Thursday, January 1, 2015

Rally America Developments/Status as of 1/1/15

Call me a loser, call me a hack, call me a know nothing, call me a detriment to the rally community.  That's fine.  I accept it.  Fortunately I really don't care.  Whether out of narcissism or a need for attention (both?) I enjoy looking into the success or failure of Rally.  In some instances its others its failure...

In some cases its organizations that don't communicate with their customers what their actual operations look like and what troubles they may be undergoing.  While from a business perspective it makes sense to keep these issues private, from a consumer perspective, it can be very important to know where your money is going and how it is being used.  If you want to attribute positive reasons for my disclosure of this information, great.  If you want to ascribe uglier reasons, that's fine, I accept it.

So here goes...The following information was obtained first hand from various high level sources at multiple Rally organizations with each corroborating parts of the others information.

Rally America is about to see a significant change in the way it receives or doesn't receive the proceeds of competitor funds and its actual role in the sport is being drastically curtailed.

First of the first USRA 2015 events will be the Waste Management Winter Rally.  No surprise here given one of the USRA's board members is one of the WMWR's chief organizers.  Secondly it looks as if there will be a second USRA even in the Northeast in connection with the O'Neil Rally School in '15 given Tim O'Neil's involvement with the USRA and his confirmed displeasure with Rally America at the moment.  The rest of USRA's events are likely to be held in the SouthWest where the majority of USRA's other listed board members are located and have organized prior events.

Now onto the good stuff...

 If you remember a couple years back, RA got into a deal of trouble with Oregon Trail (I believe) and other events/organizers because they never paid the organizers for months after the event. At this point in time the flow of funds from competitors went directly to RA first and RA was then responsible for sending these funds out to organizers, insurance companies, vendors, etc., etc.

Eventually that got ironed out months and months later though whether everyone got paid what they were owed is doubtful (this last part is my speculation).

Well fast forward to now and the situation has only turned astronomically worse. RA is being sued by a previous insurance company who was never paid, causing RA to obtain a new insurance company in the past couple years and pass on a jacked up insurance rate to racers, organizers haven't been paid, vendors haven't been paid, most RA employees (what few there are) haven't seen a check in months and perhaps most importantly, USAC hasn't been paid.

So this USRA thing began development about 10 months ago from a bunch of organizers and others who don't like RA and have numerous personal gripes against RA. Their idea is not much different than anyone else's in Rally. They aren't recreating the wheel there...they just want to put on events and get people to come. Their plan is to start out with smaller events, probly like 6 or so in '15 and move to National level events in years after.

These events will be organized/sanctioned between USRA and USAC, there will be no RA involvement here.

On the RA event side of things, the National events did and have not wanted to operate with RA in '15 for some time. They actually came to the USRA as a group (in part or whole) and asked them to handle the '15 events hoping to drop RA entirely but USRA turned them down feeling they were not ready to take over such a task given that at the time they barely had their BOD set and lots of other beginning stuff to work on.

So the RA National events were stuck with RA for '15--but...USAC is PISSED they haven't gotten their money from RA and how RA has handled their payment of various parties in general, (this is where the 1/1/15 date comes in) and will be notifying RA that as of 1/1/15 that they, USAC, are taking over all the licensing, registration, payment, and insurance,  etc. of the RA National events. RA (the company) will be left SOLELY as a promotional/marketing arm putting their "name" on the events but not really having anything to do with the competitors or their money.

And HERE is where I think the rubber meets the road in terms of the Fogg's interest in the sport and this gets into some speculation on my part vs. what I have been told first hand by those directly involved.

RA as a company owes tons of people, tons of money and can't pay its bills. It also couldn't produce something that NBCSN wanted and couldn't meet its obligations to paying sponsors who had counted on advertising/promotional time on those supposed NBCSN broadcasts.

So where did that money go?? Here's my speculation. Until very recently, RA controlled 100% of the flow of funds for these events. They took all these funds in and then were trusted to pay everyone. Well, that didn't happen very often. So my belief is that the Fogg's were and are, using the funds from competitors to prop up their other businesses or to fund their personal interests and then would "repay" various groups at later dates when they got more funds from somewhere else (cash flow improves, another event happens and they have another inflow of funds, a sponsor signs, etc.)  Whether this is 100% true is mostly besides the point...what matters is that RA took the money in and did SOMETHING with that did not involve paying its obligations related to Rally America events...

Its worse than even a company earning money on the "float" they might earn by holding the funds for longer than they seems to me that they were using these competitor and sponsor funds for operating purposes elsewhere.

Well, this is where USAC's decision is going to seemingly cripple their ability to do that. See, in the past the flow of funds went something like this: Competitor (entry fee) -->RA-->Organizers/USAC/Insurance company and as of 1/1/15 the flow of funds will be like this: Competitor-->USAC-->organizer/insurance company and then if there is ANYTHING left over it will go to RA for their "sanctioning" of the event.

So instead of being first in line for all these funds and RA making all the decisions as to who gets paid and when and getting their hand on EVERY penny an event generates they will now be LAST in line for the funds and won't get them until very late in the process if at all.

So...if YOU were RA and you had been using the funds gathered from various events in order to support operating needs of other companies or personal interests and suddenly had that flow of funds (in the hundreds of thousands of dollars annually) completely pulled from you with no control over the amount or timing of the funds you MIGHT get....and you had no real interest in the sport itself...What would you do?

So...going forward you will be needing a USAC license, not an RA license for competition in RA.  RA will have zero control over the flow of funds with USAC taking complete control over registration, insurance, etc., and the longer term intention for many National events is to leave RA and its broken promises behind.  What is Rally America as a corporate entity left with at this point??  A name, a website and a rulebook that looks the same as everyone elses.  That's it.  There is no TV package.  Their own events don't want them, there is no national level competition, entries are dwindling, they are being sued by multiple unpaid parties, they can't pay their employees, there hasn't been a PR release in over three months...

In the meantime the Fogg's have already made intimations as to their willingness to sue various entities mentioned here over these will be interesting to see how it all shakes out. 

I hope this at the very least provides a bit of new information as to where RA stands and what some of the behind the scenes maneuvering has been of late.  All this info was up to date as of two weeks ago.

1 comment:

Anonymous said...

Fair enough