The Murdochs’ sporting life

Owning a sports team has long been considered one of the ultimate indulgences for the rich. A bit of colour and movement, a chance to mingle with some sports stars, some nice publicity – what could be better?

But as Rupert Murdoch’s News Limited has discovered this week through its 100% ownership of the Melbourne Storm, sports ownership isn’t without its problems.

And now Rupert’s son Lachlan Murdoch has become inadvertently caught up in another sports scandal thanks to his ownership of a stake in the Rajasthan Royals, one of the teams in the Indian Premier League cricket competition.

As Australia’s sports community frets over the future of rugby league, Indian cricket has been rocked by allegations about the founder and driving force behind the IPL, entrepreneur Lalit Modi.

Early this week, the Board of Control for Cricket in India (the BCCI) suspended Modi from his post as IPL chief and levelled a number of charges against him, including allegations of financial impropriety. Modi has denied the charges and has two weeks to respond to the allegations.

Investigations into Modi’s operations are continuing and while the future of the IPL does not appear to be in doubt (it is too lucrative for that) the reputation of the competition has clearly taken a hit.

The Modi suspension also appears to have sparked a wider investigation into the running of the IPL competition and specifically the ownership of the teams involved – with a particular focus on the Rajasthan Royals.

Yesterday, India’s Economic Times newspaper revealed that Indian authorities are investigating the Rajasthan Royals for alleged breaches of India’s foreign exchange rules, which govern the way foreign funds can be moved in and out of the country.

The team has denied any wrongdoing.

“In accordance with regulatory filings, we subsequently volunteered to make a full disclosure application (in July 2009) through the Government’s FIPB (Foreign Investment Promotion Board) process,” it said in a statement released this morning.

“The relevant information submitted in that application, including details of the structure, now appears to be publicly available. Our application was not initially accepted due to a miscommunication of submission timings. Our subsequent application in January 2010 has not been rejected.”

“We are well advanced towards fulfilling the procedural steps and additional information requests necessary to satisfy the FIPB,” it added.

The team has also been forced to respond to criticism from Indian cricket board President Shashank Manohar, who raised questions about the ownership of the Royals, claiming that while the bid for the team was won by a British-based company called Emerging Media, another company’s name appeared on the contract papers for the deal.

But today the Royals have hit back, saying ownership of the team has always been transparent.

“The investors agreed to submit the bid using a consortium, led by UK-based Emerging Media (IPL) Ltd. The other entities in the consortium were disclosed in the bid submission documents. Subsequently, on March 8, 2008, an Indian company Jaipur IPL Cricket Pvt Ltd was incorporated, as detailed in the bid submission. We then executed the franchise agreement on April 14, 2008. The ownership of the consortium did not change between the award of the bid on January 23, 2008 and the signing of the franchise agreement on April 14, 2008.”

The team has also spelled out for the first time the exact ownership split of the franchise, including Murdoch’s 11.7% stake and a 44.2% stake held by Suresh Chellaram, the brother-in-law of Lalit Modi.

The team and its investors will be hoping these statements put a close to these matters. However, the fallout from the suspension of Modi looks certain to drag on for some time.