Analysis

Thursday 21 August 2014

Anger at heart of broken charity won't alone bring needed change

Ex-CEO Kerins broke rules, dominated her personal 'fiefdom' and sidelined the board.

Daniel McConnell

Published 13/04/2014 | 02:30

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Rehab chairman Brian Kerr
Keith Poole faced the Public Accounts Committee over the charity scandal last week. Photos: Tom Burke

'W ill this be a problem if it gets into the public domain?" came the question from Rehab director Liam Hogan. It was early February 2010, and in the boardroom of Rehab Headquarters in Roslyn Park, Sandymount, directors of the charity's audit committee were gathered to discuss a controversial deal to purchase coffins from China.

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Three months earlier, at a board meeting of the full Rehab group, ideas were considered as how to "replace the significant loss of business due to the economic downturn".

Then Rehab Director of Enterprise, Michael Horgan, told the board that he "had been in discussions with a company with a view to the importation of coffins" from China.

Then came a dramatic intervention from former CEO Angela Kerins.

She informed the board that "certain members of her family" (namely her brother and her husband) held shares in the company that Mr Horgan had been dealing with.

It is clear from board minutes that the proposed deal was first "introduced" by Kerins, however she claimed she had since "withdrawn from commercial decisions on this matter".

At February's meeting, audit committee members were told that the planned project, to import the coffins, had been "kept at a high level".

Concerns were raised by Rehab internal auditor Tom Connaughton, who said "it could be a sensitive issue" which if not handled right could impact the "group's reputation".

"This needs careful consideration as far as contracts and prices are concerned," he said.

Ultimately, despite such concerns being expressed, the audit committee "unanimously agreed" to allow the deal go ahead.

Invoices obtained show Rehab bought the coffins from a company co-owned by Angela Kerins's husband, Sean, her brother, Joseph McCarthy, and Frank Flannery, a fellow director of Rehab.

Their firm, Complete Eco Solutions, initially billed Rehab Enterprises for €255,552 for importing 528 coffins from China on January 4, 2010.

But Rehab said while it was billed for €255,552, it actually paid Eco Solutions just €70,000, after reducing the consignment of coffins.

A further €30,000 was spent kitting the coffins out in a Rehab facility in Kilkenny.

The project ultimately "did not fly" and made a loss of up to €80,000 as the charity sold the remaining coffins two years later for €10,000 plus VAT.

Yet, Kerins's role in the affair is back under the spotlight in terms of the Public Accounts Committee (PAC).

She initiated the deal.

Despite claims she "withdrew" from the process, an internal email titled "coffin business plan" has surfaced from Mr Horgan to Keith Poole and Ms Kerins on December 18 that year.

"It looks as if this business was set up specifically with family members of Ms Kerins, along with Mr Flannery, in order to make a profit," PAC member Mary Lou McDonald said.

"The most senior level of Rehab regarded the organisation as something like a personal fiefdom and that they could break rules with impunity," McDonald added.

At least one financial controller in Rehab spotted trouble and initially refused to sign a cheque. Despite his objections, he was overruled and the payment was made.

Another issue which has arisen is that Kerins informed the Rehab board of her family's business in November, but Complete Eco Solutions was only set up one month later in December 2009. How could she have done this?

Worse still, Michael Horgan has since left the charity having been paid a "six-figure settlement" after a major falling out over the coffins debacle.

He had been involved at the outset of the coffins deal, but was "removed from Rehab" following "some difficulties between both parties", the PAC heard.

"He was involved with the coffins. He reported directly to Ms Kerins. He was forced to leave the organisation," PAC chairman John McGuinness said.

Much has been made of the €409,744 paid to Frank Flannery to lobby and consult on behalf of Rehab.

Much has been made of the fact that payments had been made to his company, Larragh Consultancy, even though it had lapsed.

But of fresh concern is that until Flannery returned to the board in 2011, members of the board were kept in the dark by Kerins about how much he was being paid.

She had sole authority to sanction payments.

Also, in 2011 "the then chief executive directed that invoices from Mr Flannery be paid through the TBG Learning company", a UK Rehab subsidiary. Why would she do this? No adequate explanation has yet been given for this.

It has been accepted by remaining Rehab directors that by paying Flannery up to €80,000 last year, it broke its own 2006 rules and regulations.

But it can be revealed that other directors of Rehab and their associated companies also benefitted from Rehab fees.

Director and audit committee chairman, Liam Hogan, also got €60,000 in fees for additional work he did for Rehab between 2000 and 2006, or €10,000 a year. A former Deloitte employee, he received payments for working one day a month for Rehab.

"The remuneration I got before they made it illegal. It is absolutely dynamite in the present context but in the previous context it was perfectly legal," Hogan has conceded about the payments.

Payments to KCMS (a quantity surveying company in which former Rehab director Barry Keogh is a director) of more than €30,000 in the past two years alone have emerged.

Gene Lambert, a director of Rehab, was involved in a publication called 'Insight', an attachment to The Irish Times which is published on a quarterly basis. He has received €17,000 in fees since 2011.

The Sunday Independent has also learnt of another £85,000 (€102,000) payment paid to a UK-based Rehab director of the same subsidiary, TBG Learning, which was used to channel Flannery's lobbying payments.

Much of the controversy around Rehab had previously centred around the pay of senior people like Kerins, who got €240,000 last year, up from €234,000, while front-line staff were being laid off or having to stomach pay cuts.

Internal documents obtained by the Sunday Independent show clearly how low-paid, often minimum-wage front-line staff were told because of "government cut-backs" they were being axed or cut while executive pay was being increased.

What is also now clear, thanks largely to PAC member Sean Fleming, is that far from being a commercial entity, Rehab, with an Irish turnover of €118m a year, is 92 per cent funded by the taxpayer and public donations.

Kerins's previous defence for not revealing her salary has been shattered. We know now that Rehab director of training Marie Kelly is paid €174,000, finance director Keith Poole is paid €152,667, director of health and social services Laura Keane is paid €150,000, and Shona Byrne, the director of human resources, is paid €141,000.

Rehab's director of communications Cliodhna O'Neill, its director of policy Sarah Jane Dillon and its director of fundraising John Fleming are each paid €130,000 a year.

Four other managers outside the remit of the remuneration committee are paid salaries greater than €100,000, but their identities are yet to be revealed.

While some were also enjoying bonuses of up to 30 per cent of salary, between €6,000 and €14,200, at least one senior director repeatedly declined to take his.

Declan Doyle admitted at the PAC that salaries were too high. "The remuneration committee accepts that we have not given adequate attention to comparisons with organisations in the charity and not-for-profit sectors," he said.

Another of the major weaknesses at Rehab to emerge has been the relationship of the board and the CEO.

Rehab chairman Brian Kerr was unable to answer several detailed questions at PAC, and it became clear to PAC members that Kerins and the executive "kept the board in the dark".

"Was the board dominated by her," Shane Ross asked at PAC last Thursday.

"The board was quite questioning but perhaps, in certain areas, we could have been tougher," came the reply from Doyle.

For his part, Keith Poole, having initially refused to answer a question as to whether he had reservations, went on to say: "She was a forceful individual."

An internal complaint has in the past two months been made against Kerins, which is now in the hands of Rehab's lawyers. So the complaint has come in the midst of this damaging controversy surrounding Rehab.

Rehab stands now a deeply damaged organisation and all of its own making. Kerins and Flannery are gone, but dark shadows loom over their tenure. Rehab must move on and has entrusted its future to governance consultant Eddie Molloy. But the damage done is not limited to Rehab, its folly has done real harm to the wider charity sector.

The scale of the anger was well captured by Keith Poole on Thursday. He said: "Sometimes I feel angry and sometimes I feel disappointed. I believe, and it is my fervent wish, that Rehab will change, and I think that is what we have to be allowed do. That is how I feel."

A sentiment many share by now.

Sunday Independent

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