or management roles at various times”.
The PwC report said McGregor “appears to have been intimately involved in multiple transactions, including supporting business transactions and acting in an advisory role through his chartered accounting practice, receiving fees for that work”.
It said there were no records registering disclosure of a conflict of interest – also the case with “multiple crossovers of directorships” between ARL directors.
McGregor was not the only ARL figure to face questions over payments to companies. Troy Hardy, the league’s digital manager from 2014 to 2021 with a responsibility to organise digital services for the organisation, also faced questions over payments to a company he owned. In total, $26,613 was paid to Carlaw Park Die Hards Ltd between 2016 and 2021, PwC said.
Of that, $18,694 was paid to Hardy on August 16, 2021, as a part-payment for videos of the ARL grand finals, some matches and the awards. The next day, Auckland went into a Covid-19 lockdown which effectively ended the season. Then, on August 27, Hardy finished at ARL.
The PwC report said a search of banking records “shows no evidence of reimbursement” to ARL although a note in the audit committee said there would be a new work programme and any extra cash would be used to produce extra digital content for the virtual tournament that ran the following month.
A search of ARL revealed no records of the potential conflict of interest or any steps in place to recognise such a conflict. PwC said: “Mr Hardy had an undisclosed and unmitigated conflict of interest from which he received a potential benefit.”
The PwC report said good practice to actively manage such a potential conflict would have included shifting any decisions about Carlaw Park Die Hards Ltd away from Hardy to others in the business, for ARL to have no interaction with the company during Hardy’s employment or for Hardy to cut any connection to his own company.
And there was criticism, too, of former chief executive Greg Whaiapu whose job was to put in place steps to identify, manage and report Hardy’s potential conflict of interest.
Cash withdrawals at SkyCity
The question might be asked why this matters?
It has long been the narrative of rugby league in New Zealand that the game’s failure or success is tied to the relentless hard work of a tight group of administrators.
PwC argued people in these roles did not follow accepted, basic, management and governance practice. In doing so, it said, the lack of transparency made it difficult to understand whose interests were served.
In one document, the PwC team said: “We found an inconsistent understanding and administration of the overall financial governance, policies and controls at ARL, and an inconsistent, and in many instances, a failure, to implement these processes.”
PwC identified one employee – a person with decades of involvement – had allegedly obtained $183,798 through using an ARL credit card for withdrawals at SkyCity while altering accounting details to divert invoice payments to their own bank account.
The Herald has chosen not to name the employee who offered no explanation to PwC for the invoicing changes which saw $136,000 paid into her bank account between 2013 and 2023. No banking data was available prior to 2013.
The employee had claimed money withdrawn using an ARL credit card was either for legitimate purposes or had been used for gambling but repaid. PwC’s examination of accounts found $57,880 withdrawn on 380 occasions at SkyCity – an average withdrawal of roughly $150 – and only $10,100 repaid.
“On the balance of probabilities, these cash advances made at SkyCity represent unreimbursed, unauthorised cash advances made by [the employee] for [their] own benefit.”
PwC said it was “widely known” at ARL that the employee gambled yet “no concerns were raised” by managers over her role in handling its finances.
Lax controls were also identified with the distribution and monitoring of Bartercards – a credit card-like system which, through its sponsorship of ARL, allowed those using the system to save 40% on purchases.
The PwC report said there were 66 Bartercards issued to 28 ARL employees and 16 other individuals linked to the organisation. “From the available information, it is difficult to determine who these people are, what their connection to ARL is, and what their legitimate business need was for an ARL Bartercard.”
It found “Bartercard was regularly used for personal expenses” including by those in leadership and management roles, such as CEO Whaiapu and Pat Carty, a life member and a senior manager at various times.
There were no policies around use, no processes for reviewing spending and a “general lack of understanding” around use and reimbursement of the cards. While PwC identified $1004 of outstanding personal expenses, it said limited banking records and other documentation meant “we are unable to confirm the full amount of all personal expenses incurred by ARL employees”.
One document sighted by the Herald shows one former senior manager charged $19,000 of dental work to Bartercard.
In a letter to ARL dated August 30, 2024, PwC said ARL management appeared to be relying on the board to provide “effective management oversight” while the board was relying on management to “implement and operate effective controls”.
In PwC’s view, neither fulfilled their roles and “the combined factors resulted in there being no effective oversight of risks”.
“This appears to be a failure by both ARL management and the board to sufficiently understand the roles and responsibility of governance and management, and ultimately provide effective financial management over ARL.”
Put to Russell, she reflected on the early stages of the investigation when the alleged credit card fraud was discovered. Russell took it to the ARL board – as it was at the time – and as she explained it to the board, she recalled one of the directors saying: “That’s very clever.”
“And Louis [Nel, head of finance] and I looked at each other and thought, ‘there’s nothing clever about that’.”
That was also PwC’s view with one letter saying if credit card statements had been reviewed over the period of eight years it examined, it would “have easily identified the large volume and value of transactions made at SkyCity”.
For Russell, she couldn’t understand how the alleged credit card fraud and invoice re-directing had been missed. That then raised questions for her about the effectiveness of management oversight, and of governance above managers.
There were those on the board who had worked in management roles at ARL or continued to do so. It raised questions for Russell as to how effective they had been in their roles.
In Russell’s view, a board’s accountability to an organisation is to keep that organisation safe.
As PwC’s inquiry progressed, she had started to believe there were people on the board unsuitable for management and governance roles.
They call her ‘The Duchess’
Such is the antipathy towards Russell and her moves towards financial rigour that detractors have taken to calling her “The Duchess”.
As PwC began reporting to Russell and ARL chairman Shane Price, they took a path intended to set league on a new track.
That led to the suspension last year of directors Pearson, Carthy and Whaiapu. All had worked in ARL’s offices as employees while also sitting on the board. Remaining on the board was Price, elected director Tasha Tasmania and two independent directors, Struan Abernethy and Julian Butson.
As elections approach for the ARL board, Russell finds a possible split in the road ahead.
Next week, ARL clubs will have the opportunity to vote for new board members and possibly a new chairman, with Price telling the Herald he had yet to decide if he would stand.
With those elections approaching, NZRL has emerged as a voice of concern over the changes she has overseen.
That follows its hearing into Carthy and Whaiapu’s suspensions from the ARL board. The two suspended directors appealed to NZRL in a hearing on April 18 with a decision in their favour issued a month later.
NZRL’s appeals board said there was “no evidence at all suggesting [the suspended directors] personally gained from any wrongdoing”. It also said it was unclear why Price wasn’t also facing questions as current board chairman and former chairman of the audit and risk committee. The Herald understands Price did not chair that committee.
While ARL had argued Price wasn’t a member of the management team, NZRL’s appeals board said this “ignored the well-established doctrine that a key governance responsibility of boards is to manage risk”.
NZRL’s board also said there was insufficient information given to the directors before the suspension and insufficient time for those facing accusations to consider a response. And, it claimed, ARL had predetermined the outcome of the meeting at which the PwC findings were raised.
The NZRL finding comes with more than a hint of frustration – it discovered through the course of the hearing it only had the power to send the matter back to ARL for reconsideration.
But its finding shows it wanted to do more, to declare the decision invalid, order the directors reinstated, and award costs to the suspended pair.
Papers show McGregor had also appealed to NZRL, claiming the board was operating outside its constitution, airing concerns over ARL’s finances and over ARL’s member clubs not filing accounts which ruled them out of decision-making votes.
NZRL didn’t leave it there. On September 5, chair Justin Leydesdorff and chief executive Greg Peters wrote to ARL saying NZRL had “significant concerns” with “ARL’s current situation”. In it, they raised the “significant costs” of the PwC investigation and its “lack of finalisation”, unaware PwC had finished its work and reported to ARL’s board the week before.
It also appeared to echo issues raised by McGregor in his appeal, saying “there appears to be a pattern of disputes resulting in appeals that we would like to discuss as this is concerning”.
In response, ARL’s Price told NZRL the PwC findings “suggest systemic financial mismanagement issues that have existed over a long period of time and involved a relatively small number of long-tenured individuals”.
Price believed “the losses ARL has suffered in the 10 years up to the commencement of the investigation and the potential future losses far outweigh the cost of the investigation”.
That letter from Price landed with NZRL on September 17 – the same day NZRL took the step of writing to ARL’s member clubs to raise the same concerns it had already raised with the parent body.
Not only did it raise concerns, NZRL organised a meeting at the Mt Albert Rugby League Club for the following week at which they were aired.
That meeting was led by Peters with Leydesdorff present alongside league legend Sir Peter Leitch. Peters told the crowd that calling the meeting was an “unprecedented step” but it wanted to “provide information on what we understand … to be the situation in the ARL”.
“This is not the NZRL telling you what to do or anything. It’s providing … a meeting to enable us to hear those views.” Even though Peters called the meeting, he told the crowd: “This is your meeting and we’re only here as a party to facilitate that discussion.”
Peters went on to talk about Price being difficult to contact, recent resignations of directors from ARL’s board and the long period of time the organisation had been without a full board because of the earlier suspension of three directors. There were concerns raised about the “significant cost” of the PwC investigation” and a “general lack of transparency”.
There was initial consternation over McGregor’s presence at the meeting, prompting him to rise and speak.
“I can tell you right here and now that if somebody can find something wrong that I’ve done, so be it, but I haven’t been charged with anything and I can tell you that I have done nothing wrong.
“It’s a bit like the three directors. They’ve got sacked and suspended. They have never been charged with anything. No, well, it’s rubbish. It’s absolutely rubbish. Rubbish. It’s rubbish. You charge people.”
The aftermath of the meeting appeared to evolve into a tug-of-war with NZRL organising a fresh meeting of club chairs and suggesting issues it should deal with.
ARL, meanwhile, took aim at NZRL saying it was “concerned” with the national body’s “behaviour” with a pushback that included a professionally-produced 30-minute video briefing for club chairs in which it alleged $7.2m had been mishandled or lost.
ARL’s Price wrote that he had been told “there is a wider play by NZRL to take over ARL”. He said it would claim to do so “in the interests of protecting the game” but he believed there was suspicion the actual purpose was a cash grab for ARL’s significant asset base. This is mainly $78m in value tied up in the former Carlaw Park land.
The reason for this? Price wrote: “ARL members believe that this is driven by a need to resolve [NZRL’s] funding challenges.” He said the national body’s finances were stretched with it facing six-figure annual interest payments each year to cover a mortgage it took out in 2019.
Currently, he said, control of ARL rested with the clubs. If NZRL had its way, he claimed, control would be diluted and give it influence over ARL’s clubs, direction and money.
Voting opens on Monday in what could be a battle for control of ARL – and the $78m pot of cash it holds in the form of student accommodation built on the hallowed home of league in New Zealand, Carlaw Park.
‘One of sport’s best leaders’
For Russell, there is support in the form of another venerable rugby league fixture.
League legend Sir Graham Lowe, the only non-Australian to coach a State of Origin team, said Russell was impressive.
“I don’t think it will be long before she is head-hunted by an NRL club. She’s one of the best leaders in sport I’ve come across.”
Lowe said he believed Russell was committed to improving the ARL and bringing a “professional mindset” to what was a collection of amateur clubs.
“She’s trying to put a professional discipline into their thinking. I don’t think many sports anywhere have had a similar opportunity.
“Rebecca has taken on a big responsibility and a big job. Leadership is being prepared to make hard calls and she’s obviously prepared to make hard calls. If you want to be everyone’s friend, you give them icecreams – when you’re a leader, you’re not there to give icecreams away.”
Peters told the Herald that NZRL was not after ARL’s assets but was concerned it was not being governed in a way that aligned with its constitution. He said the moves were not related to the PwC report “because we don’t know what’s in it”.
“Whatever is there is important but until we see it … that will be for Auckland to address.”
McGregor, who refused to speak to PwC’s investigators, said he would not comment until he had read the report. He said the Herald’s questions suggested the report “is wrong on a number of levels”.
“Obviously I believe the PwC report is wrong on a number of accounts mainly because they have not had full access to all the information,” he said.
Whaiapu said he was unable to talk openly because of constraints as a suspended director.
Long-time administrator Pearson, another suspended director, said “I feel sick” after the Herald summarised the PwC findings, particularly in relation to the fraud.
“I sort of trusted everybody in terms of what they were doing. I had no idea someone was [allegedly] putting money in their own account.”
Pearson said he had sent a text message to one of the PwC staff after he was interviewed saying they needed to look harder because what he heard from them didn’t sound right. “Turns out I was wrong.”
Russell wishes none of this had happened. “It’s certainly not the job I came to do.”
For years, she was the supporter on the sideline. When she walked into the office and discovered a blizzard of paperwork containing troubling gaps – or what appeared to be unusual, non-declared conflicts – she faced straightening out the past so she could focus on the future.
“For us, what we’ve seen is this massive resistance from the national governing body.” What she had hoped, she said, was an approach from NZRL to say: “Let’s clean up this game together.”
Russell said she always wanted the clubs to know what the investigation had found. With it concluding only recently, she said they presented an overview of findings last weekend.
Ahead of voting for new board members on Monday, Russell instructed the full report – with privacy redactions where needed – was released to the clubs yesterday.
“We are trying to change the culture. It’s been normalised over the years. We don’t want this to be normal. It’s just not good enough.”
David Fisher is based in Northland and has worked as a journalist for more than 30 years, winning multiple journalism awards including being twice named Reporter of the Year and selected as one of a small number of Wolfson Press Fellows to Wolfson College, Cambridge. He first joined the Herald in 2004.
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