Monday 24 October 2016

There's still zero accountability in the collapse of INBS

Published 05/04/2015 | 02:30

Former building society boss Michael Fingleton. Photo: Frank McGrath
Former building society boss Michael Fingleton. Photo: Frank McGrath

The investigations into the collapse of Irish Nationwide Building Society keep running down expensive dead ends.

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There is something about the particular brand of toxicity around INBS that makes every investigation into its collapse vanish like a puff of smoke.

The latest investigative cul-de-sac was reached when IBRC liquidator Kieran Wallace of KPMG reached a settlement agreement with four former directors of INBS.

On foot of dearly-bought legal advice and consultants' reports, IBRC clearly believed the four had a case to answer when it issued High Court proceedings against them, alleging they failed to properly discharge their duties.

A confidential settlement has been reached between both sides which will see an undisclosed sum paid over to the State-owned bank.

A statement from the liquidator did not disclose the amount, who paid it, whether it was paid personally by the former directors or by an insurance company under the directors' indemnity insurance, and why it has been paid. Is there any admission of liability implied or otherwise?

The liquidator said the settlement was good for the bank and its creditors. It is utterly worthless when it comes to transparency.

The four former directors - Stan Purcell, Michael Walsh, Terry Cooney and David Brophy - had denied the allegations and were due to rely on the special powers granted to former INBS chief executive Michael Fingleton as part of their defence.

Part of their defence was that Fingleton had been granted powers to do all kinds of things, which inhibited their role in the running and collapse of the society.

One report into the society by former Jersey financial regulator Scott Dobbie expressed a view on this issue. It said: "The concentration of abuse and power must have been obvious to the board - or, if not, it is a sign of greater incompetence - and one is frankly surprised that anyone mindful of personal reputation did not seek either profound change or resignation."

One former director, Stan Purcell, quite reasonably had the Central Bank joined as a third party in the case on the grounds that it was aware of these extraordinary powers and didn't act.

Another, Terry Cooney, sought to have former INBS auditors KPMG joined as a third party to the case against him and the other directors.

The net in this legal action against the directors was reaching far and wide. Wallace may have felt the case wasn't winnable or would yield even less. Wallace, who works for KPMG, is taking separate independent advice on whether to sue his own firm because they were auditors to INBS. That assessment has been going on for six months and will take another three months to complete.

IBRC has said that it will continue its legal action against Michael Fingleton, which relates to the €1m bonus he received prior to the collapse of the society.

The Central Bank has been conducting its own probe now for years. Its own obvious failings should have been the subject of an investigation. Last October, after four years of investigation, the Central Bank appointed a panel of 13 people, many of whom are independent, to inquire into allegations of banker malpractice.

Their first case was due to be INBS. The panel hasn't been heard of since.

Despite the complexity of the case, there are only two scenarios here. Either INBS collapsed costing us €5.4bn because nobody did anything wrong, but everybody simply made a series of errors or bad calls. Or this building society was effectively out of control. Somebody is to blame and they should be held accountable.

It actually is that simple.


Bye bye Ballsbridge hotels... hello apartment living!

The Ballsbridge hotels that cost Sean Dunne so dearly in late 2005 are finally going up for sale. These hotels weren't so much Dunne's Waterloo as his Little Big Horn - a total defeat that never made any sense in the first place.

Ulster Bank has chosen its time to sell. Hotel values and profits have risen - but so have property prices.

Unlike the Four Seasons or the Burlington, the Ballsbridge Hotel (formerly Jurys) and Clyde Court will likely be demolished, replaced with a mix of apartments, a restaurant, a retail unit and a 151-room hotel.

The Dunner may have failed to get his 37-storey landmark "Knightsbridge-style" towers, but he did manage to get planning permission for a slimmer 11 blocks of six to 10 storeys holding a total of 568 apartments.

It is worth more as a five-acre site than as two hotels. The Burlington was bought by Blackstone in 2012 for €67m or €133,000 per room. Even if hotel values have gone up to €160,000 per room, with 577 rooms in total, the Ballsbridge hotels would be worth €92m.

The hotels are expected to sell for €120 to €150m, according to media reports. The maths looks more favourable now than it did for Dunne back in 2005.

After paying €380m for the hotels, he needed his 37-storeys or close to it, even at boom time values, to make the venture work. If the new buyer pays €150m, they will fork out just 40pc of the price Dunne paid, while apartment values in Dublin are 61pc of what they were in 2006. But just like Dunne, the new owner needs values to stay up.

Hotel Group Dalata, which has a lease on the hotels, will lose two properties when they go. However, 577 bedrooms will be taken out of Dublin's four-star hotel market which has to be good news for everybody running hotels between the two canals.

But not for visiting tourists I fear.


The politics of holding the top job at AIB

Staying with Ballsbridge, AIB should be close to appointing a new CEO for its Bankcentre offices.

The smart money seems to be on an insider - but is it retail and business banking head Bernard Byrne, CFO Mark Bourke or COO Stephen White? While David Duffy may be checking out what kilt to wear for formal occasions in his new role at Clydesdale Bank, his successor won't have as much fun in Dublin 4.

The bank is back in profit but the new chief will have to steady it through some choppy political waters before a re-float later this year.

Higher home repossessions will be politically toxic. Excessive standard variable mortgage rates remain highly contentious. They'll need to take a real risk by backing businesses other than big firms and farmers.

AIB has to sell a growth story. That shouldn't be too hard in the fastest growing economy in the EU and doesn't have much by way of banking competition. However, delivering on the growth story afterwards might be a little trickier.

As with all big CEO jobs, the person with the most nerdish detailed knowledge of the business before an IPO, might not be the best person to deliver on growing it afterwards.

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