How the Farrell dynasty built up the Irish Permanent
EDMUND Farrell, the 50-year-old ousted chief of Irish Permanent has a lot of personal history riding on today's high profile High Court case. What was once a small, fringe building society was turned into a family fiefdom by his father.
Edmund Farrell senior took over at the former Irish Permanent and Temperance Society in 1939, and over the next 35 years transformed its position, on the back of extensive advertising for deposits, into the country's largest building society.
Edmund senior had been involved with the Ambassador and Capitol cinemas in Dublin, but his real money was made as managing director of the Irish Permanent. When he died the society respected his wish that his 28-year-old son, Edmund A Farrell, should take over running the mutual society.
In 1972 he abandoned medicine and became a director of the Irish Permanent. Three years later his father died, and Edmund A was voted the new managing director. His brother Michael, an auctioneer, was also a board member of the society.
Edmund junior, despite his lack of financial or banking training, was well rewarded and enjoyed a salary package of about £250,000, plus bonuses, during the 1980s. He ran the society very much as a private family business and appeared to take exception to the push for independent directors or media queries.
By 1989 the residential mortgage business changed dramatically as the retail banks fought for some of the lucrative lending business. Suddenly the internal sweetheart deals common in some building societies were under threat.
No longer were customers willing to pay dual legal fees, duplicate surveyor's bills, put up with in-house insurance cover, or accept vague administration charges. In addition building societies were becoming more like small banks and had to agree to stricter regulation.
Dr Farrell recruited Goodman liquidator and former Coopers & Lybrand partner Peter Fitzpatrick, GPA senior executive Peter Ledbetter and the chief of AIB's British operations Roy Douglas as his senior executive team.
No longer could an autocratic family culture dominate the country's largest building society as it prepared for a public launch on the stock exchange.
Months before the flotation the board dismissed Edmund Farrell over claims that he had sold his Foxrock home to the society in 1987 for £275,000. The society had used £400,000 in members' funds to rebuild it and sold it back to him in 1991 for £275,000.
In addition, it was claimed that Dr Farrell got a `golden handcuffs' deal under which he was paid £300,000 for a restrictive clause in his employment contract. The Irish Permanent is seeking a return of this money.
In turn, Dr Farrell claims he was unfairly dismissed and is seeking £4.3m damages. In addition, his close advisor, Kelvin Smyth is taking two actions for consultancy fees against the society. It, in turn, is seeking repayment of £100,000 from Mr Smyth which, it claims, was used to buy a Connemara holiday home for Dr Farrell's benefit.