CRC faces loss over €550k loan to firm
Clinic may be forced to write off debt owed by company it set up
THE Central Remedial Clinic (CRC) is expected to make a substantial loss after advancing an interest-free €550,000 loan to a private company it set up during the boom to distribute wheelchairs.
CRC Medical Devices was set by CRC executives with the help of a €460,000 loan in 2006. But it failed to make money and ended up having to be "supported" by the clinic's charity fundraising arm, Friends and Supporters of the CRC.
The Sunday Independent has learnt CRC Medical Devices was sold last month to a rival company, Munster Medical Supplies (MMS), in a low-key deal that has left the state-funded clinic facing the prospect of having to write off some if not all of the outstanding debt, which stood at €550,000 last year.
The CRC did not respond to questions submitted by the Sunday Independent. Messages left for the managing director of MMS were not returned.
The revelations about the sale of the private company, its debt to the Central Remedial Clinic and the "support" it received from the charity fundraising arm, raise further questions over the CRC's use of state and public funds.
The Central Remedial Clinic receives €19m in state funding and is facing a Dail investigation after admitting that charitable funds raised by Friends and Supporters of the CRC are used to top-up the salaries of senior executives.
Informed sources said this weekend that the CRC hopes that some of the outstanding debt will be repaid to the company over the next four to five years. It is understood that the board of directors were told that some of the outstanding debt may have to be written off.
Brian Conlon, who replaced Paul Kiely as chief executive of the Central Remedial Clinic, is preparing a report for the board on the sale of CRC Medical Devices and how the debt to the clinic might be recouped over the next four years, according to sources.
This weekend, the Central Remedial Clinic's decision to set up a private commercial company distributing wheelchairs and mobility products was described by one source as "disastrous".
It is understood that the proposal was pitched by senior executives to the board of the CRC during the boom, as a viable business deal. Central Remedial Clinic Medical Devices was incorporated in July 2006, as a subsidiary of the Central Remedial Clinic. Its directors – Paul Kiely, Hamilton Goulding, Vincent Brady and James Nugent – were also directors of the clinic.
The CRC advanced loans of €462,858, according to its accounts – including a €350,000 loan and payments "made on its behalf" of €112,858. The CRC said the investment was for a "short term temporary period only".
In 2007, CRC Medical Devices had a turnover of €2.7m but the company's debt had increased to €696,753. For some reason, ownership of CRC Medical Devices was transferred that year to Friends and Supporters of the CRC.
The purpose of Friends and Supporters is to administer the charitable donations raised through lotteries and public fundraising campaigns for the Central Remedial Clinic. But it was also overseeing a loss-making private company that distributed wheelchairs and mobility equipment.
According to the accounts that year, CRC Medical Devices hoped to pay off the debt to the CRC by 2008. But by 2010, its debts were up to €820,346, including €540,952 owed to the CRC. The accounts stated that the loans were "interest free and have no fixed repayment terms".
In 2011, the company was hit by the downturn, which the accounts blamed on the economy and the "budget restrictions" on its major customer, the Health Service Executive (HSE). The loan owed to CRC was up to €550,000.
By the end of December 2012, the company's finances had deteriorated so rapidly that the directors were required by law to convene an extraordinary general meeting.
According to the accounts, the company needed the "continued support" of the Friends and Supporters of the Central Remedial Clinic. The accounts said CRC Medical Devices "has received assurances that repayment of the amounts due to related parties of €550,000 will not be sought until the company is in a position to do so".
The Friends and Supporters of the CRC decided to sell the company earlier this year. Sources close to the CRC said there were no takers, apart from Munster Medical Supplies.
The acquisition was agreed last month. Under the deal, the staff from CRC Medical Devices will transfer to Munster Medical Supplies, along with stock, equipment and warranties on equipment sold by CRC Medical Devices.
The only comment CRC has made is a statement posted on Munster Medical Supplies' website, which confirms that it has "finalised agreement" on its "acquisition of CRC Medical Devices".
The statement includes a quote from Brian Conlan, the CRC's chief executive, who said: "It was imperative for us that any takeover of CRC Medical included job security for the staff with an organisation that shared our ethos of client and staff care.
"It is these important elements of corporate culture that allowed us to reach agreement, safe in the knowledge that the staff and clients would continue to receive the high level of assistance and support they rightly expect and deserve."
The Sunday Independent asked the CRC last week whether the debt of €550,000 had been repaid; whether the loan to CRC Medical Devices by the CRC came from state funds, or funds raised from charitable donations; and how much its parent company, Friends of the CRC, has invested in the CRC Medical Devices to "support" the company.
The CRC did not respond.