Disastrous docklands plan was approved by Cowen
Board sought legal advice to deal with 'conflict of interest' fear after bank bosses stayed at meeting to give purchase of Glass Bottle site go-ahead
Former Taoiseach Brian Cowen personally approved the disastrous proposal to allow the Dublin Docklands Development Authority (DDDA) to buy the Irish Glass Bottle site while he was Finance Minister.
Mr Cowen's approval was based on an estimated sale price of €220m, which escalated to more than €375m without his knowledge just eight days later.
A host of confidential and unpublished documents, obtained by the Sunday Independent, cast new light on the debacle, which left the taxpayer nursing a staggering loss of at least €52m and the developer it sought to do business with, Bernard McNamara, bankrupt.
Ultimately, the cost of buying the site topped €430m, but today it lies derelict and is worth just €40m.
It was October 2006, and the DDDA was keen to expand it operations. The country still had its Celtic Tiger swagger and property speculation became the game where everyone wanted a piece of the pie.
It identified the Poolbeg area as suitable for development and a key component of that was the Irish Glass Bottle (IGB) site.
"The executive of the authority recommended to the board that the DDDA should get involved with a development partner in the development of the IGB site," said Department of the Environment assistant secretary general Mary Moylan, who also sat on the board of the DDDA.
"The area was clearly underdeveloped. The Grand Canal Dock development was seen as very successful. The IGB site fitted in with the policy and was an appropriate objective for the DDDA," she added.
The debacle was investigated at the Public Accounts Committee (PAC) last Thursday, but newly obtained confidential documents relating to the deal show:
• The 'board of experts' travelled en masse to San Sebastian in Spain for a "fact-finding" exercise and held a board meeting.
At that meeting were board members including Sean FitzPatrick (the then chairman of Anglo Irish Bank), Lar Bradshaw (also a director in Anglo Irish Bank), Declan McCourt (Bank of Ireland director), DDDA CEO Paul Maloney, Mary Moylan and others.
• Minutes of that October 3 meeting show that the Dublin Docklands Development Authority CEO, Paul Maloney, briefed the board on "confidential negotiations he had undertaken" with an unnamed developer, who later turned out to be Bernard McNamara, about developing the Irish Glass Bottle site.
• Within just eight days in October 2006, the estimated price of the deal rose from €220m to more than €375m – but incredibly neither the minister responsible, Dick Roche, nor the cabinet were told.
• The €220m valuation was contained in the only letter sent by the DDDA to the department on October 12, but at its board meeting on October 20, the figure being discussed was €375m, the minutes reveal.
• On October 19, the Department of Environment sought approval from Mr Cowen to increase the borrowing capacity of the DDDA to its maximum limit of €127m. However, this was based on the assumption that the cost of the deal was €220m and not the much higher figure. Mr Cowen approved the deal.
• The board had understood Mr McNamara was getting his finance from Bank of Scotland Ireland and Mr Maloney only learnt of Anglo and Bank of Ireland's role on October 23. Some members were subsequently "concerned there might be a perception of conflict" relating to Mr McNamara's proposed financiers.
• On October 24, Mr FitzPatrick, Mr Bradshaw and Mr McCourt all remained involved in the meeting to approve the deal, despite learning that their banks, Anglo Irish and Bank of Ireland (in the case of Mr McCourt), were lending the money to Mr McNamara to buy the site.
• The deal went ahead despite explicit warnings from the DDDA executive that the property market was "overheating".
The documents show that at that board meeting in San Sebastian on October 3, "the CEO briefed the board on the confidential negotiations which he had undertaken with a developer who had indicated an intention to bid for the site. The developer confirmed that he would welcome the involvement of the DDDA jointly in tender."
On October 12, Mr Maloney, on behalf of the Dublin Docklands Development Authority board, wrote to the Department of the Environment requesting the increase in its borrowing capacity. At this stage the estimated cost of buying the site was €220m. Bizarrely, the official he wrote to was Ms Moylan, who is a DDDA board member.
By the time the board met on Friday, October 20, concern was being raised about the manner in which the deal with Mr McNamara had been formulated, particularly in relation to "procurement issues".
However, ultimately the board concluded that the "obligations of the Dublin Docklands Development Authority are achieved by being involved in the development of this area and this is best achieved by land ownership", the minutes state. The price tag on the site was now as high as €375m.
But the most extraordinary detail of the debacle relates to the incorporeal meeting of the board at 8am on October 24, 2006. "These incorporeal meetings were in vogue at the time. I am incredulous about this," PAC member Paschal Donohoe said.
Another PAC member, Simon Harris, concurred. He said: "The more questions we asked about Thursday's PAC meeting, the more confusing the entire DDDA saga was revealed to be. It is essential that all those involved in the decision making process at the DDDA make themselves available to our committee and I welcome the fact that we have now written to former board members and invited them to attend and answer our questions."
The minutes show that board members including Mr Bradshaw, Mr FitzPatrick, Angela Cavendish, Donall Curtin, Ms Moylan, Niamh O'Sullivan and Joan O'Connor were present via telephone for this key meeting at which it decided to proceed with the deal.
According to the minutes: "Opening the meeting, the chairman [Lar Bradshaw] drew attention to the fact that he and the chief executive officer [Mr Maloney] had been advised by Mr McNamara at 8.30pm the previous night that Mr McNamara was in discussions with Bank of Ireland and Anglo Irish Bank in order to secure the acquisition funding.
"The chairman advised that he was a non-executive director of Anglo and would not be involved in executive decisions with the bank relating to the funding.
"Sean FitzPatrick declared himself to be in a similar position. Declan McCourt declared himself to be in a similar position with Bank of Ireland, and also confirmed that he was not aware of or involved in any credit decisions relating to particular funding transactions."
However, despite this apparent conflict of interest, the board "concluded that no material conflict of interest existed in respect of the participation by the board members in the discussion and decision on the proposed acquisition".
The minutes also show that the board sought legal advice to combat any "perceived conflict".
Speaking to the Sunday Independent, Mr Donohoe said: "We need to get to the bottom of why the estimated price of the site shot up so dramatically so quickly."
Ms Moylan concluded that she regretted that the deal was ultimately a failure and accepted she made a mistake in not informing her minister, Mr Roche, of the huge escalation in price.
She added: "Looking back on it now, it would have been better had the minister been made aware of the final bid price even if his approval was not required. The failure of this project is a source of deep regret for me."
As a result, former board members – including Mr FitzPatrick, Mr Bradshaw and Mr Maloney – are to be called before the Oireachtas Public Accounts Committee to account for their actions relating to the deal.