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Sunday 31 August 2014

Flannery's OK to €2.5m fees to John Hussey

Former Fine Gael Minister's brother-in-law, while a Rehab director, earned consultant fees over 10 years

Maeve SHEEHAN and DANIEL McCONNELL

Published 13/04/2014 | 02:30

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Frank Flannery at Leinster House in 2012. Picture: Tom Burke
Frank Flannery at Leinster House in 2012. Picture: Tom Burke

FRANK Flannery, then chief executive of the Rehab Group, sanctioned the payment of €2.5m in consultancy fees to a brother-in-law of a former Fine Gael minister during a period when the consultant concerned was also a director of Rehab, the Sunday Independent can reveal.

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Rehab paid John Hussey fees for management consultancy services averaging €200,000 a year from 1994 to 2005, while he was a director of the disability organisation. Rehab also paid Mr Hussey €175,000 to terminate his consultancy contract, which Rehab has said was by "mutual agreement" in 2006.

Mr Hussey is a brother-in-law of the former Fine Gael minister Gemma Hussey. Mr Flannery, was a senior strategist for the party until last month.

The fees paid to Mr Hussey were disclosed in Rehab's annual accounts. However, an informed source has told the Sunday Independent that some directors were unaware of the payments.

This source claimed that the scale of the fees paid to Mr Hussey caused "disquiet" when Mr Flannery outlined them to directors at a board meeting in 2006.

The payments will add to pressure on Mr Flannery to appear before the Public Accounts Committee (PAC), which heard last week that the vast majority of the charity's income came from the State or public donations.

In an exclusive interview with Ronald Quinlan in the Sunday Independent today, Mr Flannery explained why he refused to appear before the PAC.

"Why should I be publicly abused or brought in to be castigated? All I want to do, and I am in my own way, is speak for every private citizen in Ireland, because what happens to me now could happen to somebody else," he said.

"We cannot and should not be blackguarded, bullied or demeaned. I am not being unreasonable or recalcitrant. I am not trying to bully anybody. I am just trying to stand up for my decision as a citizen of the Irish Republic and my rights under our Constitution."

Contacted last night about professional fees paid to Mr Hussey, Mr Flannery said, "That's a matter for Rehab and for the board of Rehab to deal with. It is not a matter for me to comment on."

In his absence, the PAC was told by Rehab directors last week that Mr Flannery himself was paid €409,000 in professional fees by the Rehab Group for lobbying and consultancy since between 2007 and last year. The directors did not mention the consultancy fees paid to Mr Hussey.

However, the Rehab Group confirmed yesterday the payments to Mr Hussey.

Mr Hussey's fees started in 1994 when "a company in which he had a material interest" was paid the equivalent of €60,000. The payments increased dramatically over the following years, peaking at €299,000 in 1998; and sums ranging from €279,322 in 2001, €274,516 in 2002 and €271,759 in 2003.

In the latter years, the payments were described in the accounts as being to Mr Hussey.

Mr Hussey resigned from the board in 2005 but he remained contracted to Rehab. The charity paid out €175,000 to terminate the contract in 2006.

A source said that Mr Flannery discussed the payments to Mr Hussey at a board meeting in 2006. "There was general anger at the meeting," the source claimed.

However, in a statement yesterday, Rehab said it had no record of the fees discussed at a board meeting in 2006.

"We are not aware of any record in any board minutes to suggest that this issue was raised in 2006 as suggested," the statement said.

Rehab said that "all fees for the provision of professional services by board members, or companies associated with board members, were disclosed in the company accounts".

Rehab said: "Mr Hussey is a chartered accountant and management consultant and worked 'virtually full-time' for the Rehab Group from 1994 to 2005 providing management consultancy services at a time of rapid growth."

The charity said he was involved in group reorganisation, corporate restructuring and strategic development, and acquisition and business development in the UK.

While it was known that Mr Hussey had been paid some consultancy fees by Rehab, John McGuinness, chairman of the PAC, said yesterday the scale of the payments revealed today were "massive".

"There is no getting away from it, an explanation is required around that money," he said. "This thing will never end if someone does not give a clear account from the time of Frank Flannery through to Angela Kerins, both from their perspective and the board's."

At last week's PAC meeting, Rehab promised that its directors would not be paid fees for consulting, lobbying or any other services.

Mr Flannery began lobbying for the Rehab Group in 2007 after he resigned as chief executive of the organisation in December 2006. He was later successfully nominated to the board in 2011, at a time when new Fine Gael/Labour Government took office.

Mr Flannery resigned from the board of Rehab earlier this year – and from his senior Fine Gael position – after disclosures that he was a paid by the charity to lobby the Government while also serving as a director.

Ms Kerins, who succeeded him as chief executive in 2006, resigned 10 days ago, citing the personal effects of the ongoing Rehab controversies. Both Ms Kerins and Mr Flannery have declined to appear before the PAC.

The Sunday Independent has also learned that Rehab's former director of enterprise, Michael Horgan, was paid a reported six-figure sum, believed to be a €300,000 settlement, after he left the organisation in 2011.

The PAC heard last week that Mr Horgan was "removed" from Rehab following "some difficulties between both parties." The chair of the PAC, Mr McGuinness, said: "He was forced to leave the organisation."

Rehab said it was not in a position to discuss remuneration of current or former employees without permission and that it did not have such permission from Mr Horgan.

Other payments to Rehab directors under review by the PAC include:

* €60,000 to Rehab director Liam Hogan, the head of Rehab's audit committee, for working one day a month over six years. Mr Hogan has insisted the payments "were legal" but accepted that in the current climate they looked like "dynamite".

* £85,000 (€102,000) to a UK-based Rehab director of the same subsidiary, TBG Learning.

* More than €30,000 in the past two years to quantity surveying company KCMS, in which former Rehab director Barry Keogh is a partner.

* €17,000 to Rehab director Gene Lambert, since 2011, for the provision of editorial content to a Rehab publication Insight, a quarterly attachment in The Irish Times.

Meanwhile, Rehab's accounts show that it has been forced to plug a €7m deficit in its defined benefit pension fund when the scheme was wound down.

The accounts state that "the settlement obligation noted as €7.082m in the Rehab Group's 2012 accounts arises from the payment of employer contributions during a three-month notice period which ended on March 17, 2013, and another amount agreed with trustees over the next six years."

Rehab insisted that no loans were taken out in respect of the pension settlement. It said pension costs were funded from the companies in which the relevant staff were employed.

The latest Rehab annual accounts show it has net assets of €75m, including cash on hand at the bank of €18m.

Sunday Independent

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