What Next For Katusha?

Wednesday, 12 December 2012

Joaquim Rodriguez

Katusha had a great end to 2012 with success for much of the Vuelta and Rodriguez’s win in Il Lombardia which crowned him was the World No.1 rider in the UCI rankings whilst the team finished an impressive second overall in the same rankings. Only now the taste of champagne has gone and instead the UCI’s thrown a bucket of ice cold water over the team and its plans for 2013.

Monday’s news that Katusha have been refused a spot in the UCI World Tour for 2013 took everyone by surprise. Even the team management was confused, imagine what riders and sponsors must think? But the Russian team wasn’t dazed for long. Within 24 hours the lawyers were on the case and a public relations campaign has started too.

What are the options for the team? Can it get back in or is it out of the sport for good. What about the riders, will they stay with a team without a licence? If we can’t predict the future we can explore the scenarios and check the rules.

First a quick summary of how the licence is awarded. A team has to meet four criteria: sporting, ethical, admin and financial to satisfy the UCI’s Licence Commission. You probably know these by now but the Licence Commission itself is worth a mention because if it is part of the UCI it is run at arm’s length. It’s run by Paolo Franz, Hans Hoehener, André Hurter and Pierre Zappelli – all Swiss. These are not small time bureaucrats, Zappelli is a judge and member of the Switzerland’s Supreme Court whilst Hurter is the boss of a Swiss energy and water utility. They are tasked with reviewing all the applications and the idea is to keep them away from the other parts of the UCI so that the Licence Commission can be neutral. Does it work? Who knows but the point to note is that the Licence Commission is not President McQuaid and his pals. The Licence Commmission then works with Ernst and Young, a firm of accountants, to review the documents submitted, especially the financial ones.

Also note this is not a passive process. The UCI called Katusha to a hearing and I gather team staff had been busy working with the UCI to get the documents ready. In other words a team is guided through the process with dialogue, as opposed to submitting a bid and hoping all goes well.

Katusha Fax

That’s a fax from Katusha’s Swiss lawyers sent to the UCI on Tuesday and you can see the UCI’s rejection is “categorically contested and refused by Katusha.”

What went wrong?
This is the million Rouble question. We don’t know for sure but the document above helps to clear some things up. There had been speculation the team had been called up for ethical issues like employing Viatcheslav Ekimov or the Alexandr Kolobnev race sale allegations but this didn’t stand for me because Ekimov is innocent for now and the same for Kolobnev, the UCI’s investigation into the Liège sale takes place next January. No, instead the talk is of financial problems.

When I mentioned financial concerns on Twitter some wondered how a team sponsored by Gazprom and Itera could be short of funds. It’s possible sponsors won’t cough up the cash no matter how big but there’s more to finance than the sum of money. Having millions of Euros to spend is one thing, accounting for it is another and there are documents that the UCI expects to see, here’s a taster:

1. the audited accounts for the last financial year, with the audit report;
2. interim accounts to 30 June of the current year;
3. profit-and-loss account forecast for the current year;
4. forecast cashflow plan to the end of the current year;
5. annual budget for the registration year with explanatory notes;
6. monthly cashflow budget for the registration year;
7. financial plan for the period covered by the licence application or the remainder of the licence period.

For now we don’t know what has gone wrong, it could be that something in one of these documents didn’t satisfy the Licence Commission. The point here is that there’s a lot of paperwork to present, when we say “financial” it’s way more than just having a suitcase of Roubles or Euros. However as the lawyer’s fax states it seems Katusha thought they passed everything.

What next?
The team is already working on the PR front. They put out a press release yesterday which crashed the team website. The message was three-fold:

  • Chaos: the team was told at the same time as the press release went out and there was no explanation given to them, no chance to react to the news before the world was told about the humilation. It slams the UCI for this mess.
  • Patriotism: the word “Russian” appears five times, all that was missing was the Katyusha Soviet folk song which gives the team its name.
  • Fight: the “Russian team intends to defend its interests with the help of all possible civilized instruments and methods, including going to court.”

It’s nice to know they promise to keep things civil. There are direct provisions in the UCI rules to seize the Court of Arbitration for Sport. There’s a short window to appeal and Katusha must to state why it’s appealing but but also name who it will invite as a witness and present more documents. Once the paperwork is filed the UCI then has 15 days to present its documents to the court. An expedited hearing takes place – there won’t be any Contador-case delays for months on end. Done quickly it means Katusha could just about start the Tour Down Under, now less than 40 days away. If it wins.

But things are not so easy. First of all the team is going nowhere, they’re not even registered to ride a kermesse. Katusha hasn’t simply been relegated down from the World Tour to Pro Continental, instead it must apply for the second division licence. Now the terms and conditions are lighter but there’s no certainty. If the UCI has said “no” already then it might reject them again.

What If?

  • Katusha gets the second tier “Pro Conti” licence. This is not going to satisfy the team, especially since it will sit alongside sister team Rusvelo. First we have riders like UCI world number one Joaquim Rodriguez who might exercise a break clause to change teams. He’s said he’s not going anywhere but he would say this given the news has only just emerged. These clauses are common should the team suffer a variety of misfortunes. It won’t please the team management either, the squad has one of the biggest budgets and its backers are not here to spend July riding the Tour of Austria or begging for wildcards. In fact today is the deadline for teams to submit the application for a Giro wildcard to RCS so there’s a good chance of no Giro already.
  • What if the team wins on appeal? We’d get 19 teams in the UCI World Tour. This is possible as the UCI’s pick of 18 teams is arbitrary. But it would mean that race organisers only get to invite three teams on a wildcard basis bringing knock-on consequences for the races and other teams.
  • What if the team gets nothing? Who knows, maybe the team goes back to the CAS again? It would be unprecedented and bizarre to see a team told it is redundant. We have a squad of riders, a roster of staff and the press have been invited to the team launch.

Another fine mess
I’ve written about problems with the licensing process run the UCI before. Some points have been theoretical, pointing out problems within the rules that could occur. But here’s a real mess, a genuine disaster. If readers can crowd source another sport where teams are reviewed and rejected just 20 days away from the start of the season, please post a comment. Now I’m fine with rejecting a team, if it can’t meet the rules then it can’t ride. But surely this can’t happen at the eleventh hour, the evaluation process needs to be brought forward, perhaps the summer? Certainly the finance and admin could be taken care of well in advance, leaving the team to work on its sporting aspect, hiring and firing during the second half of the season.

Conclusion
The UCI’s Licence Commission aren’t saps, one of them is a Swiss supreme court judge. This is no light verdict.

But it is a bombshell. Katusha have started an appeal process, first by contacting the UCI and also via the court of public opinion. We’re still none the wiser as to the problems but the outcome will either be a return to the World Tour as the 19th team or an angry year in the Pro Conti ranks or even frozen out the sport for good.

The next step should see the UCI explaining the Licence Commission’s decision. This could lead to the CAS and a fast-track hearing process, certainly Katusha give the impression of wanting to try everything. As long as it is civilized.

Longer term though you wonder about the sport as a whole because it’s another scary prospect for a hesitant sponsor deciding between cycling and another sports sponsorship. And there’s also the political angle with Katusha team boss Igor Makarov sitting on the UCI’s own management committee. He must be red with rage right now and it’ll be interesting to see if he reacts, especially given whispered ambitions to run the UCI or place his man Andrei Tchmil into this role. Plus Russia is negotiating with the UCI to get a World Tour Race (perhaps a WSC event) and a decision on this is expected in May 2013 but Russian cycling officials might well have had enough of the UCI.

Carlos December 12, 2012 at 6:02 pm

A question i can’t get out of my head since the news from Katusha came out. Maybe somenone can help out…
The UCI hands out multi-year WorldTour licences to teams (until 2015 for Katusha, 2016 for Euskaltel, etc…) and yet each and every team must comply with the UCI criteria in order for them to be elected every year to race at the top level. So, obvious question is, why on earth do they do such thing when nothing is guaranteed?

The Inner Ring December 12, 2012 at 6:05 pm

Good question. A licence is not really a licence, it is more a one year licence with an option for renewal so long as the team can continue to meet the sporting, ethical, financial and administrative criteria for each year. So it’s more a case of once you win the licence you can be sure of 4 years as long as you keep ticking the boxes every October.

Bob December 12, 2012 at 9:01 pm

It’s the tie breaker for teams with the same sporting rank when one is a renewing applicant and the other is a new applicant. This wasn’t UCI’s idea. It was a concession to get certain organizers back into the World Tour.

Fred B December 12, 2012 at 6:15 pm

Scottish Premier League football fixtures this season were drawn with a Club 12 with the financial problems at Glasgow Rangers (now in renewed, post-liquidation, form in the third division) and that club only confirmed as Dundee on July 16th for fixtures starting August 4th.

You would have thought that the general reaction of surprise at the exclusion of Katusha could have been predicted and some explanation prepared in advance. It is, as oft stated, all rather opaque for most of us.

Doxter December 12, 2012 at 7:33 pm

Yes fred , the club was issued with a licence to operate as a member club the day before its first fixture took place – this was the remit of the Scottish Football Association , a fifa member nation.

Of course there was politics at play , and this licence was conditional on acceptance of an illegal transfer embargo and perhaps even a tv deal being enforced ?

Re katusha – id imagine its best to await the detail but i feel for the team being handled in such a poor way

The Inner Ring December 12, 2012 at 9:26 pm

Thanks for the example, worth noting.

Q December 12, 2012 at 6:38 pm

There are plenty of other teams with poor management or riders under suspicion for doping issues. I predict that this has something to do with financial records, either really sloppy accounting, or worse, evidence of financial misdeeds. Has anyone ever used a cycling team to launder money before? Maybe we’re about to find out.

The Inner Ring December 12, 2012 at 7:13 pm

Yes, it’s been done before and by a Russian team in Italy:
http://inrng.com/2010/04/money-laundering-mafia-pro-cycling/

MaLóL December 12, 2012 at 6:42 pm

Perhaps UCI should be re-named to Clowns-comité?? This situation couldn’t be more hilarious. “nd team in the ranking and first rider on the uci ranking get no license… If UCI is changed by a group of 6 year old individuals, things would improve largely.

Mats December 12, 2012 at 7:16 pm

It’s all about the Russian backwards ‘bizniz’ culture. They sign a contract and in a minute they will start to find ways to circumvent it. Nothing new under the sun.

TomC December 12, 2012 at 8:56 pm

That sounds like an unsubstantiated slur based on a national stereotype. Would you care to expand your hypothesis?

wansteadimp December 12, 2012 at 7:24 pm

The financial documents don’t seem that onerous. I can’t believe that a major international business wouldn’t have those docs as a matter of course.

However, I would be very happy to believe that the numbers they contain may not stack up the way the UCI want, especially as the statement makes reference to “explanations”.

The Inner Ring December 12, 2012 at 9:28 pm

The list above was only a “taster”, there’s a lot more to be provided and other work too. The UCI rulebook has pages and pages, I didn’t want to quote too much.

Jason December 12, 2012 at 9:09 pm

Clearly some swiss bankers are pissed that the Russians aren’t using their banks to hide financial assets….only explanation.

Shawn December 12, 2012 at 9:19 pm

Your suggestion to have a summer review of financial docs for the purposes of licensing potentially could create problems for the many teams that spend most of the summer trying to solidify commitments from sponsors. I agree that this is ridiculously late notification but it seems that the UCI sat on the docs they had while trying to make their final decisions on licensing because their own standards are so vague.

The Inner Ring December 12, 2012 at 9:29 pm

That’s true, bringing the date forward is not without problems. But with Katusha hopefully there would not be a problem. Perhaps it could be optional, teams can clear this problem in August if the sponsor is there and the UCI ready?

Ross December 12, 2012 at 10:27 pm

You would think that the UCI, after all it’s recent bad PR, would try and avoid a situation like this. They may have a very valid reason for excluding Katusha, but obviously the way it has been communicated to the Team, and general public, has been very poor. Once again, another stuff up by the boys at the UCI!

The Inner Ring December 13, 2012 at 3:39 pm

The point to note here is that the UCI’s Licence Commission is not a little sub-committee that reports back to McQuaid. It’s led by a Supreme Court judge and is very independent.

It seems they ruled but didn’t give all the details to the UCI. A PR disaster but actually beyond the UCI’s control. If the UCI doesn’t know what its Licence Commission is doing this is actually a refreshing sign of independence and not necessarily bungling incompetence.

hoh December 14, 2012 at 1:30 pm

This might prove the Licence Commission’s independence, but it also proves UCI’s incompetence.

In normal circumstances, such commission would explain their decision quite clearly to their employer which is the UCI in quite substantial written form. If UCI actually does not know why the Licence Commission choose to eject Katusha by now, that means something is seriously wrong with UCI’s workflow.

Then again, professionalism wasn’t cycling’s strong point I suppose.

ave December 13, 2012 at 12:28 am

Can it end in 19 pro tour teams and one less rider/team?

The Inner Ring December 13, 2012 at 8:40 am

I can’t see them firing one rider per team. 19 will work if it comes to it, just less choice for races to invite wildcard teams.

THa December 13, 2012 at 1:06 pm

I assume ‘ave’ means that individual races would have one less rider per team to allocate for the extra team, not letting go a rider each for the whole season.

EG the Giro features an 8 man team instead of 9. 18 World Tour teams plus Katusha plus 4 wildcards would equal 184 riders. Less than the current 198 in a 22 team Grand tour.

cilmeri December 13, 2012 at 1:37 pm

But other teams have built up squads with the knowledge of needing 9 men teams for these races, so that’s unfair to every other team. I can see plenty of objections to that as well.

Angelo senza la o December 13, 2012 at 5:30 am

It was November 25, 2009, when Lampre (Lampre-Farnese Vini) found themselves in the same pickle except that only 17 teams were named to the ProTour. Saronni’s reaction was, “I see I will have to work on administrative and bureaucratic issues. I am ready to go to work immediately, as always, to clear up the situation and guarantee that Lampre-Farnese Vini occupies the position it deserves in cycling’s elite.” http://italiancyclingjournal.blogspot.com/2009/11/saronni-surprised-lampre-protour.html

By Jan 15, 2010, the team was still in limbo: http://italiancyclingjournal.blogspot.com/2010/01/quagmire-of-team-lampre-farnese-vini_19.html

On Jan 25th the team was “provisionally registered until March 31st and were finally registered as a ProTeam on April 1, 2010. http://italiancyclingjournal.blogspot.com/2010/04/lampre-farnese-vini-finally-registered.html

The Inner Ring December 13, 2012 at 8:36 am

Phonak had the same in 2005 too, after the UCI kicked it out for several doping scandals. The team went to the CAS and won:

http://velonews.competitor.com/2005/02/news/road/cas-orders-phonak-back-in-protour_7500

Duncan December 13, 2012 at 9:55 am

You say the deadline for a Giro wildcard has gone, when is the Tour wildcard deadline?

The Inner Ring December 13, 2012 at 3:36 pm

I’m not sure, it has moved in the last couple of years. ASO even announced invitations by surprise a couple of years ago.

THa December 13, 2012 at 1:15 pm

Honestly aren’t Katusha a bit of a 1 man band as far as the races are concerned? If Rodriguez decides to do Tour/Vuelta, will the Giro really miss them? Or if he chooses to do Giro/Vuelta would the Tour choose Katusha over the option of another French team?

Think World Tour needs an ‘Opt-In’ procedure at the start of the year. The teams choose which races they want to race and the races choose the teams they want. If there is any overlap when teams and races don’t want to be involved then it frees another wildcard. EG: Euskatel at Flanders and Roubaix I imagine.

LWB December 13, 2012 at 3:07 pm

Surely this is just more evidence that cycling’s structure needs to change. Teams need confidence to build for the future which will ultimately filter down into riders contracts/racing. I assume the Change Cycling Now group are taking note?

The Inner Ring December 13, 2012 at 3:19 pm

Some things need to change but here we don’t have to change leadership nor the structure of the sport, just tweak the rules.

But perhaps there is a cultural element here? If the UCI can’t spot the possibility of these stories happening then we should ask why, it’s not like rejecting a major team weeks from the start of a new year is an unpredictable event given the rules themselves cover it. Plus we’ve seen troubles before with Phonak, Lampre etc.

LWB December 13, 2012 at 4:23 pm

Agreed – rules are not hard and fast which does add a cultural element. But systematic, whole scale change should change cycling for the better? Rule changes and alterations have had little impact for some time now. I’m not an advocate for the WSC project but a clean slate, whilst retaining some of the positive historic elements of cycling (Classics, Grand Tours, race organisation etc), for me, is the way forward.

Larry T. December 13, 2012 at 4:54 pm

How much bigger of a mess can these folks create? And now they settle with “Il Pistolero” for an undisclosed amount? Can these crooks even spell ETHICS? What planet are they living on? I thought Aigle was in Switzerland, not Uranus. They REALLY need to clean house and start anew, or just bring the management from World Wrestling Entertainment in to complete the break from anything resembling SPORT.

The Inner Ring December 13, 2012 at 5:05 pm

It’s a big mess as I’ve tried to show above the Licence Commission is a strict and independent body and won’t have taken this decision by accident. Something has gone seriously wrong here and Katusha will have been given several chances to get things right before rejection.

Doubter December 13, 2012 at 7:14 pm

Looks like things are business as usual in Aigle…………

George Kaplan December 13, 2012 at 9:19 pm

Thanks for the great analysis INRNG! You just keep going like an Energizer bunny, don’t ya? RoadCycling.Com has an interesting analysis on the UCI structure / decision system which made the decision and on the possible motives which might have caused the UCI to say ciao to Katusha. http://www.roadcycling.com/news-results/katushas-exclusion-worldtour-and-how-it-may-benefit-uci

The Inner Ring December 13, 2012 at 10:45 pm

An interesting read but I can’t stress enough how the Licence Commission is not the UCI, it is reasonably independent of the governing body and its staff.

George Kaplan December 14, 2012 at 1:37 am

But the Licenses Commission is elected by the Professional Cycling Council of which 6 of its 12 members are nominated by the UCI. Not many members need to be swayed for it to be non-independent, right?

The Inner Ring December 14, 2012 at 8:47 am

True in theory but the members this time look strong. I can’t see anyone who has been parachuted into the job to do the work of the PCC members.

Dr. Ko December 15, 2012 at 1:24 pm

Inner Ring, You are doing a fine job to analyse all this mess. I kind of gave up on this, checked my whisky stock level and wrote a fairy tale solution:

http://innercitymobility.blogspot.de/2012/12/christmas-edition-fairy-tale-saving.html

Regards,

Dr. Ko

Chrisman January 10, 2013 at 10:49 pm

Ernst & Young got fingers all over the place

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