Melbourne Storm stripped of titles and £1m prize money for wage-cap fraud

One of the world's most successfully and controversially created sporting franchises is in tatters following the revelation of a million-pound fraud at the Melbourne Storm.

The Storm, the rugby league club implanted in Aussie Rules territory 12 years ago, have been stripped of the titles they won in 2007 and 2009 after being found to have breached their salary cap by more than A$1.7 million (£1m) over the last five years. They also lose the World Club Challenge title they won against Leeds earlier this year – and the prize money from all their successes.

"The Melbourne Storm have been the dominant force in the NRL [National Rugby League] for the past five years and it is clear to see now why," said the Leeds chief executive, Gary Hetherington. The Rhinos will not be seeking, however, to have the World Club Challenge awarded to them retrospectively. The £50,000 prize money is a slightly different matter; the Rugby League's board of directors will discuss the matter at its next meeting, but the money is more likely to be divided among Super League clubs than handed directly to Leeds.

In all, the Storm have been ordered to repay A$1.1m in prize money and have been fined A$500,000. On top of that, they have been docked all this season's competition points and will not be allowed to accumulate any more, effectively leaving them with nothing to play for over the rest of the season.

The first sign that something was badly amiss was when bookmakers noticed a series of bets on the Storm, then in the NRL's top four, finishing bottom – which they will now do. News of what the NRL's audit had revealed had clearly leaked out.

The draconian scale of the punishments – more severe even than those dished out to Canterbury for the previous record salary-cap transgressions in 1992 – is a reaction to the blatant and highly organised nature of the scam.

The Storm ran parallel sets of accounts, one for public consumption complying with the NRL's stringent salary cap and a secret set showing the actual, higher, payments to players.

The man the club is blaming, the former chief executive, Brian Waldron, left his job in January to join Melbourne's Super 15 franchise. He and other club officers, including his successor, Matthew Hanson, who was suspended by the club yesterday, face the prospect of jail over the fraud, while players and their agents could also be investigated over how much they knew. "This is an absolute shock to myself, our football staff and our players," said the Storm's coach, Craig Bellamy. "Personally, I am heart-broken."

Melbourne's rugby league history has always been a stormy one. Planted in alien territory in 1998 in the wake of the Super League wars and at the expense of traditional clubs in Sydney, they have aroused strong emotions.

On one level, their consistent playing success has made them the strongest argument yet for geographical expansion in a country where the rival codes now trespass routinely into each other's backyards. They are still propped up financially, however, by their owners, News Ltd, and there are many in the old league heartlands of Sydney and Brisbane who would cheerfully see them go

That is unlikely to happen, although the club might now find it impossible to hang on to players of the calibre of Australia internationals like Billy Slater, Cameron Smith and Greg Inglis. They are all products of the Storm's astute talent spotters in Queensland and their possible availability will inevitably excite British Super League clubs.

One of their former players, Matt King, is now with Warrington, while their former assistant coach, Michael Maguire, has taken charge with great initial success at Wigan.

Yesterday the once proud club was contrite. "We do accept the referee's decision," said their chairman, Rob Moodie. "The rules are clear, we broke them and we offer no excuse."

There is no suggestion at present of News Ltd pulling the plug on their problem child, although their chief executive, John Hartigan, made no bones about the severity of the betrayal. "This is not cheating around the edges," he said. "This club has had a couple of rats in its ranks. We will root them out and try to rebuild a great club."

The Australians have a word for this sort of thing, "rort" – cheating or fiddling. There have been plenty of rorts in rugby league, but Melbourne's is the biggest to date.