Wednesday 23 January 2019

Appleby and the public service must be held accountable

There are many lessons to be learnt from the FitzPatrick trial, but public service accountability must come first, writes Sarah Carey

Paul Appleby. Photo: Damien Eagers
Paul Appleby. Photo: Damien Eagers

Sarah Carey

The centre must hold! That's what they say and that's what I preach when the threat of mere anarchy is let loose upon the world. And sure enough, despite all that has been thrown at us, there have been sufficient numbers of Irish voters with a French sense of responsibility to maintain - just about - mainstream political parties.

The disasters of Trump and Brexit have proved that populists who win have been exposed as the charlatans many of us knew them to be, and that anarchism is no solution to anything. But after a week like last week, I wonder, almost in amazement, how the middle ground has been maintained.

The incredulity that Sean FitzPatrick was guilty of nothing was only one of several talking points in the news. The discovery of incompetence in the Office of the Director of Corporate Enforcement, just as negotiations on public sector pay opened, inflicted a severe blow on the idea that the establishment is capable of delivering, not merely economic recovery, but the promise that the insanity of the bust could not be repeated.

On the subject of the bankers, others will have plenty to say, so I'll confine myself to this: we may have to accept that most of what was done to bring the banks down was legal. Joris Luyendijk, author of The Guardian's Banking Blog and associated book, Swimming with Sharks, has long argued that banking executives never asked what was moral or immoral, ethical or unethical, safe or sound, but merely: is it legal? Once the answer was "yes", they did it.

The complexity of the financial system, the massive rewards for high-risk behaviour, combined with enormous resources to pay lawyers, meant that the inability of regulators to keep a step ahead of bankers is an international problem.

In that respect, Sean FitzPatrick came a lot closer to judicial accountability that many of his global peers; while Willie McAteer and John Bowe from Anglo-Irish Bank and Denis Casey from Irish Life & Permanent, did receive custodial sentences for their crimes. As for Sean FitzPatrick: as the public face of our financial crisis, I think that while he may be at liberty, he is a kind of prisoner. I don't know how he can walk around the country without the constant risk of being challenged or abused. In many ways, aside from his personal bankruptcy, he has paid for breaking not just a bank, but a country.

On the other hand, Paul Appleby, former Office of Director of Corporate Enforcement (ODCE), could probably stroll around Ireland recognisable to only a few insiders.

It was easy earlier last week to zero in on the hapless Kevin O'Connell for shredding documents in a panic. But later it became clear that Appleby, himself, was actively involved in the disastrous practices that led to the collapse of the case against FitzPatrick.

He was personally part of the committee-like construction of the statements from the Ernst & Young auditors. He made additions and deletions as almost 40 versions of the statements were being compiled. You simply cannot do this in any kind of fair, judicial process.

It goes against all basic procedures for criminal cases. So the collapsed case was not about one unfortunate official. This was the system employed by the office: Appleby's office.

He was also behind the policy not to investigate the auditors for their complicity in any of the potentially fraudulent transactions. I have never understood this reluctance to go after the auditors. Neither did Judge Martin Nolan, who said last year when sentencing McAteer and the others, that it "beggared belief" that Ernst & Young had signed off on Anglo's interim accounts.

"They should have known what was happening if they did their job properly," he said.

"It seems incomprehensible how these accounts were signed."

Having said that, I know in weeks like this it's easy to scapegoat one person and one agency. To that end, Niamh Brennan, the fair-minded UCD expert in Corporate Governance has asked why the agency wasn't headed up by someone legally qualified. And if not, why they didn't employ a barrister to help them?

But here's what really gets to me and here's what I believe is truly damaging to the project, such as it is, to persuade people that the centre is worth holding:

Mr Appleby wanted to retire early in order to avoid pension cuts that were being imposed as part of government cutbacks, but the conditions of his job restricted his early retirement. So the Government engaged in some convoluted bureaucratic engineering which involved changing his job-grade for a day, to allow him to retire early with maximum entitlements. In total, since then he has received €590,000 in various payments, most of it tax free. His annual pension is €73,000.

I have never earned in a year what he gets annually in retirement. I think people at that level do not understand that what they consider to be a basic, is riches beyond belief to the rest of us mere mortals. If you think that's bad, Patrick Neary, the former Financial Regulator, receives a pension of €114,000, plus the generous tax-free lump sum of hundreds of thousands he got on retirement.

The straight-talking Judge Martin Nolan, whom I quoted earlier, also had choice words about Neary. In sentencing McAteer, Casey and Bowe, he said it was only very reluctantly he had to accept that he couldn't allow the bankers to argue that they had been effectively entrapped by the Regulator when they were engaging in illegal transactions to save the banks. But they ended up in jail while Patrick Neary enjoys a retirement income of which most working families can only dream.

But Appleby and Neary are only two of the dozens upon dozens of lifers in the civil and public service who have been rewarded, despite making catastrophic mistakes. They are perhaps, unfortunate, because we know their names.

So let's look at the wider issue then. Because last week, we learned that over the past decade, just 55 out of 37,000 civil servants were let go. Ten years, 55 civil servants. There is no way on earth that tiny number represents the reality of incompetence within the service. But there is simply no accountability. It used to be the case that civil servants were low paid and all accountability was pushed up to ministerial level. Political scalps served as the public's sense that someone paid for a mistake.

But the benchmarking of public sector salaries should have changed that paradigm. If the Secretary-General of a department has a salary equivalent to the CEO of a major company, then he should also have the equivalent accountability: a P45 when he fails.

Admittedly golden parachutes are common in the private sector, but rock-solid job security is not.

Robert Watt, the dynamic Secretary-General of the Department of Public Expenditure and Reform, has promised that civil servant accountability is being improved and that upcoming data will show this to be the case.

As the talks on public sector pay unfold, there must be a political will to impose accountability.

It is absolutely vital that is so, because if the establishment fails to deliver, then I certainly can't blame anyone for abandoning hope and opting for anarchy.

The centre cannot hold. The centre must hold. It hangs on by a thread.

Sunday Independent

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