THIS WEEK YOU’VE probably once again been reading and hearing about the investigation into the sale of certain loans held by IBRC, the former Anglo Irish Bank, including the controversial Siteserv deal.
The story itself is a complex one involving many characters, multiple companies and even more unanswered questions. It caused considerable controversy over the summer and has reared its head again this week.
But what on earth is it all about and why is it back in the news? Let’s start from the beginning…
What is IBRC?
The Irish Bank Resolution Corporation is an amalgamation of the Anglo Irish Bank and Irish Nationwide. As you probably know, these two banks, primarily Anglo, cost the taxpayer billions of euro as a result of their reckless lending behaviour during the boom and both had to be nationalised.
IBRC was established in 2011 to wind-down both banks by selling off distressed assets and ensuring the maximum return for the taxpayer. IBRC itself was liquidated in February 2013 as part of efforts to abolish the promissory note arrangement (you can read about that whole other story here).
What is Siteserv?
Siteserv provides a wide range of services to public and private companies, such as scaffolding for construction projects and the installation of satellite TV boxes.
Heavily indebted to IBRC, Siteserv was sold to the Denis O’Brien-owned Millington for €45 million in 2012. As part of the deal, IBRC gave Siteserv a total loan write down of €119 million (out of €150 million it was owed by the company) with €5 million also paid out to shareholders.
A subsidiary of Siteserv, GMC/Sierra, went on to be awarded a large water metering contract in July 2013.
Why did this deal cause controversy?
At the time of the sale three years ago, the Department of Finance had considerable concerns about the Siteserv deal, including, among other issues, the handling of other bidders and the payment of €5 million to shareholders.
However these issues did not come to light until April this year when, after much probing, Social Democrat TD Catherine Murphy released documents she obtained under Freedom of Information that exposed the significant tensions between the Department and the state-owned bank.
Was it just the Siteserv deal causing problems?
No. Following Murphy’s disclosures the Department of Finance released documents showing that Micheal Noonan was so concerned about the “constant stream of issues” arising at IBRC that he was not confident about accounting for the bank’s actions in the Dáil.
In short, the documents laid bare serious problems in the relationship between IBRC and the Department of Finance in 2012. But only now, three years on, were these concerns coming to light.
The revelations about this troubled relationship are particularly interesting as IBRC was wound-up in February 2013. The government maintains this was solely for the purposes of abolishing the promissory note. Murphy and others have started to doubt this.
What have people at IBRC said?
Alan Dukes, the ex-chair of IBRC and a former finance minister, has consistently rejected suggestions of impropriety in relation to Siteserv deal and indeed any other deal the bank undertook:
I am extremely angry at any reference to criminality or malpractice. There’s absolutely no grounds for suggesting that.
Although Dukes did acknowledge tensions in the relationship between IBRC and the Department of Finance when he gave a lengthy press conference in April.
Where does Denis O’Brien come into all this?
In late May, Murphy used a Dáil speech to make claims about what she called “extremely favourable interest rates” O’Brien received from IBRC when repaying loans. The businessman had already secured an injunction against RTÉ from broadcasting similar claims.
As a result the media were temporarily restricted from reporting on Murphy’s claims despite them being made under Dáil privilege. Eventually, the High Court clarified that the injunction was not intended to prevent Murphy from making the claim under privilege.
O’Brien is currently taking legal action against the Oireachtas, the State and an Oireachtas committee that did not find Murphy had abused Dáil privilege.
In short, he isn’t happy with how his private financial affairs have been made public and disputes the portrayal of them, as well as the accuracy of some information. He wrote in the Irish Times in June:
For me this was an intrusion too far. Over the past several years, some of the media in Ireland has become more and more vicious and invasive and this was a deliberate attempt to misrepresent my personal banking relationship.
What did the government do?
In response to the considerable controversy caused by the disclosure of an uneasy relationship between the Department of Finance and the now-liquidated bank, Noonan asked IBRC’s special liquidators, KPMG, to carry out a review.
Opposition parties and TDs were not satisfied that a review was sufficient given those liquidating the bank were essentially tasked with reviewing their own work.
Over the course of May and June further – as yet unproven – allegations emerged in relation to transactions and deals carried out by IBRC. It was suggested as much as €1.2 billion was written off for 40 customers – both businesses and individuals, while Murphy claimed some clients were afforded special low interest rates and debt write downs.
Such was the unfolding controversy, the government decided to establish a statutory Commission of Investigation in order to carry out an independent inquiry into all loan sales and activities of the IBRC that resulted in a loss of €10 million to the taxpayer. It would also examine any special interest rates which resulted in IBRC borrowers saving more than €4 million.
The inquiry was originally to be chaired by retired High Court judge Daniel O’Keeffe but he was later replaced by serving High Court judge Brian Cregan. With a budget of €4 million, the commission got underway in June, and began the process of examining nearly 40 separate deals.
Why is it back in the news now?
Last Friday, Judge Cregan wrote to the Taoiseach telling him he has insufficient powers to handle sensitive financial documents, running to thousands of pages, handed over to the commission by the Department of Finance and IBRC’s special liquidators, KPMG.
Why doesn’t he have the powers?
The Department of Finance said that its assertion of confidentiality over IBRC documents is based on a matter of law principally the “banker-customer duty of confidentiality”. In a statement, the Department explained:
As a witness to the investigation, for the Department not to assert confidentiality would have been incorrect as a matter of law and could have opened the Department to legal action from customers of IBRC or indeed IBRC itself for not respecting and protecting their rights.
Essentially, it had to tell the commission about the confidentiality issue. However, the Department believed that Cregan would have sufficient powers under a public interest provision in the 2004 Act Commission of Inquiries Act to override this confidentiality issue and enter the documents into formal evidence.
Michael Noonan said he believed this provision was “robust enough” to override any confidentiality assertions made by either the Department or by KPMG.
But the judge felt otherwise. He felt that even though he had received the documents he could not do anything further with them. This has effectively stalled the inquiry.
Somebody should have spotted this before now though, right?
Opposition TDs have been quick to say the same thing, but the government has pointed out that during all the Dáil debates on this issue there was no reference from anyone to the possibility that this might happen.
However, a 76-page determination from Cregan has disclosed that the Department of Finance raised concerns about its duty of confidentiality in August. However Noonan maintains he always believed the commission had sufficient powers through the public interest provision to override these concerns.
Questions have also arisen as to why the Attorney General Máire Whelan, the government’s legal advisor, didn’t raise this as an issue when the terms of reference for the Commission were being drafted.
The government has argued that several commissions of investigations have taken place in the last decade. They have dealt with a whole range of sensitive issues and this problem has never arisen. The AG’s advice to government is privileged so we will likely never know what concerns, if any, she raised.
So what’s the government going to do now?
On the advice of Cregan himself, the government is currently awaiting his interim report before deciding how to proceed. It’s been suggested that emergency legislation could give Cregan the powers he needs but this could still mean a court challenge by those parties at the centre of the deals being examined.
In his determination, the judge said that the 2004 Act had not provided any mechanism whereby he could seek a High Court direction on the confidentiality of documents. He pointed out that a previous commission of inquiry, on child abuse, had been provided with specific powers to go to the courts. This may now be considered by the government as the way forward.
Any chance of this being done before the election?
Probably not given the delays so far. Noonan said this week he didn’t know how much of a delay the latest issue would cause.
Why is this important?
All of us paid a heavy price for the bank guarantee of 2008 and subsequent EU/IMF bailout in the form of increased taxes on our salaries and savage cuts to everyday services. The economy is recovering again, but how a taxpayer-owned bank disposed of distressed assets and whether they got the best value for money is important given it’s essentially our money at issue here.
In this instance the question has been asked as to whether IBRC got the best deals possible or did special arrangements with wealthy business types to the detriment of the taxpayer. While the bank’s former executives wholly dispute the latter, it’s up to the judge to determine the full story.
Indications are that it could take him years to do so.
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