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Australian National Rugby League (NRL) team Melbourne Storm has been stripped of its 2007 and 2009 titles for breaking salary cap rules.

Melbourne was found guilty of systematic salary cap cheating totalling Aus$1.7m over the past five years.

As well as losing its titles, the club has also been hit with a Aus$1.6m fine and ordered to return prize money.

Melbourne will accumulate no points for the entire 2010 NRL season and the governing body has removed three minor premierships – the titles for finishing top of the lucrative NRL after the end of the regular season – between 2006 and 2008.

However, because the NRL does not operate a promotion-relegation system, Melbourne will still be able to participate in next season's competition. The ruling is the most severe punishment handed out in NRL history.

Each of the 16 teams in the NRL must not exceed a Aus$4.4m salary cap set by the league, which employs a special audit team to monitor the finances of each club.

The investigations into Storm's accounts revealed the club maintained a dual contract system whereby promises of extra payments were kept separate and clandestine from the club's owners, News Ltd, and its board members.

"While the amount itself is cause for concern, the most damning indictment is the systematic attempt by persons within the club to conceal payments from the salary cap auditor and, it would now seem certain from the club's board and from its owners, on an ongoing basis," said NRL chief executive David Gallop.

“It was through this system that they were able to attract and retain some of the biggest names in rugby league.

"In doing so they have let down the game, the players and the fans of the Melbourne Storm. Clearly there were some individuals who knew what was going on and perhaps many who did not.

"By nature, that means innocent parties will suffer as a result of this punishment but the persons responsible are those who constructed the scheme and anyone who knowingly signed a false statutory declaration to deceive the game.

"It would be unfair now on the players and fans of every other club in the competition to allow the Storm to enter this year's finals series or to retain the titles they won.

"As a game, we will do all we can to restore the faith of each of those parties but there is no alternative now but to deal with the situation that has been so deliberately engineered."

Gallop added that Melbourne, which won the World Club Challenge by beating Leeds at Elland Road in February, will have to work hard to restore its reputation.

Gallop continued: "As was the case with Canterbury after 2002 – the only other instance in which we have seen such an elaborate and contrived set of accounts – there is the chance for the club to begin a rebuilding process with the fans and the game by the way it conducts itself in the weeks and months ahead.

"A significant step in that process has been the way the Melbourne board has reacted to the information the salary cap team tabled this week.

"Rather than look to conceal the activities, the board has co-operated fully and we have been informed that the club's owners, News Ltd, have now ordered a full forensic examination of all club accounts."

Melbourne chairman Rod Moodie said: "Today is a most unbelievable blow and this is the lowest day in the club's history.

"On behalf of the Melbourne Storm, I would like to sincerely apologise to our players, our staff, our sponsors, our members and our supporters, and we will continue to assist the NRL with their investigation.

"We will absolutely endeavour to return this club back to the great heights where it deserves to be."

On Friday (April 23) morning, it emerged that Brian Waldron – who was chief executive at Melbourne Storm between 2004 and 2009 and was labelled by his former employers as the "architect" of the illegal player payments – has resigned as chief executive of new Super rugby franchise Melbourne Rebels.