Business Irish

Sunday 4 December 2016

IBRC row no longer business... it's personal

Controversy over sale of Siteserv has exposed deep tensions between the Government and IBRC, writes Maeve Sheehan

Published 26/04/2015 | 02:30

Michael Noonan
Michael Noonan

ALAN Dukes folded his rangy figure into his chair. He leant back, and swivelled around, eyeballing journalists as he gave his account of the story that dominated the political agenda all week. He was angry, forthright and oozing confidence. Even his posture seemed to scream "bring it on".

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It was 3pm on Friday afternoon at a press conference in Dublin to reject "concerns" held by Department of Finance officials about transactions conducted during his chairmanship of the nationalised toxic bank IBRC.

The sale of a bust company, Siteserv, to Ireland's richest businessman, Denis O'Brien, in a deal overseen by IBRC, had shared top billing on the political agenda along with the banking inquiry.

By Friday, the story had moved on. Siteserv was one of several transactions carried out by IBRC that the department was "concerned" about. Documents released under the Freedom of Information Act had revealed the deeply fractious relationship between the IBRC executives charged with recovering what it could for the taxpayer from the state's most toxic bank, and the Department of Finance, which ultimately seemed to fear that the bank was not accountable enough to the Minister. On Thursday, the Minister for Finance, Michael Noonan, had ordered a "review" of all transactions worth more than €10m, thought to be around 40.

Alan Dukes was not just angry, he was "scandalised" that the review would examine whether there was "criminality" and "malpractice".

According to Mr Dukes, the board of IBRC acted in the best interests of the taxpayer. The department was concerned about governance and oversight of the nationalised bank. But now it seems their interactions were coloured by what appears, on the face of it, to have been an unpleasant clash of personalities.

There was more banking experience on the board of IBRC than there was in the entire Department of Finance, Mr Dukes told reporters. He accused the department's former secretary general, John Moran, of having "odd notions."

Had John Moran made overtures for a position in IBRC before he became secretary general of the Department of Finance, a reporter asked? "That would be a very personal question, wouldn't it," said Mr Dukes, grinning ear to ear. (Mr Moran has denied this).

The documents, and the further insight added by Mr Dukes' candid countering of their contents, have raised significant issues that go way beyond the Siteserv transaction. Such as how a deeply fractious relationship could have persisted for so long between officials in the Department of Finance and the board and executives at the State-owned bank, when they should have been singing off the same hymn sheet?

Of course it's arguable that none of this would have emerged in the first place were it not for the independent TD Catherine Byrne, who repeatedly questioned the Minister for Finance about Siteserv in the Dail, and who obtained the records released last week under the Freedom of Information Act.

Siteserv was set up by Brian Harvey, a UCD graduate, who took it public in 2006. It offered a range of services to various industries - public and private - such as cabling, scaffolding and fencing. Profits soared as it expanded into the UK, dropped in the bust, leaving it limping along from contract to contract and dragging along a debt of €150m owed to the former IBRC that it could never hope to pay.

It was sold in March 2012 to Denis O'Brien's company, Millington. The details of the sale were well aired last week. Walter Hobbs, the financier appointed by IBRC to supervise the sale, said last week: "O'Brien's bid was three pages long, very straightforward. The other bids were hugely complex, and I knew their price would be lower by the time we got to the end. Selling it to Millington was a great escape for the State."

The sale attracted comment at the time, not least from rival bidders who had lost out and complained about the sale process. There were also questions raised about the same firms advising both buyer and seller in the deal. IBRC got €40m of the €45m purchase price, but wrote off the rest of Siteserv's €105m debt. The sting in the tail for taxpayers was the €5m from the proceeds of the sale that went to shareholders of the bust company as a sweetener to vote in the deal.

Alan Dukes said last week that he "knew" the deal would be controversial. "The board had quite a discussion about it and we didn't like it, but Walter Hobbs told us it was this deal or nothing."

That same month, John Moran joined the Department of Finance as secretary general. He came from the private sector to take up the most important civil service job as secretary general of the Department of Finance in March 2012. Usually these jobs stay in-house but Moran, who was regarded as well-liked by Michael Noonan, a fellow Limerick man.

Moran, a lawyer by profession, had a long career in private sector banking, took time out from the rat race to run a juice bar in France, returned to join the Central Bank before joining the department. He left in May 2014, two years later, in an unexpected departure and is a director of the European Investment Bank.

The documents released by the Department of Finance don't tell the whole story but they do show that from April 2012, the aftermath of the Siteserv deal, among the issues between the Department of Finance and the IBRC were one of "governance and remuneration".

Their concerns ran the gamut, from the information the bank was providing to the department (not enough), to the wages it was paying its staff (too high), to its public image ("seriously bad") while the officials had also raised questions about several transactions including the bank's dealings in chasing down the allegedly missing millions owned by the Quinn family, its biggest debtors.

At a meeting on April 5, the Minister and the chairman of IBRC, Alan Dukes, discussed driving salaries down, keeping the minister consulted on renewing board positions, while Mr Dukes mentioned relations and transaction that were subject to "adverse press comment".

He told the Minister that all transactions were "conducted in the best interests of IBRC and the State."

At a meeting between officials and IBRC executives in May, the bank's sale of Apthorpe, an apartment block in New York, concerned the department's officials. This was because an executive at IBRC had raised concerns about it internally, and then raised them with the department. His concerns should be raised with the board, the officials said.

But relations had plummeted further as the summer progressed. One briefing note for a senior department official raises seven different areas of concern over the bank, mostly relating to oversight.

Why was a chief financial officer appointed without the Minister's approval? The IBRC board was accused of disregarding the Minister's role and discretion. Why were wages for new recruits higher than in other similar banks?

The bank had a "serious image" problem. It had been reported that Paddy McKillen, one of IBRC's clients, had received text messages from the chief executive, Mike Aynsley. Had the board considered its image?

Another meeting was dedicated to Siteserv. The bank provided a chronology of the detailed steps relating to the sale, which was published on the Department of Finance's website along with other documents last week.

Officials recommended either an independent review, either instigated by the Minister or by Alan Dukes, the IBRC chairman, but it never happened. Michael Noonan has said that he was reassured by Alan Dukes that the sale of Siteserv to Mr O'Brien represented the best deal for the taxpayer. At a meeting in July 2012, the Minister for Finance said his "confidence was wearing quite thin".

The "constant stream of issues" in IBRC was in contrast with AIB and with Bank of Ireland, he said.

On Friday, Alan Dukes moved the story on again and this time, he shifted the focus on to a personal level. Mr Dukes linked the deterioration of his relationship with the Department of Finance to John Moran. "It definitely took a turn for the complicated at that point," he said on Friday.

"He expressed a wish to me ... in a private conversation, he expressed a wish to me to be on the board. I said I didn't think that would be appropriate because he would be seriously conflicted. He made the point that the Treasury in the UK had appointed a Treasury civil servant to the board of Northern Rock, I said, yeah, but it wasn't the person in charge of making banking policy for the Treasury," said Dukes.

"He did have some odd ideas. He said if he were on the board, we wouldn't have to have so many meetings because he and I would ready things up between us and push them through the board. I said, no we wouldn't, because if you were on the board - which I don't want you - I would have to treat you the same as any other board member, except for the chief executive officer."

Mr Dukes complained that the department kept coming back to things he thought were closed. He attributed this to a lack of self confidence.

As for the relationship with IBRC's wealthy clients, which was questioned by the department, Mr Dukes said relationships were maintained in the interests of getting a return for the bank and "nobody" got free flights. Lunches and dinners with clients were normal.

John Moran has yet to give his full account of what was clearly an acrimonious period in relations between the IBRC and the Department of Finance.

On Friday evening, he issued a statement to say it was "regrettable and a step back to pre-crisis mindsets among bank management that what seems to have been happening today are personal attacks on civil servants asking the right questions..."

He said he would be happy to answer any other important issues.

Mr Aynsley, meanwhile, has accused the department of releasing material that is "a serious attack on a highly experienced banking expert".

Sunday Independent

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