Monday 21 August 2017

Richard Curran: Watchdog's FitzPatrick probe shambles beset by staffing problems

Sean FitzPatrick leaves Dublin Circuit Criminal Court with his daughter Sarah after he was acquitted on all charges
Sean FitzPatrick leaves Dublin Circuit Criminal Court with his daughter Sarah after he was acquitted on all charges
Richard Curran

Richard Curran

Writing in his 2013 annual report Ian Drennan, the head of the Office of Director of Corporate Enforcement, had this to say about the pending criminal actions being taken in the Anglo Irish Bank Maple 10 case:

"The fact that this case has been brought to trial demonstrates that the system for investigating possible company law offences at the more serious end of the spectrum is capable of responding appropriately, albeit that, in the broader context, the Office's capacity has been significantly impacted. That, it is hoped, will serve to support and enhance public confidence in that system and, by extension, to contribute towards a strengthening of Ireland's reputation as a well-regulated economy."

Little did he know how another of those Anglo trials would completely undo all of that. The shambolic end of the trial of former Anglo Irish Bank chairman Sean FitzPatrick has left the ODCE reeling and achieved exactly the opposite of what Drennan had hoped for three years ago.

The obvious story narrative here is one about how white-collar investigations are not taken that seriously by the Government and politicians, which results in poor levels of funding and bad outcomes.

However, a closer look at the operations of the ODCE since the controversy at Anglo Irish Bank arose paints a different picture and one which, if anything, suggests the disastrous handling of the investigations was a car crash waiting to happen.

Set up in the wake of the corporate and banking scandals around Charles Haughey, Ansbacher, National Irish Bank and Ben Dunne's novel approach to distributing money to some people, the ODCE was a bold statement that Ireland was not some banana republic which allowed the business classes to do whatever they wanted.

It was given solid statutory powers, a reasonable, though arguably modest level of funding and a fair wind to do its job. The ODCE did secure enforcement orders, director disqualifications and landed other points over the bar, but never managed to get it right when it came to big cases.

When Anglo Irish Bank collapsed in 2009, and the economy with it, the ODCE was overrun with the need to address this complex investigation while dealing with new company failures all over the place.

But as the exchequer finances went into freefall, its budget was not cut. Its resources were increased. At the end of 2009 it had been sanctioned to have 51 staff. It had 49.7 full-time staff equivalents. Its budget that year was increased.

To help deal with the scale of the Anglo investigations it had been sanctioned to hire more staff and had additional staff from the Department of Enterprise and Gardai seconded over to help.

The ODCE ended up with 16 staff working on Anglo investigations, which was one third of its available staff. It was against this backdrop that mistakes were made in taking evidence from witnesses and appointing a solicitor with little experience of criminal investigations to handle the Anglo case.

In 2009 the ODCE pushed for a High Court inspector to be appointed to DCC and one of its subsidiaries on foot of civil actions regarding allegations of insider trading by Jim Flavin.

It succeeded but the High Court inspector, Bill Shipsey, later concluded that no breaches of the law had taken place and that was the end of that. The ODCE had gone down a rabbit hole.

The case work associated with the Anglo investigations meant that other enforcements fell off. In 2008 it had 32 secured convictions. This dropped off to just six in 2009. In 2008 it had 20 disqualifications of directors. This halved to just 10 a year later.

The organisation was being overwhelmed by the Anglo probes. However, by 2012 it was approved to have 49.1 staff but had just 45.5. A year later, in 2013, it was approved to have 49.1 staff but had just 42.9.

There was something going seriously wrong in the resourcing and staffing levels within the agency. It wasn't even spending the budget it had been allocated. In 2013 it had been granted a budget of €5.3m but spent just €3.1m. It had just one accountant and two solicitors that year. By the end of 2015 the situation had got worse. It spent €3m of its €5.1m budget. It had just 37 staff with no accountant and just one solicitor.

One can either conclude that it was not fulfilling its duties adequately or it was struggling to hire suitably-qualified people because it couldn't pay them enough money. If it is the latter, then a way should have been found to deal with that.

It was well on its way to cocking up the biggest corporate criminal investigation in history at that stage, and wasn't even spending its allocated budget, despite the country being in a troika bailout.

There was nothing wrong with the idea, legislation and structure behind the ODCE. Did it fall foul of the public sector hiring ban or public sector pay agreements and caps? If so, these issues have to be fixed. Its credibility is in tatters.

 

Coveney rent caps taking hold

While Simon Coveney battles it out for the leadership of Fine Gael and the housing crisis rumbles on, there may be signs of his cap on rent increases starting to take hold.

There may be some hope of a softening of the massive growth in the price of houses and apartments in Dublin.

During the week it emerged that a building of 105 individually-let apartments at the Casino in Malahide was withdrawn from sale. There won't be any problem selling them individually or in smaller lots, but the withdrawal had to do with the price tag that could be achieved given the restrictions of the government's rent caps.

This is an early sign that where rent caps are in place, investors might want to recalibrate their calculations on what they are willing to pay. In fact, these apartments will remain an attractive proposition but as a single lot, the rent caps may be starting to do their job.

Contrast this with the Shelbourne Plaza apartment block near Dublin's Silicon Docks area. Because they have not been rented before, the 4pc cap on rent increases won't be a problem for a first letting.

This block of 52 apartments attracted offers from eight bidders and they may go for €22m to €23m. That is an average price of €355,000 per apartment.

Compare that to the Kennedy Wilson purchase of the Gasworks apartment block which is not far away, back in 2012. It paid around €40m for 210 apartments or €204,000 per apartment. The average price differential is 74pc in five years.

The good news is that perhaps the much-maligned cap on rent rises may help to cool the market in places without freezing it.

 

Beef Brexit battle lines are drawn

Beef farmers are feeling a chill themselves from the latest beef-processing consolidation that has seen Dawn Meats pool its UK assets into a joint venture with Dungannon-based Dunbia Meats. This will create a separate company which will own the enlarged UK processing business.

Farmers are worried about the reduction in competition it could cause.

However, they should be more worried about how large beef processors are obviously preparing for a hard Brexit.

They are ring-fencing their UK assets into a standalone business.

It makes good business sense for Dawn and Dunbia, which has grappled with profit margins of just over 1pc. However, it could also signal a greater separation of the British and Irish beef markets by making it easier for them to source beef for processing in their UK plants from the UK and not from Ireland.

Farmers should be worried.

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