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A spotlight on the inner workings of Irish Rail

ON December 3 John Keenan was told to clear his desk at Irish Rail, where he had been director of human resources for 15 years, triggering a High Court action that has once again put the inner workings of the State transport company under an uncomfortably public spotlight.

Mr Keenan made allegations that the potential fraud losses in the group were being played down by the company, while in a series of counter allegations, Mr Keenan was accused of spying on employees by accessing emails and monitoring bank accounts.

The extraordinary claims -- denied by both sides -- emerged when Mr Keenan applied to the High Court on Friday for an injunction lifting his suspension from the firm.

Mr Justice John McMenamin has reserved his judgement for a week. But the stage is set for a bruising battle between some of the state transport company's most senior executives.

The CIE chairman John Lynch and the chief executive of the CIE subsidiary, Irish Rail, feature at the heart of the dispute. Mr Keenan's legal action comes at the end of a tough period for Irish Rail bosses.

In September, a confidential Baker Tilly consultants' report was leaked to the Sunday Independent, revealing that the company lost an estimated €8.7m to fraud. The resulting political outcry resulted in CIE group chairman John Lynch and Irish Rail chief executive officer Dick Fearn being summoned to explain the figures before an Oireachtas Committee in October.

On top of that, an Equality Tribunal ruling last month was, in the words of Irish Rail's barrister, a "damning indictment" of the company. The tribunal awarded a record €189,000 to a female executive who was consigned to a basement and passed over for promotion when she returned from a career break.

Irish Rail claims that Mr Keenan's handling of this tribunal ruling was the sole reason for his suspension. Ten days passed before Mr Fearn found out about it, a delay the chief executive found so unacceptable that he suspended Mr Keenan.

But Mr Keenan asked the court to consider his suspension against a backdrop of differences between him and his bosses over the extent of fraud losses at the company, a subject that had attracted intense media and political interest.

"Tensions" between the director of human resources and his chief executive, Mr Fearn, have simmered for some time, according to evidence given to the High Court, and centre around his role in investigating fraud at the firm.

Mr Keenan joined CIE on leaving school and rose to manage Irish Rail's HR department. As head of their cost audit unit, he has also led vigorous inquiries into fraud.

In 2005, the unit uncovered a web of collusion between some contractors and employees suspected of defrauding the company. Gardai were informed, employees were dismissed and investigations continued.

On Mr Keenan's recommendation, forensic auditors Baker Tilly were brought in to review procurement procedures and to forensically examine a number of financial transactions over three years.

Mr Keenan estimated in a report to management that potential losses could run to a "seven- or eight-figure sum".

His estimate was met with "great displeasure" by Mr Lynch, the court heard, and the chairman allegedly instructed that no more minutes were to be taken at meetings about the matter and that nothing should be kept in writing. Mr Lynch denied these allegations.

When the forensic accountants later reported estimated losses from fraud of €8.7m over three years, the estimate was rejected by the chief executive as unsubstantiated and outside of the accountants' terms of reference.

Mr Keenan claimed that he advised against removing the figure. It was later reduced to €2.5m in the final report.

When the draft report was leaked to the Sunday Independent, leading to an Oireachtas inquiry, Mr Keenan claimed that he got an irate telephone call from Mr Lynch warning him to button his lip and accusing him of leaking the document.

"There is no doubt that there is some tension between Mr Keenan and Mr Fearn," said Mr Keenan's counsel and Labour Party councillor Oisin Quinn.

Irish Rail dismissed Mr Keenan's claims as a "conspiracy theory"; the reason for his suspension was his failure to report the Equality Tribunal ruling to his boss.

For his part, Mr Keenan had denied that he delayed informing his boss.

The court heard how he got a copy of the ruling in late November, and afterwards met with the company solicitor to discuss it. They agreed to appeal the findings, in the belief that the ruling was flawed and inaccurate. With that action in train, he intended to brief the chief executive on the matter at a one-on-one meeting in early December.

But the day before that meeting, Mr Fearn "suffered the grave embarrassment" of being told about the Equality Tribunal ruling by his chairman Mr Lynch, who had in turn been told by the company solicitor.

"If the complainant's allegations are only 50 per cent true, it paints the most appalling vista of the conditions of her employment," said Roddy Horan, barrister for Irish Rail.

He said Mr Fearn and other executives were criticised in the report, but claimed that Mr Keenan came out worst. "The CEO is entitled to be told immediately about a decision such as that," he said. "There were all sorts of ramifications." After his suspension, the company claimed other matters came to light, in what Mr Keenan's lawyers claimed was a "digging exercise" to find a "back-up" argument.

The company claimed it had since learned that Mr Keenan had accessed 32 computers used by "very senior" members of staff.

"There is now information that the plaintiff accessed bank accounts of individuals which, if true, is a very serious matter," said Mr Horan. He claimed Mr Keenan had "a tracking device placed in the vehicle of a third party" and claimed that emails on a computer containing confidential medical information had been accessed.

Mr Horan claimed that it was "only now" that people were coming forward with information, including the head of the company's IT section and another employees from the cost audit unit.

"They have volunteered information. We have to analyse whether it has substance," he said.

In the meantime, Irish Rail argued that Mr Keenan's suspension should remain in place as a "holding measure".

But Mr Keenan countered that email monitoring was done on his instruction, as director of human resources investigating fraud in Irish Rail. The work was in line with company policy and was fully documented. He claimed he had never accessed personal medical records. He claimed that the company had acted unreasonably and that his suspension was unlawful.

Judge McMenamin reserved judgement until later this week. But given the Garda Bureau of Fraud Investigations' ongoing inquiries and the prospect of further inquiries by the Oireachtas Transport Committee, the drama at Irish Rail is expected to play out for some time.

Sunday Independent