Farm Ireland

Friday 26 April 2019

IFA to draw on reserve fund to settle Smith case

Total cost of package for former general secretary will be in excess of €2m

Former general secretary of the IFA Pat Smith
Former general secretary of the IFA Pat Smith
Louise Hogan

Louise Hogan

The Irish Farmers' Association will be forced to dip into its special reserve fund to pay a settlement to former general secretary Pat Smith. The final cost is expected to be in excess of €2m including legal fees.

Mr Smith is to receive €1.55m for his severance claim and €350,000 in relation to his defamation claim after the case was settled on the steps of the High Court.

The controversy over pay at the IFA saw Mr Smith leave his post as general secretary in November 2015.

The IFA has net assets of €16.3m, but the full financial fall-out of the controversy will be felt for years to come as European involvement fund levies - an important source of income for the IFA - have declined sharply in the last two years.

Levies have fallen from €4.18m in 2016 to €2.95m last year, with the IFA instructing ABP to suspend the collection of levies after the processor announced plans to introduce an 'opt-in' model for farmers.

However, the IFA maintains that the number of farmers declining to pay membership and levies has stabilised in the two years since the controversy.

The Association does not yet know the full cost of the legal fees for the case, but estimates are that the costs could approach €500,000, which pushes the total cost of the settlement well beyond the €2m mark. The fees from Mr Smith's legal team will be sent to the Taxing Master at the High Court for assessment.

Professional fees

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The IFA accounts show professional fees last year amounted to over €977,000.

"IFA has a special reserve fund in place which has been built up over a number of years," a spokesman told the Farming Independent. "Regrettably, some funds from this reserve will have to be used."

The accounts state that the special reserve fund of €12.4m should only be drawn down under 'exceptional circumstances'.

However, the IFA may have recorded an operating loss of €1.4m last year but it is well funded with the value of its financial investments increasing from €13.4m in 2016 to €15.8m in 2017. The bulk of which forms a special reserve fund.

The National Council passed a resolution in March 2017 to enter into mediation with Mr Smith and his legal advisors.

In 2015, Mr Smith said his agreement with the IFA on his exit consisted of a €1m exit package and a further €1m in yearly €100,000 instalments.

He said the €2m exit package was agreed with former IFA president Eddie Downey, who later stepped down from his position. The exit package for Mr Smith was vetoed by the IFA council in 2015 when the association stated that it would explore all legal options to challenge Mr Smith's severance package.

Mr Downey met the IFA's national officers on Thursday and made his views known to them, according to a source. "It is understood he was happy for the IFA that it was concluded and feels vindicated by the actions he took for the organisation. However, he feels there are unresolved matters in the way he was treated," a source said.

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