| 13.6°C Dublin

FAS chief's €1.1m deal not done by the book

THE controversial €1.1m golden parachute deal for former FAS chief Rody Molloy broke key Department of Finance rules, internal memos reveal.

The new revelations, contained in emails and correspondence seen by the Irish Independent, will come as a major embarrassment to Taoiseach Brian Cowen.

He insisted just weeks ago that all proper guidelines had been followed.

The memos show at least three different Department of Finance officials warned prior to the deal being approved that it fell outside of what was allowed in the guidelines.

Despite these concerns, a senior department official agreed to sanction the deal on the basis it was "an exceptional case".

In fact, several department officials were clearly uneasy about the terms of the package. Mr Molloy's deal involved an extra four-and-a-half year's service being added to his record. This ensured he got a full pension and lump sum, as if he had served 40 years in the public service.

The total package -- worth €1.1m if Mr Molloy is to lives for another 30 years -- included a tax-free lump sum of €333,732, equal to a year-and-a-half's pay, a taxed sum of €111,243 equivalent to six months' salary, and an annual pension of about €111,000.

Mr Molloy had been seeking two years' salary on top of his generous pension entitlements, but this was rejected.

Department officials with expertise in pensions were asked for their opinions on the contents of the deal on November 26 -- the day after Mr Molloy's resignation was announced.

Leaked emails show at least three of the officials consulted said such generous terms could only be sanctioned under department guidelines if Mr Molloy had been sacked.

However, as Mr Molloy resigned of his own accord he was only entitled to a reduced package in line with his actual service of 35-and-a-half years, the officials stated.

Their assessment was based on 1998 Department of Finance guidelines regarding severance payments for chief executives of state-sponsored bodies.The officials were also united in their view that a government decision would be necessary if the deal was to be approved in its current form.

Daily Digest Newsletter

Get ahead of the day with the morning headlines at 7.30am and Fionnán Sheahan's exclusive take on the day's news every afternoon, with our free daily newsletter.

This field is required

However, despite these reservations, the deal received department approval later that day. In a letter from John O'Connell, assistant secretary at the Department of Finance, to Dermot Mulligan, assistant secretary general at the Department of Enterprise and also a FAS board member, Mr O'Connell noted the terms offered to Mr Molloy were "not fully in accordance" with 1998 guidelines.

"Nonetheless, I am to convey sanction to the proposed terms on condition that this is an exceptional case and that your department is satisfied that these terms are appropriate in the circumstances," Mr O'Connell wrote.


The revelations directly contradict assurances given last month by Mr Cowen that Mr Molloy's retirement package was "dealt with in accordance with established guidelines from the department".

In comments made on September 25, he also said formal cabinet approval was not needed for the deal, even though it is now known there was clear advice from within the department that the matter should be referred to the Government.

When asked about the issue three days after the Taoiseach's comments, Tanaiste Mary Coughlan made no reference to the department guidelines and instead said the legal basis for the deal was covered by the Labour Services Act.

However, none of the extensive departmental correspondence seen by the Irish Independent refers to this act. In fact, notes from negotiations show that those involved were only concerned about two main issues -- the terms of Mr Molloy's contract and what was allowable under the department guidelines.

Mr Cowen and Ms Coughlan have already faced criticism for the failure of the Government to seek legal advice on the deal.

No legal advice was sought on the matter, even though Department of Enterprise negotiators feared Mr Molloy could sue if he didn't get a favourable deal.

Most Watched