Wednesday 24 April 2019

Ghosts haunt Greencore

FORGET that nasty little matter of fraud at Greencore. Instead, rejoice with all the Greencore winners.

The books have been fiddled, the share price is tanking, the brand has been damaged by fraud; but there are plenty of heroes at Greencore.

First, congratulations are in order.

Start with the directors.

Top of the list comes the chairman of the audit committee. David Sugden is as cute as they come. Let us applaud his wisdom. For six years on the Greencore board David held no shares. Finally, last January, he broke out and bought just 17,500.

He was not suffering along with investors. Bright guy, David.

Ditto Gerry Corbett. Gerry had been a director for five years, no doubt appointed as a rock of reassurance to shareholders. Gerry put his money elsewhere.

Then suddenly last week he bought 59,00 shares soon after they had bombed. All board members pocketed minimum fees of €48,000 last year.

Another canny member of the audit committee, David Simons, holds less than 10 grand's worth of Greencore shares.

The final member of the key audit committee, Pat McCann, has actually increased his holding from 5,000 to 12,000 shares. Bravo, Pat.

Pat McCann is not exactly facing debtors' prison. He was formerly the well-rewarded boss at Jurys Doyle Hotels, is a €44,000-a-year part-time director of the ailing EBS and currently heads Quality Comfort Hotel Group.

Probably a multimillionaire, he can find only €25,000 to put into Greencore. Good thinking, Pat.

David Sugden received extra fees of €21,000 for chairing the audit committee. McCann and Simons were awarded top-ups of 10 grand each for their hard work on the same committee, keeping the Greencore books supertight. All the time the profits were being puffed .

The annual report boasts that David Sugden and David Simons "have recent and relevant financial experience" for the audit committee.

Ouch.

A pity neither David managed to spot the €21m fraud at Greencore's Scottish mineral water division.

So are the three "experienced" lads going to give back the extra 41 grand they earned on the audit committee while the fraud was perpetrated on their watch? Guess.

Members of the audit committee are not the only Greencore guys who should be congratulated for brass neck.

Enter the auditors. The real McCoys. Perhaps Greencore's auditors were amateurs?

Hardly.

The auditors were none other than global giants PricewaterhouseCoopers.

They deserve far greater plaudits than the three underperforming members of the audit committee. PwC were the guys who gave the accounts the all-clear and were reappointed, year after year.

Last year, PwC -- the blue-chip auditors -- charged shareholders €800,000 for the comfort of their opinion. It always helps to pay big bucks to a big name auditor. Less chance of any slip-ups.

PWC have been auditors to Greencore since time immemorial. This year, last year and the year before, they failed to spot a colossal fraud.

During their period as auditors they have probably extracted fees of over €10m. There is little evidence that they have ever faced a challenge for the gig. Will PWC be offering shareholders their money back? Guess.

Congratulations, too, to the big guns at Greencore. They have walked away with fortunes.

Last year, four executives, David Dilger, Patrick Coveney, Geoff Doherty and Tony Hynes banked €1.8m in 'performance bonuses'.

Part of these bonuses depended on profit targets and increased earnings.

Sadly for Dilger, Coveney, Doherty and Hynes, in the real world of post-fraud Greencore, part of those profits are now illusory. They will be revised downwards. Will the happy quartet hand back their bonuses? Guess.

The bonuses are spent.

We are about to witness the most fascinating game of pass the parcel in the history of corporate Ireland . The parcel will move swiftly from the board, to the audit committee, to the internal auditors, to the outside auditors and back to the top executives.

No one will take the blame. Minor managers in Scotland have already walked the plank. That should be enough.

Indeed, those with the most responsibility have actually benefited from what transpired as phoney figures. Puffed-up profits, puffed up bonuses. Meanwhile, down go the shares.

Greencore's shares were already dogs, even without the help of a little fraud.

Since last June they have lost 65 per cent of their value, down from €5.50 to €1.90. How can the bosses justify pocketing performance bonuses in these circumstances? But pocket them they did. Congratulations to them, the leaders of the Greencore brass neck brigade.

Congratulations, too, to the company itself for surviving its eccentric history.

Greencore is jinxed. An endemic problem or just bad luck?

Look at its history. It is diabolical. An unwelcome controversy hit its predecessor, the old semi-state sugar company, prior to the flotation in 1991. The flotation itself was mired in scandal. Allegations that Taoiseach Charles Haughey tried to influence it were rife. And the stock exchange held an inquiry into strange goings-on.

Later the chairman, Berni Cahill, was shafted at an AGM in a dramatic coup by financier Dermot Desmond.

And finally, one of the movers and shakers in the Ansbacher scandal, Jack Stakelum -- a Charlie Haughey chum and appointee -- sat on the Greencore board, almost unnoticed, for years. Last year Mr Stakelum was disqualified from the management of any company for five years. This year, Greencore is the victim of fraud.

Bad board , bad luck, or bad management?

The board is of doubtful calibre. Plenty of the golden circle of insiders resurface there.

Chairman Ned Sullivan is a Jonah of the corporate world. Ned is not only chairman of Greencore, but of the currently disastrous McInerney Properties. McInerney shares have collapsed from €2.50 twelve months ago to today's price of 57¢. And Ned's third high-profile board is Anglo Irish Banks, a stock in freefall. Quite a treble. Ned's talents for such plum posts are unproven, but it helps that he has friends on other boards.

Friends like Sean Fitzpatrick, chairman of Anglo, who in turn sits on Ned's board at Greencore. Sean holds a pitiful 23,000 shares in Greencore, worth less than 50 grand. A token investment for one of the richest men in Ireland. Good decision, Sean.

The board is a mixture of the new golden circle of directors, shrewd operators unwilling to risk more than a pittance in the company and executives earning performance bonuses based on what we now know were phoney profits figures.

One exception. Last week I could not believe it. I rang chief executive Patrick Coveney for information on the fraud. I anticipated the usual blarney from business bosses in the manure.

Patrick took the rap up front. He returned calls immediately, provided information and showed a calmness in adversity uncharacteristic of his peers in corporate Ireland.

Patrick offers a rare spark of hope in a doomed company. He heads up a template for the worst excesses of corporate Ireland, a close rival to DCC.

This was a €21m fraud. Even if it had happened at a giant like BP, it would be a sizeable scandal. When it happens to Greencore it is a tsunami.

Yet the Greencore fraud leaves plenty of the reddest faces smiling all the way to the bank.

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