Wednesday 22 November 2017

Breakdown in regulation has a real cost for our society

WHEN the tide goes out in the financial markets we can see, as Warren Buffett once put it so vividly, exactly who is swimming naked. It's not a pretty sight.

A lot of money was made in the heady days of the Celtic Tiger, some of it by shrewd investing. But most was amassed by participating in elaborate games of pass-the-parcel. Few players knew exactly what was in the parcels -- mortgages, commercial loans, shares and other types of debt -- but players assumed they could unwrap the parcel when the music stopped. Turns out they couldn't.

Over the last few months, the 1,500 people who were left holding parcels belonging to Custom House Capital watched as Financial Regulator Matthew Elderfield tried to unpick the glossy wrapping off their investments. What he found, as detailed in a 200-page report released last week, was a ponzi scheme that has left hundreds of investors down millions of euro.

We now know that money was moved out of cash funds and transferred into property deals without the permission of clients. A massive €56m was transferred to property syndicates mainly in Germany and France.

Management, meanwhile, paid themselves handsomely. Former chief executive Harry Cassidy took home a salary of €430,000 last year as a reward for lying to his customers.

Every recession produces scandals. The last one had spectacular insider trading cases in the US and UK as well as false accounting cases and the like.

Custom House Capital fits into the mould and there have already been others here such as Dublin socialite Breifne O'Brien's ponzi scheme which also left middle-class savers in the red.

Common sense tells us that many more schemes have been uncovered in Ireland. Some will become public but others will be quietly buried for all sorts of reasons -- to spare the banks' blushes, to save the country's reputation or because the law is stacked in favour of white-collar criminals and a prosecution would be unlikely to yield results.

The grapevine tells us that over the past few years dozens of crooked accountants along with lawyers and financial advisers have left the country. Most will never face prosecution.

Bad, or non-existent, regulation has been one of the hallmarks of government over the past two decades. The scandalous situation at Priory Hall is just another manifestation of a mindset that has allowed almost every element of Irish life to be corrupted -- with unregulated priests allowed to abuse children and unregulated gardai allowed to turn Donegal into a sinister place.

Doctors who refuse to work their contract hours thumb their noses at the HSE while bankers ignore their largest shareholder -- the State -- and attempt to pay their chief executives more than agreed after destroying the country.

Rapacious developers build dangerous houses and greedy landlords rent them out at exorbitant rents. The State appears unable to cope with any of this.

This breakdown in regulation and enforcement has a real cost for society and individuals. What happened at Custom House Capital will rob some people of a secure old age and deter many more from saving for that eventuality.

As the full extent of what happened in Custom House Capital became apparent, Mr Justice Gerard Hogan ordered that copies of the report be sent to Justice Minister Alan Shatter, the Director of Public Prosecutions, the Director of Corporate Enforcement and gardai.

This would be cause for celebration if we could believe that anything would follow from this but almost nobody can allow themselves to hope for justice in Ireland these days.

Just look at how long we have been waiting to hear something, in fact anything, from the investigation into the Anglo Irish loans. It's almost three years since Anglo came a cropper and not one person has stood trial. Not one person has been convicted of any wrongdoing despite the fact that cleaning up the mess is matter of huge public concern.

The victims of this latest scandal would do well to try and forget it. There can be little realistic expectation of justice anytime soon.

Irish Independent

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