OECD/Transparency International report – Ireland

The OECD/Transparency International Progress Report into international bribery passed the world by there yesterday. Pity, it’s broadly positive.

On the Irish angle though, not so much. What’s new though, hey?

On the international comparisons Ireland is ranked in the lowest category for its efforts to deter the payment of bribes in the export/import markets. We’re categorised as having “little or no enforcement”. The experts of OECD/Transparency International point out that we do have ‘jurisdictional limitations’ (i.e. a porous border) but find that we lack sufficient legislation for criminal liability for corporations anyway; and once again that we’ve no whistleblower protection. The OECD also found fault with Ireland’s level of sanctions for foreign bribery and false accounting. Furthermore they question whether “the Garda Bureau of Fraud Investigations is sufficiently trained and resourced to enforce the prohibition of foreign bribery”.

More worrying however is the country report. As you can see in table B and C or the PDF, Ireland is the only country examined with ‘null’ figures. This is because the Gardaí outright refuse to provide information to the OECD/TI team in relation to investigations carried out during the year.

The claim is any report would tip-off subjects that they are being investigated. Stunning; a ‘1’ – no further details! – on a TI report published annually would tip-off an person paying bribes? Gimme a break.

In compiling their figures Transparency International experts do also attempt to glean information from relevant media reports on investigations, but none were available for Ireland. This shows just how secretive the Garda Siochana is by international standards. Figures were calculable for Turkey, Estonia, Bulgaria, Chile and South Africa but not Ireland. We alone are the country with null figures in table B and C. This reflects poorly on the Gardai, the State and, to an extent, the media.

OECD/TI also express concern that the Prevention of Corruption (Amendment) Bill has yet to be enacted despite being due for implementation in January of this year. They recommend it be enacted as soon as possible. Who wouldn’t? Here’s hoping.

Previous posts from this website on Garda secrecy and unaccountability: ‘Gardai and Freedom of Information‘, New details relating to the Terence Wheelock case; Deaths in Garda Custody.

Maybe Paul Williams could look into international bribery for Transparency International’s 2011 report?

Anglo Irish Asset Finance PLC

I’ve been leafing through the company accounts of several interesting Anglo subsidiaries. The numbers would make you ill.

Anglo Irish Asset Finance PLC stands out (AIAF for short). The company directors have changed somewhat, but for most of the relevant period the directors were:

Brian Linehan (Not the Minister for Finance)
Gordon Parker (FG Parker)
J Brydie (Jim/James Brydie)
TP Walsh (Thomas Walsh)

AIAF, under cashflows, in the 12 months to September 30, 2008, had losses before tax of £116,805,450.That was before the bank guarantee.

In the 15 month period between September 30, 2008 and December 31, 2009, the company had losses before tax of £1,197,670,982, or almost £1.2 billion. (In an interim management report in March 2009, the company reported a loss of £972m, including £613m on a Yen deal that went badly wrong). The majority of the £1.2bn loss was from UK investments, £88m was from Mainland Europe. The company had £5.34bn in liabilities up to the end of 2009. Interest and similar income fell from £399m in the 2008 period, to £290m in the 2009 period. Trading losses would make your brain melt. In the 2008 fiscal year it lost £99m in “trading losses”, in the 2009 fiscal year it lost £613m. Provisions for impairment went from £124m to £974m in the 2008 to 2009 period.

Now for derivatives – and as far as I can tell, the taxpayer still holds these.

As of December 31, 2009, AIAF held £2,148,360,000 total derivative financial instruments, of which £1.74bn was interest rate swaps.

AIAF held £3.16bn in loans classified for sale to NAMA at year end 2009. Less provisions for impairment this is £2.3bn. But it was the £3.16bn that was designated on December 31.

Share capital was increased from 300,000,000 shares in 2008 to 3,300,000,000 in 2009. On November 18, 2008, 1,000,000,000 ordinary were issued at par for a consideration of £1 billion and subscnbed by CDB (U K ) Limited, the parent company, thereby increasing ordinary share capital by £1,000,000,000 to £1,220,000,000. Note 28 states:

In order to further strengthen the capital position of the Company, on 18th November 2008, the issued ordinary share capital of the Company was increased by £1,000,000,000. In addition AIBC agreed to the irrevocable write off of £200m of the intercompany loan between AIBC and the Company which has further increased the capital of the Company through the creation of a capital reserve of £200m.

Note 29 is on NAMA (in relation to AIAF’s parent in Dublin):

The transfer of assets to NAMA is a fundamental aspect of AlBC’s restructunng process. AIBC estimates that NAMA will acquire land and development loans and certain associated loans with a value of approximately £3,166m on a gross loan basis (i e before taking account of £864m of loan loss provisions) from the Company. AIBC and the Company have no control over the quantity of eligible assets that NAMA will acquire or over the valuation NAMA will place on those assets. NAMA has not confirmed to AIBC or the Company the total value of eligible assets it expects to purchase or the consideration it will pay in respect to those assets.

NAMA appear to have applied the following (Note 29):

Total assets as classified for sale, neither impaired or past due: £451m
Past due but not impaired: £176m
Impaired: £2.538bn

So let’s put it this way. NAMA have said that 80% of the loans are impaired as of December 2009. And 87% of all loans (either impaired or not) are related to just three sectors, retail (10%), residential development (37) and commercial development (40%).

Is NAMA a public authority?

It seems as though myself and Emily O’Reilly’s office are not seeing eye to eye on this question. Not to say that her staff are anything other than friendly and helpful, they certainly are. We simply appear to be disagreeing on how to read SI133/2007 – the Environmental Information Regulations.

As readers of this blog will know, her Office issued a preliminary decision in which NAMA was deemed not to be a public authority for the purposes of those regulations. I will reply to the preliminary decision shortly, after which a binding decision will be made by her office. The stakes are pretty high, and I believe – after speaking to a number of legal people – that I am correct on my reading of the SI, and the Office is fundamentally incorrect (in their preliminary decision at least).

I do find it perplexing that on the one hand Emily O’Reilly is complaining about NAMA not being under FOI, while on the other her office issued a preliminary decision that denied NAMA’s status as a public authority under the sister legislation to FOI. That might sound like criticism, and yes it is, albeit mild. But if the Office were to make a binding decision that NAMA was not a public authority, it gets far far more serious.

Let me be very clear here. NAMA is a public authority for the purposes of the Regulations. This is utterly clear. I believe the preliminary decision has erred both in law and in fact by:

Failing to find that NAMA is a public authority by reason of Regulation 3(1)(vi) of SI 133/2007;
Failing to apply the correct test when considering whether or not NAMA’s functions are administrative in nature;
Failing to find that NAMA is a public authority by reason of Regulation 3(1)(b) of SI 133/2007; and
Incorrectly finding that NAMA’s powers serve no public purpose and that it is a purely commercial entity.

I’ve had huge (read: massive) help in drafting my reply, but that person has asked to remain anonymous (for now at least). If the Office issues a binding decision that NAMA is not a public authority I believe the error will be significant enough that it would require a High Court action to correct. And this doesn’t just relate to NAMA – it relates to a large number of bodies in the State which would no longer fall under EIR on the basis of the NAMA precedent – which poses a question as to what bodies are or are not covered by the legislation. This affects us all.

Without going into the detail of the reply (it’s over 5,000 words in length so far), I would make two important points.

First, in her reply, the investigator states:

“I take the view that Article 3(1)(a) of the definition of “public authority” is meant to refer to a Department of State or local authority or other State body within the executive branch of government; it does not refer to a body with an economic or commercial mandate such as NAMA.”

I think this is one of many fundamental errors in the preliminary decision. 3(1)(a) could conceivably included many more bodies than those in the executive. But even if I’m wrong, that’s why 3(1)(b) is also worth looking at.

Second is NAMA’s own memoranda of association. You see when NAMA was established, it also established several limited companies, including National Asset Loan Management Limited. And the memoranda of association for this company includes, in article 9:

To purchase, take on lease, on licence, in exchange, upon option or otherwise acquire and hold any lands, buildings, property (whether leasehold or freehold) or any rights or interests therein or in respect thereof and to develop, improve, alter or manage the same or any part thereof in any way (including, without limitation, construction, demolition, landscaping, planting, draining and improving).

Now read the legislation (this is simpler than it might look):

3. (1) In these Regulations—

“public authority” means, subject to sub-article (2)—

(a) government or other public administration, including public advisory bodies, at national, regional or local level,
(b) any natural or legal person performing public administrative functions under national law, including specific duties, activities or services in relation to the environment, and
(c) any natural or legal person having public responsibilities or functions, or providing public services, relating to the environment under the control of a body or person falling within paragraph (a) or (b),

and includes—

(i) a Minister of the Government,
(ii) the Commissioners of Public Works in Ireland,
(iii) a local authority for the purposes of the Local Government Act 2001 (No. 37 of 2001),
(iv) a harbour authority within the meaning of the Harbours Act 1946 (No. 9 of 1946),
(v) the Health Service Executive established under the Health Act 2004 (No. 42 of 2004),
(vi) a board or other body (but not including a company under the Com- panies Acts) established by or under statute,
(vii) a company under the Companies Acts, in which all the shares are held—
(I) by or on behalf of a Minister of the Government, (II) by directors appointed by a Minister of the Government,
(III) by a board or other body within the meaning of paragraph (vi), or
(IV) by a company to which subparagraph (I) or (II) applies, having public administrative functions and responsibilities, and pos- sessing environmental information;

Here is my logic:

1. NAMA is a body established by or under statue, therefore it is a public authority under 3 (1) (vi). No decision has to be made about whether if falls under a, b or c: 3 (1) (vi) is entirely sufficient.
2. Even if the “and includes” part of the legislation instead said “or includes” NAMA would still be a public authority under 3 (b), since it carries out public administration. Believe it or not, the entire disagreement with the Information Commissioner’s office stems from what ‘and includes’ means here. I believe it is perfectly clear.
3. Even if NAMA was not under 3(b), it would be under 3(c), because, as outlined above it is a natural or legal person (a company), having public responsibilities or functions relating to the environment (by virtue of it carrying out demolitions or building that would affect the environment).

But the question is, should I have to bring a High Court action in order for the legislation to be read correctly?

The Directive itself (on which the SI was based) says:

Member States may provide that this definition shall not include bodies or institutions when acting in a judicial or legislative capacity. If their constitutional provisions at the date of adoption of this Directive make no provision for a review procedure within the meaning of Article 6, Member States may exclude those bodies or institutions from that definition.

But when transposing the legislation, we deliberately included parts (i) through (vii). It is a non-exhaustive list of bodies and categories of bodies which are to be considered public authorities for the purpose of the Regulations. No ifs, ands, ors or buts.

And one last thing. NAMA will be one of the biggest, if not the biggest land owner in the State. It will have the power to compulsorily purchase land, demolish houses, redevelop existing land… the list goes on. So let us remind ourselves what defines “environmental information” under the European legislation [my emphasis]:

“environmental information” means any information in written, visual, aural, electronic or any other material form on—

(a) the state of the elements of the environment, such as air and atmosphere, water, soil, land, landscape and natural sites including wetlands, coastal and marine areas, biological diversity and its components, including genetically modified organisms and the interaction among these elements,
(b) factors, such as substances, energy, noise, radiation or waste, including radioactive waste, emissions, discharges and other releases into the environment, affecting or likely to affect the elements of the environment,
(c) measures (including administrative measures), such as policies, legislation, plans, programmes, environmental agreements, and activities affecting or likely to affect the elements and factors referred to in paragraphs (a) and (b) as well as measures or activities designed to protect those elements,
(d) reports on the implementation of environmental legislation,
(e) cost-benefit and other economic analyses and assumptions used within the framework of the measures and activities referred to in paragraph (c), and
(f) the state of human health and safety, including the contamination of the food chain, where relevant, conditions of human life, cultural sites and built structures inasmuch as they are, or may be, affected by the state of the elements of the environment referred to in paragraph (a) or, through those elements, by any of the matters referred to in paragraphs (b) and (c);

Digest – July 25 2010

I’m still trying to catch up with this Wikileaks thing. No time to write anything smart or amusing here.


Only caught this now, via Anthony; ‘Developers bribed planners with discounts on apartments‘.

Jim Stewert on Progressive Economy; ‘The privatisation board, what will it do?

Gerard O’Neill; gainfully employed.

I never thought I would say it, but Willie O’Dea TD is right. He proposes in today’s Sunday Independent that:

We should be seriously considering a scheme here where 100,000 people on the dole could be paid an extra €100 per week for the next 12 months to undertake vital work in their community. The work should match the people to their existing skills and training — whether that is in IT or building. It would be a social work programme, not a social welfare one.

Week’s read: Suzy Byrne; playing games with people’s health.

Colm Keaveney is a Labour Party Councillor in East Galway and a SIPTU official.

[…] Not sure if Colm knowns anything about transgender issues and the impact of waiting for surgery on peoples lives or indeed the impact of politicians spouting this sort of rubbish on the safety and mental health of transgendered people in Ireland. Well given that Colm was President of USI when I knew him and supported the development of structures for lgbt students one might have thought he would know better. It’s fairly clear he can’t see things with their eyes and empathise with them.

Jim O’Leary in The Irish Times; I should have been more pushy at opposing risk-taking in the bank.

A critical impediment to be overcome in the delivery of good corporate governance outcomes is asymmetry of information. Put crudely, the starting position is that a company’s managers possess all the relevant information while the board or at least the non-executive directors have none. The board is given as much information as management is prepared to share with it.

By information, I don’t just mean raw data; I mean the wherewithal to interpret the data intelligently. Nor do I mean only the kind of information that is amenable to quantification or communication in discrete form.

Basically, management was collectively (selectively?) incompetent?

Venividi (Ireland’s best photoblogger) Dublin port medallion. Worth spending some time on that blog, fantastic photo archive.

ScandalCentral; Fine Gael in crisis in Cork North Central?

P O’Neill has a puzzler; who’s getting Anglo’s €22bn?

WORLD Continue reading “Digest – July 25 2010”

As the days roll by…

Press release from the Green Party today to capitalise on the Creighton-O’Flynn-Anglo Ten donations-Fine Gael issue. Opening line;

The Green Party Leader and Environment Minister John Gormley has said that he intends to change the way politics is funded…

A quick look back into The Irish Times archive for their coverage of the announcement of John Gormley’s selection as environment minister. July 7 2007;

The newly elected leader of the Green Party, Minister for the Environment John Gormley, said yesterday he wants changes in the ways political parties are funded.

That was 1,103 days ago. Or 157 weeks. 26,472 hours. 95,299,200 seconds.

Tick-tock tick-tock.

Anglo’s meetings with Finance

Readers might recall that back in November, I published an FOI released to Deputy Joan Burton. She appealed a decision by the Department of Finance to refuse the release of certain documents to the Information Commissioner, and the Commissioner appears to have settled the matter with the Department – resulting in the release of more documents. Joan was kind enough to pass a copy onto me. The Irish Independent reported on the documents last week.

The documents contain the minutes of a meeting between the Department of Finance and Anglo representatives in December 2008. Sean FitzPatrick and Kevin Cardiff were present. At the meeting, Anglo proposed that Standard Life and the Irish Government would help underwrite a rights issue, the draft plan is included in the documents. It also contains a letter from Anglo chairman Donal O’Connor, dated January 15, 2009, where he states:

First, we have considered the funding and the assets and liabilities of the Bank and we confirmthat in the contextof the Government’s commitment the Bank remains solvent. Secondly, while we cannot predict the response of our depositors and other creditors to nationalisation with accuracy, we confirm our belief that, given all necessary support, the Bank can remain a viable institution in the context of nationalisation.

And as late as January 8, days before nationalisation, staff at the Department appeared to be still asking how many branches Anglo had.

Further to our conversation this morning, we have offices in six foreign jurisdictions:
1. The UK operations are a branch in accordance with Article 25 of Directive 2006/48/EC. This is usually referred to as “an EU branch”. Partially regulated by the FSA.
2. Germany – as UK. Partially regulated by the BaFin.
3. Austria – as UK. Partially regulated by the FMA.
4. United States – three representative offices in Massachusetts, New York and Illinoislicensed by the Federal Reserve Bank and each State Regulator.
5. Isle of Han – a subsidiary licensed by the Isle of Man Financial Supervision Commission.
6. Jersey – a branch licensed by the Jersey Financial Services Commission.

I also confirm our conversation that we will launch the Mortgage Bank without the Govt Guarantee in place, and once the CEBS rules become clearer on the disclosure for Guarantors we will look to have the Mortgage Bank included.

And it includes this gem from Sean FitzPatrick, on how long it would take Standard Life to do due diligence:

SF Indicated that due diligence would take circa 48 hours. He acknowledged that they need to prove that they can get a substantial part of the funds required and that they need to bridge a credibility gap between Finance/FR and Anglo’s thinking.

Revisiting Rody Molloy's golden handshake

For several weeks starting in late September Rody Molloy’s pension led news reports. I wish to return to it as I’ve some new questions to raise following weeks of fairly frustrating research.

This is a lengthy post. The next series of paragraphs are all context to the whole Rody Molloy pension issue. You may find being reminded of the details useful, if so, read on. If not scroll down and click ‘Continued’ and it’ll bring right into the main subject…

Readers may remember Mr Molloy finished in his role at Fás in strange circumstances following a prolonged period where various questions regarding his excessive expenses, his handling of internal procedures and his general management abilities, were raised.

For a period in September 2009 there was confusion about whether he resigned or had been removed from his position. This would later become important as it would have effected his pension entitlements.

On September 24 the Public Accounts Committee was told he had received a generous pension enhancement valued at more than €1m. Peter McCloone and Sean Gorman spoke of how they brokered deal on behalf of Fás with Mr Molloy, part of which involved him agreeing to resign. Questions were immediately asked about how the deal was negotiated. “There was no question of pals or anything like that”, Gorman told the PAC. They admitted no legal advice had been taken.

As the media pounded on the stunning admission that no legal advice had been sought, ministers desperately attempted to pass the buck. It became clear that both the minister for enterprise, then Mary Coughlan, and minister for finance, Brian Lenihan would have been required to sign-off on the deal. The Green Party quickly distanced themselves from the story, obviously uncomfortable with the deal and how it came about. Mary Coughlan ordered a review into the circumstances surrounding the deal.

Two days after the PAC meeting An Taoiseach Brian Cowen was pushed on the issue. He admitted that Mr Molloy did not threaten legal action during discussions. He said Mr Molloy acted “honourably” by resigning and claimed the enhanced pension fell within departmental guidelines. Prior to this ,in an attempt to excuse the the cost of the deal, ministers had insinuated that Mr Molloy would have initiated a lengthy legal action which would have cost the taxpayer far more than the €1m golden handshake. Nobody (me included) bar one letter writer, seemed to notice that even if this had been the case Fas could seemingly have used the Employment Appeals Tribunal or Rights Commissioner, both of which are inexpensive as they require no legal teams. Even if Mr Molloy had won his case there the maximum award would have been two years salary – about €440,000 – much less than the million euro deal signed-off by Government.

We were the first to question whether Mr Molloy’s pension did in fact fall within the guidelines cited by An Taoiseach when we published them in full on this website. It wasn’t until two weeks later that the print media returned to this element. Several more reports in various media outlets continued to state unchallenged that the deal was within departmental guidelines. Some two weeks later Shane Phelan of The Irish Independent destroyed that myth with a frontpage story about how even senior civil servants in the department didn’t believe the enhanced pension fell within the guidelines. The enhancements should only have been available as part of a contract termination by the Government but Mr Molloy had resigned, as we’d noted earlier on this website.

The new revelations, contained in emails and correspondence seen by the Irish Independent, will come as a major embarrassment to Taoiseach Brian Cowen.

He insisted just weeks ago that all proper guidelines had been followed.

[…] The memos show at least three different Department of Finance officials warned prior to the deal being approved that it fell outside of what was allowed in the guidelines.

In comments made on September 25, he also said formal cabinet approval was not needed for the deal, even though it is now known there was clear advice from within the department that the matter should be referred to the Government.

When asked about the issue three days after the Taoiseach’s comments, Tanaiste Mary Coughlan made no reference to the department guidelines and instead said the legal basis for the deal was covered by the Labour Services Act.

However, none of the extensive departmental correspondence seen by the Irish Independent refers to this act. In fact, notes from negotiations show that those involved were only concerned about two main issues — the terms of Mr Molloy’s contract and what was allowable under the department guidelines.

Guidelines are essentially plain-English versions of legislation.

As part of the review initiated by Mary Coughlan legal advice was sought from the attorney general and thereafter no alteration was made to the pension deal.

Continue reading “Revisiting Rody Molloy's golden handshake”

Times leader on ethics and donations

The Irish Times leader is on ethics and standards in public life today. Good piece. Ending paragraph;

It is not just Fianna Fáil that has behaved badly over ethical legislation and transparency. Because political donations below a certain limit do not have to be disclosed to the standards commission, many donations were set below the limit.. The commission also suspects that large donations may be split up into small amounts to avoid disclosure. Last year, when local, European and byelections were held, not a single donation was publicly recorded by Fianna Fáil, Fine Gael or the Labour Party. This is a disgrace. Ethical standards and political funding mechanisms require fundamental reform.

Interesting bit in bold there.

Parties use various methods to effectively bypass the donations system. We’ve written about this pretty extensively in the past. Two pieces maybe worth re-reading if you’re interested in the topic. This one on a prior Times leader on funding reform which I disagreed with…

One oddity of the current system for donations to individuals is related to declaration thresholds. Despite being obliged to open an account once they receive a donation exceeding €126.97, politicians don’t have to declare full details of any donations less than €643.97 to the Standards in Public Office Commission. This means the bank account, for the purposes of transparency, is effectively useless unless a donation exceeding €643.97 is made. Reducing the declaration threshold from €643.97 to €126.97 while ensuring all transactions below the lower figure are on record anonymously would be beneficial to the transparency of the funding process. This would mean the public could inspect the credit and debit side of the donations account upon declaration and see if there were excessive amounts of donations made for more than, say, €100. If this was the case and SIPO suspected several of these may have come from one individual, SIPO should have the right to inspect the account in detail.

Of course a significant increase in the level penalties imposed against those who breach the above would also be warranted also. That almost goes without saying.

And one of the first posts on this site from way-back-when, when I tended to adopt a more cynical radical tone; Want to bypass our donations system? No problem.

The dreamer in me has been telling for while not the write this post. “Don’t tell the good politicians how the bold ones work the system”, it screamed. The other 99% of me said, “fuck it, they all know about this anyway, it’s whether they chose to work it or not is the question”. So here, dear reader, I tell you how I understand our public representatives can work the donations system…

Pretty much a how-to, that one, but perhaps insightful.