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The farce of Irish financial regulation continues

July 13, 2009 in Banks & Finance, Government, IFSRA by Anthony | No comments

The farce that is financial regulation in Ireland continues. The latest joke concerns allegations that banks are overcharging customers who break out of a fixed-rate mortgage (Sunday Business Post).

(Big John Wayne) Lenihan apparently heard that banks were carrying out such dastardly acts and immediately ordered the Financial Regulator to investigate.

The FR, in keeping with its high standards of professionalism and concern for the best interests of consumers approached the banks and politely asked them if they were stealing from customers.

The banks, in keeping with their high standards of honesty, integrity and concern for the best interests of consumers, carried out an in depth investigation which, I believe, included asking the janitor, but found no evidence of wrong doing.

(Big John Wayne) Lenihan was pleased and in that endearing tongue twisting manner of his, he announced:

The regulator concluded, and has confirmed to my department, that its analysis indicates that the early redemption fee calculation in all cases appears to seek to recover costs and that lenders do not generally apply additional fees in the case of early redemption.

But wait – Big John spotted something amiss. The findings were based solely on material provided by the lending institutions themselves so in case there was the slightest risk that the legendary honesty of Irish financial institutions could be blemished in any way Big John Lenihan ordered the FR to carry out at least six on-site inspections.

A spokesperson for the financial institutions said that just because they were aware months ago of media allegations of wrong doing, were aware some commentators had expressed concern about possible wrong doing, were aware of polite questions by the Financial Regulator and were now aware that the FR was about to carry out on-site investigations with, of course, the usual prior notice of exact times and locations, did not mean that they would attempt to organise a cover up of any wrong doing.

A spokesperson for the Financial Regulator (under cover of darkness and wearing a hood) said that because of strict secrecy laws it was unable to confirm or deny reports of any wrong doing, was unable to confirm if (Big John Wayne) Lenihan was the Minister involved, was unable to confirm if it actually had powers to investigate banks and indeed was even unable to confirm if the entity commonly known as the Irish Financial Regulator really existed but the spokesperson did admit that most Irish citizens don’t really believe that it does.

Copy to:
Financial Regulator

The all powerful ‘independent legal advice’ defence

March 10, 2009 in Banks & Finance, Civil Service, IFSRA by Anthony | No comments

Before Patrick Neary completely disappears into his very rich sunset there’s one fact that needs to be put on the record.

The board of the Financial Regulator gave themselves the power to decide what they should be paid. In other words Patrick Neary himself decided that he was worth a lump sum of €428,000, a special sum of €202,000 for keeping his mouth shut and an annual pension of €142,670 (Irish Independent).

Some politicians ranted and raved when they discovered that civil servants had taken on such amazing powers but, to date, they’ve done nothing to bring these greedy and incompetent people down to size.

It seems that this reluctance to act is closely related to that most powerful and mysterious concept of Irish public life – Independent legal advice.

Once these holy words are uttered no more questions can be asked. Not even simple questions like; what, precisely was the advice offered and who gave it? No, once these most powerful of words are uttered the silence is total, complete, nothing more can be said on the matter.

It is even said that a member of this special club could get away with robbing a bank operating under the ‘independent legal advice’ concept. In fact, such robberies are quite common in Ireland.

It should be noted, however, that the ‘independent legal advice’ defence is only available to certain classes of people like senior civil servants, politicians and the higher echelons of the business sector. Peasants do not qualify as they are provided with their own special system commonly known as criminal law.

Groundhog Day (again)

February 25, 2009 in Banks & Finance, Corporate, Government, IFSRA, Regulatory Agencies by Anthony | 2 comments

From an Irish point of view there is absolutely nothing new about the recent scandals involving Anglo Irish and other banks. Theft and fraud within the Irish financial sector has long being an integral part of Irish culture.

Such activity is common because the State itself officially accepts such behavior as the norm and, over the years, has developed a whole raft of mechanisms and strategies to protect those in the financial sector who regularly engage in criminal activity.

We only have to look back at any one of the many scandals of the past thirty years or so to confirm the truth of the situation.

In this case I’ve chosen the Ansbacher scandal because, like the Anglo Irish Bank scandal, it involves secret names and a golden circle.

It will be obvious after reading the following quotes, opinions and comments that nothing has or is about to change in corrupt Ireland.

((My comments are in brackets, emphasis mine).

On the 27th September 1999 the then Tanaiste, Mary Harney, gave the following excuse for not publishing the Ansbacher names.

“If the Government were to break the law and publish the names, everybody on the list would walk free and prosecutions would not be brought.”

(During the Ansbacher scandal Harney constantly made the case for secrecy because, she claimed that she was absolutely determined that prosecutions would follow, that justice would be done).

When the Ansbacher report was finally published in 2002, five years after the scandal was first uncovered, Mary Harney’s party colleague and Minister for Justice Michael McDowell cautioned against public expectations that a rash of arrests and prosecutions would follow.

(This is thinly coded message for the crooks – Don’t worry, our strategy of putting things on the very long finger worked, you’re all off the hook).

(Nobody was ever prosecuted for the Ansbacher criminality. Those involved did secret deals with Revenue and a few were banned from acting as company directors. The exact same strategy is being adopted by the present Government to protect the bankers).

Mary Harney (Still in office) must have had a moment of Déjà vu as she listened to Brian Cowen.

“Be assured that the suggestions being made quite frankly by political opponents that I’m in some way not very much in favour of bringing this into the public domain as soon as possible consistent with the proper investigation of this which wouldn’t put anything at risk or compromise any future prosecutions that would be deemed to be appropriate.”

Here are some more quotes from the Ansbacher scandal to confirm that strategies employed by government to protect the corrupt are still the same.

“The Fine Gael motion calls on the Government to ensure that names of all persons who held Ansbacher accounts are made public via a Dail committee.”

(The Opposition made the same suggestion regarding the Anglo Irish Bank names and the Government has rejected it, just like they did in 1999).

The Ansbacher report was finally published in 2002.

“The Director of Public Prosecutions James Hamilton is also considering a copy of the report. Responding to queries yesterday he pointed out that if any criminal offence disclosed by the report requires further investigation for the purpose of prosecution, this will be a matter for gardai, the Revenue Commissioners, the Director of Corporate Enforcement or the Central Bank.”

(As I mentioned, no prosecutions were ever brought).

“The Ansbacher report is not just a damning indictment of those wealthy and powerful individuals who evaded their due taxes, broke company law and engaged in criminal conspiracies from the 1970s to the 1990s, it reflects the failure of Irish regulatory authorities and professional bodies to uphold the standards required of them in the interest of the common good. There is a great deal to be ashamed of in the report and many lessons to be learned. New and rigorous standards must be applied by the authorities.”

(No lessons have been learned because the same corrupt administration is still in place)

“In a series of interviews at the weekend, the Minister for Justice, Mr. McDowell, hoped for a change in Irish attitudes so that people who engaged in multi-million pound tax fraud were not regarded as heroes in their local yacht clubs while those who fiddled their social welfare payments were sent to jail”

(Just recently, we heard Ulick McEvaddy refer to the Anglo Irish ‘names’ as heroes. He’s not the only one who thinks this way).

“Nobody believes it will be easy to successfully prosecute some of the extremely wealthy individuals involved. But, if a determined attempt is not made, the consequences will do lasting damage to our democracy. The belief that there is one law for the rich and another for the poor will grow and flourish.”

(Only the corrupt or the very ignorant would claim that there isn’t, in fact, one law for the rich and another for the poor).

“The Government will face strong opposition demands today for assurances that prosecutions will follow arising from the publication of the Ansbacher report.”

“The public must be shown that such behaviour will not be tolerated. The most obvious and public penalty is a jail sentence for the guilty.”

(Nobody went to jail; corruption in the business and political sectors is still rampant).

The following is a statement from the Paul Appleby, Director of Corporate Enforcement, on 6th July 2002, in response to the publication of the Ansbacher report.

It is worth reproducing in full to give an indication of what action we can expect from this toothless tiger regarding the Anglo Irish Bank scandal

6TH JULY 2002

I am determined that action will follow.

Speaking at a press briefing in Dublin on Saturday morning, Mr. Paul Appleby, Director of Corporate Enforcement, said:

“The company, now known as Ansbacher (Cayman) Ltd., secretly operated in this jurisdiction for over twenty years and conducted business which, the Inspectors have found, amounts to evidence tending to show that it contravened prevailing banking, tax, company and other legislation. When its activities came to light in 1997, the nation was shocked that such activity had occurred and had remained effectively hidden from official authorities for so long.

In a sense, these revelations infected our collective psyche in subsequent years, creating suspicions that it was possible to evade legal or other obligations without effective sanction and thereby undermining respect for the rule of law and damaging public confidence in the State’s institutions.

The conclusion of the Ansbacher inquiry and the publication of this Report represent, in my view, the first phase in purging these doubts and regaining lost ground. In defining publicly for the first time the company’s Irish business, the High Court Inspectors (past and present) have done a remarkable public service.

Indeed, the Companies Act 1990, and particularly the company investigation provisions of that Act, have again proved their worth and highlighted the importance of these legal provisions in investigating circumstances suggesting unlawful corporate conduct.

As this important phase of fact-finding investigation concludes, the relevant State Authorities, including my Office, will now examine what remedies are available to address the findings in the Inspectors’ Report.

My staff and I have commenced identifying the matters which fall within our statutory remit. Every line of potentially valuable inquiry will be examined thoroughly, and I am determined that appropriate action will follow. I am mindful, however, of the Inspectors’ comment (at page 18 of their Report) that they foresee some difficulty in bringing prosecutions arising from the matters investigated by them.

(Damn, there’s that Michael McDowell message to the corrupt again)

As early as next Monday, I will be seeking the approval of the High Court to gain access to certain of the Inspectors’ papers, in order to allow us to follow up on a number of issues in the Report. We will also be supporting in due course an application for the recovery of the costs of this Inquiry, in order that the taxpayer does not bear further financial loss as a result of the events described in the Report.

In the coming weeks, I will be considering what further action is warranted to remedy or sanction the conduct which is indicated in the Report and is relevant to my responsibilities under the Companies Acts.

I have no doubt that other relevant State Authorities, such as the Central Bank, the Revenue Commissioners and the Director of Public Prosecutions, will closely evaluate their own legal options in the light of the information contained in this Report.”

(They did indeed evaluate their legal options and, as is the norm in Ireland, did nothing).

Here are some comments on the Regulators in the report. (Note: The Central Bank was the so called financial regulator at the time).

“Failures by the Central Bank meant the Ansbacher scheme went undetected for years”

“The bank’s failure to test, appraise and gather information “available to it” resulted in the true nature of the activities going undetected for longer than ought to have been the case.”

“The bank had reservations at all times about the loan-book, but took at face value assurances by the scheme’s mastermind, the late Mr. Des Traynor, that the amount of loans extended to Irish residents was being run down.”

(Just as the present so called financial regulator took the word of Anglo Irish Bank lawyers that its controversial €300 million share deal last summer was above board. This is no accident, it has nothing to do with incompetence, it is, effectively, an official policy).

The Tánaiste, Ms Harney, on the failures of the Central Bank.

“It seems extraordinary that we lived in a time where the culture, even amongst State organisations, was one of ‘let’s pretend we don’t know’ because clearly in some cases where organisations knew or should have known they seemed to take the view that they didn’t want to know.”

(The exact same attitude and practices are still dominant in the Irish regulatory system today).

Writing in the Irish Times 8th July 2002 Mark Brennock made the following comments and observations.

“The Government must now reassure the scandal-weary public that this can never happen again.”

(Corruption within the financial sector never stopped, never even waned. That situation will continue for so long as Ireland remains a corrupt entity in itself),

“Governments are responsible for the level of regulation, and there was clearly a massive regulatory failure. This systematic evasion went on for over two decades, unhindered by the Central Bank, the Revenue Commissioners, company law regulators or prosecuting authorities.”

(Hardly an hour passes without some politician, journalist or banker telling the Irish people ‘there was clearly a massive regulatory failure’ regarding Anglo Irish Bank. We will continue to hear this into the future until somebody actually establishes a proper regulatory systems that puts people in jail rather than, effectively, facilitating their crimes)

“The Tánaiste yesterday pointed to a new system for regulating the accountancy profession, new legislation to encourage “whistle-blowers” and enhanced powers which have been given to the Revenue Commissioners.”

(None of this was done and politicians are still waffling on about the ‘urgent’ need for such reform as a result of the Anglo Irish scandal).

“The powers of a new financial services authority are detailed in a Bill currently before the Dáil.”

(This ‘new’ financial services authority was finally established in 2003. It was hailed as a powerful and hard hitting agency that would forever rid Ireland of the corrupt vermin that infects the financial sector – it was a complete failure.

Today this failed ‘authority’ is investigating itself for its part in the Anglo Irish Bank scandal. It will clear itself of all charges and continue to implement policy and secrecy laws that, effectively, protect fraudsters).

Then Tanaiste, Mary Harney on the Ansbacher report.

“The report is a watershed in Irish life” for the clarity of the insight it gives us of how a section of the political and business class in this State used to operate. The political task is to demonstrate to a scandal-weary public that it can’t happen again.”

(Harney is still in power and a scandal-weary public is still waiting).

And finally.

“The report showed that there was now the capacity in Ireland to “lift the veil of secrecy” over such activity. The Government had already begun the process of ensuring there was a coherent and comprehensive body of law to ensure “that our society is a fair and just place in which to live and do business“.

There is virtually no prospect that our corrupt system will suddenly decide to reform itself and therefore the only hope we have of ridding ourselves of the rampant corruption that infects our political, business and bureaucratic sectors lies with EU intervention.

I fervently hope, for all our sakes; that we see such an intervention before very long.

Copy to:
Financial Regulator
ODCE
Government

A corrupt nation in denial

December 31, 2008 in Banks & Finance, Civil Service, Fianna Fail, Government, IFSRA, Regulatory Agencies by Anthony | 17 comments

The Financial Times has rightly described Ireland as a banana republic in response to the Anglo Irish Bank scandal. This is part of an ever increasing realisation by the international community that the administration of Ireland is, at every level, rotten to the core.

It is only within Ireland that the reality is denied. It is only within Ireland that a large majority of people including politicians, intellectuals, journalists and business people continue to pretend that Ireland is a normal, functional democracy like any other.

The financial tsunami that’s sweeping the globe is likely to strip away all such pretence and expose us for what we really are – a corrupt nation in denial.

The reaction to the Sean Fitzpatrick scandal and the banana republic editorial in the Financial Times is typical of such denial.

Brian Lenihan, Minister for Finance:

“I don’t accept that claim (Ireland is a banana republic), for one minute; very few countries have been left unscarred by the financial fall-out from the problems initially sparked by US sub-prime lending.
“There is nothing unique in what has happened in this country — and, indeed, we haven’t had all of the failings that have been demonstrated in some overseas banks.”

(Irish Independent, Dec 23).

Actually what happens in this country is unique. No other democracy in the world allows its bankers and other financial institutions to rob customers on a regular basis.

The corrupt and rotten business and political environment in Ireland is, largely, a creation of Lenihan’s party, Fianna Fail.

Shane Ross, Independent Senator:

“It’s a pretty stunning state of affairs.”

(Today with Pat Kenny, 19th Dec).

Actually it’s not stunning at all. This kind of ‘inappropriate’ behaviour has been going on since the foundation of the State. People like Senator Ross, unfortunately, have an amazing facility for getting outraged, forgetting and then getting outraged all over again when the next scandal breaks. He seems unable to join up the dots and see the reality that the Financial Times can see at a glance.

“What has happened here is a complete collapse of financial regulation…What has the Financial Regulator been doing since he became aware of Fitzpatrick’s loan last January?”

Wrong again Senator; there never was any financial regulation to collapse in the first place. Irish governments and regulatory authorities do not regulate but rather ‘facilitate’ the activities of financial institutions.

Last October, for the first time in the history of the State, an Irish financial institution was fined and that was only because it threatened the interests of other banks.

It’s likely that since last January the so called Financial Regulator has been trying to find a way of getting Anglo Irish and Sean Fitzpatrick off the hook. If it wasn’t for the collapse of the banking system Fitzpatrick would have been allowed to continue with his ‘inappropriate’ activities.

This is exactly how a ‘regulator’ behaves in a banana republic.

Gina Quin, CEO of Dublin Chamber of Commerce:

“I think it’s worth remembering that this wasn’t an illegal practice and you know business gets done between friends all of the time because we like to work with the people that we know and like and we can trust.

And trust is a hugely important feature of Irish business moving forward in the current climate. Trust and confidence are the absolute cornerstones of us pulling ourselves out of this current situation.

…the man has fallen on his sword, his fellow director is gone as well who was involved in one of the loans and we’ve got to move on…this is one small unfortunate incident and its not helping, we’ve got to move on.”

(Today with Pat Kenny, 19th Dec).

“This is one small unfortunate incident”???

To be charitable to Ms. Quin, she’s young, ambitious and obviously completely ignorant of the rotten reality at the core of Irish public life. I hope that she manages to remain in her comfortable little bubble world interacting with people she likes and trusts.

Institute of Chartered Accountants in Ireland(ICAI):

The regulatory board of the Institute of Chartered Accountants in Ireland said it’s to look at the circumstances surrounding the director loan issue. It wants to know if any of its members was involved.

Recently, this organisation established an ‘independent’ regulatory board (CARB). Clearly, the ICAI sees regulation as a bit of a joke when we learn that they appointed Dr. Liam O’Reilly as chairman of the board of CARB.

During his career as chief executive officer of the Financial Regulator Mr. O’Reilly enthusiastically enforced policies that ensured no financial institution was ever brought to account for fraud or theft. His attitude is unlikely to have changed.

No accountant will be will be made to answer for the Anglo Irish Bank scandal.

Irish Association of Investments Managers:

The Irish Association of Investments Managers said it’s disappointed at events which have led to both Mr. Fitzpatrick’s resignations and that of the bank’s chief executive officer David Drumm. The association’s members manage 250 billion worth of investments and say they expect the highest level of transparency in dealings by directors of listed companies.

This joke organisation claims to ensure best standards throughout the investment industry. Two names – Jim Flavin, Sean Fitzpatrick.

Mary Hanafin, Minister for Social and Family Affairs:

When Hanafin was asked why couldn’t the Government make such loans illegal she spluttered

“Mmm…, Obviously, all sorts of arrangement and mmm…dealings that banks make, you know, and I think the regulator, the regulatory authority rather is actually looking to see what was behind that and the whole circumstances of it.”

(Saturday View, 20th Dec).

Hanafin went on to talk about the Fitzpatrick scandal as if she was a tourist from Mars and not part of the political establishment that created and supports rogue bankers.

Prof. Ray Kinsella, Director of the Centre for Insurance Studies at the Quinn Business School, UCD:

“This crisis has brought a generation to its knees…the impact on the very fine people working in the bank…the impact on Sean Fitzpatrick himself, I know it’s an unpopular thing to say but I’m uncomfortable with judgementalism and I don’t know all the facts but the impact on the Irish economy and financial system has been devastating.”

(Saturday View, 20th Dec).

The best that can be said of the professor is that he’s a bit of a header (See here). He once suggested that the Irish media should keep quiet about banking corruption as such talk could damage our international reputation. As I say, he’s a bit of a header.

Professor Niamh Brennan, Michael Mac Cormac Professor of Management, Director of Academic Centre For Corporate Governance, UCD:

Commentating on the failure of the Financial Regulator, Patrick Neary, to act on Fitzpatrick’s dodgy activities.

“I had thought it was a member of the staff that had made the discovery and hadn’t escalated to the Financial Regulator himself. But it appears that he knew and I find it absolutely extraordinary that he would have been part of those all night discussions in the Dept. of Finance and told nobody about this finding.”

(The Sunday Supplement, 21st Dec).

Professor Brennan is shocked because she, like many others in Ireland, labours under the illusion that the Regulator actually regulates, it does not. The Regulator, the Government and the banks are all in the same camp.

“What we need in Ireland is a robust system of regulation that protects the reputation of the country as a whole and which will be good for our citizens.”

As I have said, the Regulator, Government and the banks work closely together for the good of the banks and against the interests of the country and its people. The completely one sided deal done with the banks makes this fact crystal clear.

Unlike most commentators, including politicians, who immediately and without question accepted the regulator’s opinion that nothing illegal occurred, Professor Brennan believes that Fitzpatrick could be brought to account as follows.

Breach of fiduciary duties where a director puts his own personal interest ahead of the company.

Failing to keep accounting standards by not telling the truth in his financial statements.

Moving the loan was, in Professor Brennan’s opinion, illegal.

Fitzpatrick will never be brought to account for any wrong doing.

Ulick McEvaddy, businessman:

“I’ve seen this corporate madness if you like in a media frenzy to feed off any troubles that an Irish corporation would have.”

“So these people, Sean Fitzpatrick, Bill Barrett, these guys had a different philosophy in life and they to a great extent were, with Charles Haughey, another man pilloried in the media, the architects of this Celtic Tiger.”

(Marian Finucane Show, Sun 21st Dec).

My respect for McEvaddy completely evaporated on hearing this drivel. To blame the media for Fitzpatrick’s dodgy activities is bad enough but to defend the corrupt Haughey by claiming he was a victim of a media frenzy is to expose oneself as an ignorant fool of the worst kind.

David McWilliams, Economist and author:

For some time now McWilliams has been telling all and sundry what action needs to be taken in response to the collapse of the banks. But the Government have ignored his very sensible suggestions especially his insistence that the ‘financial delinquents’ who created the mess should all be sacked.

Responding to the dodgy deal done between the Government and the bankers McWilliams uses some colourful but accurate language.

“Recapitalisation is based on the economics of Noddyland.”

“Cronyism of the highest order.”

“Sends a signal to every foreign investor that Ireland is a banana republic.”

“Stroke politics” of Congolese proportions.”

(Irish Independent).

Unfortunately, McWilliams falls down in his analysis when he concludes that Brian Lenihan must be acting under very bad advice.

McWilliams, like so many other experts and commentators, persists in assuming that the Government and the Regulator are acting in the interest of the country when it is crystal clear that they are doing no such thing.

The Government, the Regulator and the banks are all on the same side, all working to an agenda that does not include the best interests of the people of Ireland.

Pat Cox, former president of the European Parliament:

I quote Mr. Cox extensively because his views are so disturbing.

Pat Cox is a highly intelligent and vastly experienced public figure. In addition to serving as President of the European Parliament he has served as an MEP, TD and broadcaster.

It is therefore deeply disturbing to witness him in full denial mode. Effectively, Cox is saying – Nothing illegal was done, Ireland is only a minor player when it comes to financial corruption and it’s just a case of some bad judgement and lax governance.

It’s difficult to believe he’s ignorant of the fact that Ireland is the only Western democracy that protects rather than prosecutes bankers who may be corrupt.

We here at Public Inquiry could quote hundreds of cases of political, financial and government corruption in support of the Financial Times accurate conclusion that Ireland is a banana republic.

Here’s what Cox had to say on the Fitzpatrick scandal.

“You asked the question at the very beginning; what about the comments in the papers about Ireland’s reputation?

If you look at the Tsunami of toxicity and greed that we have seen from Wall Street in all of the collapses and from the City of London, Ireland, I’m not relativising here (he is) but Ireland is really not king pin in this.

So those in the Financial Times editorial board or others who would cast a stone should cast them at glass houses closer to their headquarters at home. That’s the comparative point I wish to make.

Secondly, this week, we’re not discussing for example Mr. Madoff, one of the great guru’s of Wall Street who appears somehow or another by a corrupt scheme of pyramid selling to have maintained a system that finally has collapsed possibly with a debt of $50 billion.

So again, not to relativise, (he goes on to relativise) that’s real and that’s this week and it’s not in one Irish newspaper this weekend and a missing ingredient if we want comparative analysis.

I think the issue of what happened at home is an issue that touches loads of stories this week, it’s a question about people in authority, it’s a question about judgement, it’s a question about standards, it’s a question about transparency and it runs across so many stories in our papers today.

And the question about Sean Fitzpatrick is not one about legality and illegality to do with the bank giving loans. Under Irish company law it is very clear that up to ten per cent of the net assets of a business can be under law loaned to directors. Indeed, prior to earlier this decade up to a 100% could have been loaned.

So, the law is not the issue, the issue is the quality of governance, this is someone who has been the chief executive of one of the burgeoning banking institutions of this state and subsequently since he retired in 2004 the chairman.

And in that regard hiding the loan from the shareholders of his own bank, that’s the first grievous fault before we come to the public in some general prurient or other interest that they may have in this story.

It wasn’t leveling with shareholders and I only ask the question – Why not. It wasn’t illegal as has been said so why not tell it. So, there are people in the bank who made personal judgements not only one but several that it was ok in governance terms to hide this truth from their own shareholders maybe or not from their own auditors and they did it over consecutive years and it begs the question why.

Sure, not illegal but certainly well below the standards of good judgement and good authority and confidence is one of the missing ingredients in the global banking system today and in the Irish banking system and this is another heavy weight on those whose shoulders should bear the responsibility including our regulatory system.

The cosy capitalist bit or the Irish bit that I find quite disturbing is that those who have been invited to regulate appear themselves to be asleep at the wheel and so those who are there to look out for a stakeholders interest, whoever it may be, appear to have produced a less than acceptable performance and I find it really interesting that several of the newspapers today report our finance minister Brian Lenihan as not offering directly his confidence in our regulator saying this is a matter for the board and not for him.”

(Marian Finucane Show, Sun 21st Dec).

In conclusion:

The Financial Times is correct, Ireland is a banana republic. It is a corrupt state not just because of the extent of corruption throughout every level of society but more critically because of the complete failure of state agencies, including the body politic, to take effective measures to root out the disease.

This inaction has led to the State itself becoming a corrupt entity which in turn has created an environment where politicians, businessmen and many others in privileged and powerful positions can, with supreme and justified confidence, break the law with impunity.

This is the crucial difference between Ireland and other Western democracies. When corruption is uncovered in countries like America, England and France, for example, there is an immediate and robust response from well funded, professional and independent enforcement authorities. This does not happen in Ireland.

Ireland’s reputation will continue to be damaged for so long as politicians, journalists, intellectuals, business people and the bulk of ordinary Irish citizens continue to deny the reality of the situation.

Copy to:

Brian Lenihan, Minister for Finance
Shane Ross, Independent Senator
Gina Quin, CEO of Dublin Chamber of Commerce
Institute of Chartered Accountants in Ireland (ICAI)
Irish Association of Investments Managers (IAIM)
Mary Hanafin, Fianna Fail TD and Minister for Social and Family Affairs
Professor Kinsella, UCD
Professor Niamh Brennan, UCD
Ulick McEvaddy, businessman
David McWilliams, Economist and author
Pat Cox, former President of the European Parliament
Financial Regulator

A flawed and deadly assumption

October 20, 2008 in Banks & Finance, Government, IFSRA, Regulatory Agencies by Anthony | No comments

On 4th Oct last I wrote:

“There will be no sacking of senior bank management, there will be no appointment of outsiders to bank boards or if there is they will be given the job of making the coffee. There will be no financial cost to the banks; there will be no strings attached to the deal because it is the banks that are calling the shots.”

Here’s what happened.

No banker has been sacked.
No banker has had his pay reduced or capped.
No banker has suffered any restriction on bonuses or share options.
The committee set up to oversee bonuses and pay for bankers is a joke.
No independent outsiders are being appointed to bank boards. The observers being appointed will be chosen by the bankers from a panel approved by the Minister. These observers will have no power whatsoever; they are nothing more than window dressing.

Ireland is the only Western state that has failed to take effective action against the greedy and irresponsible bankers – Why?

Again, on 4th Oct I gave the answer:

“We at Public Inquiry have been shouting the message for years – Ireland is a corrupt state, the politicians do not work in the interests of the people, the civil servants for the most part serve the politicians and the Government, not the people. Banks and other big business do as they please with impunity; they are never, ever brought to account. How long will it take before the message gets through?”

Let me be even more precise. Instead of acting in the interests of the State and its people the Government, the regulators and the bankers are acting to protect the corrupt system of administration that has evolved in Ireland over recent decades.

This is not to say that any person involved in the present scandal are themselves corrupt individuals. It is to say that the actions of those involved are exactly what can be expected from those who are making decisions within a corrupt system.

This is why people like Shane Ross, David McWilliams and others always express puzzlement at the reaction of politicians and regulatory authorities to these scandals.

Their mindset includes an assumption that Ireland is just like any other any other Western democracy. They assume that the Government and regulatory authorities will always act in the best interests of the State and its people. This assumption is the fatal flaw in their reasoning.

During the period when we were waiting to see the details of the guarantee scheme that the Government and regulatory authorities were working out with the greedy and irresponsible bankers these financial experts expressed views on what action would or should be taken.

They are now expressing shock that all their predictions and analysis turned out to be wrong. They have expressed astonishment that the Government has, in effect, allowed the bankers off the hook.

Why is it that we here at Public Inquiry can make an accurate prediction of how the authorities are going to act based on our analysis of the situation and all the experts get it wrong? The answer is simple – We start off from the undeniable fact that the administration of Ireland is intrinsically corrupt.

Once this fact is accepted everything else falls into place. There will be no surprise when banks and other financial institutions are allowed to rob their customers, no surprise when state authorities fail to act against stock market fraudsters, no surprise when politicians who blatantly commit perjury are not made accountable.

Nothing will change in this country until the reality of what we are as a nation is accepted. No individual, organisation or state can begin to reform itself until the reality of their situation is faced and accepted, it is only when that point is reached that the rot can be cut out.

We are a long way from that place.

Copy to:
Senator Ross
Financial Regulator

Those fecking efficient Germans

August 14, 2008 in Banks & Finance, Corporate, IFSRA by Anthony | No comments

What a novel experience it must have been for Irish police to find themselves raiding a bank as part of an investigation into suspected criminal behaviour by its board members.

No, silly, not an Irish bank. Irish banks are never, ever raided. No, it was a German bank and it was the German authorities who asked the Irish police to raid. Oh those fecking efficient Germans, why can’t they be like the Irish and just ignore suspicions of major white collar crime.

The German investigation is centred around a €17.3 billion hit on a German bank that originated in Dublin’s IFSC financial centre, an entity that the New York Times recently described as the ‘Wild West’ of European finance. Another financial expert referred to the Dublin operation as “A sloppily-run pig sty”.

Meanwhile, in a rare show of activity the so called Irish Financial Regulator issued a statement saying it was ‘aware’ of the raids – Dimly aware, I suspect.

Copy to:
Financial Regulator

Mulcahy’s silly nuclear button

August 5, 2008 in Corporate, Government, IFSRA, Regulatory Agencies by Anthony | 1 comment

I know only two things about Nick Mulcahy. He is the editor of the Irish business magazine Business Plus and he knows very little about corporate fraud.

I gleaned these facts after reading an article in the Irish Independent by Mulcahy in which he analyses the latest developments in the DCC/Fyffes case.

According to Mulcahy, ODCE ‘pressed the nuclear button’ when they asked the High Court to appoint an inspector to investigate DCC/Fyffes over allegations of insider trading.

Pressing the nuclear button or taking the nuclear option means taking an action of last resort. In other words, only taking the most serious action after all other avenues have been exhausted.

So what action did so called Irish regulatory/enforcement authorities take in relation to the €83 million fraud perpetuated by Jim Flavin of DCC before being forced to press the nuclear button?

Initially, not a damn thing. When it became obvious that something very strange had occurred on the Irish Stock Exchange (ISE) regarding DCC/Fyffes shares not a single Irish authority acted.

It was only when the London Stock Exchange, a regulatory agency operating from a functional jurisdiction, insisted that an investigation be carried out that the ISE finally took action.

The manner in which the ISE investigation was conducted has itself raised very serious questions regarding ethical and possibly illegal interactions between the ISE, DCC and the DPP. In the best traditions of ignoring suspected wrongdoing in Ireland, this aspect of the scandal has been practically ignored to date.

After the (suspect) ISE investigation was completed, again, nothing happened. The ISE, Irish police, Financial Regulator and the Government simply buried their collective heads in the sand.

It was only when Fyffes, fearing possible financial consequences if it failed to protect the interests of its shareholders, was forced to take a civil action against DCC that the case became active again.

It is entirely from this civil case and the publicity that it generated that the ODCE, possibly the weakest financial regulatory agency in the State, was embarrassed into taking action.

If the ODCE action is successful, and that is highly unlikely, and if it decides to punish DCC/Jim Flavin for any wrongdoing then that punishment will represent the absolute minimum action that the State can take in the case.

ODCE boss, Paul Appleby, knew that he hadn’t a hope in hell of a successful action if he was depending on his miniscule legislative power and resources. That’s why he scuttled over to the High Court and the Supreme Court when they were adjudicating on DCC/Fyffes, to make a pathetic plea to these courts to use their considerable powers to act against DCC/Flavin. His pleas were rejected out of hand.

As a last resort (and there’s certainly nothing nuclear about the effort) Appleby made a formal application to the High Court for the appointment of an inspector. The only advantage Appleby and ODCE will enjoy from this appointment is that their meagre resources will not be totally obliterated as they would have been if they were forced to take the action themselves.

So, what happens now? Well, the farce continues. The High Court inspector will take years to complete his investigation (The NIB investigation took six years).

ODCE then have the option of seeking to have those involved in the scandal disqualified from involvement in the management of a company (This is the absolute minimum punishment available to the State). This action will also take years (ODCE has only just completed action against those in the NIB scandal after years of legal wrangling).

By that time Jim Flavin and many others involved will have retired (and may even have died) and the whole matter will be seen as historical. It is an absolute certainty that those involved in the scandal will never be subject to a police investigation, will never be brought before a court to give an account of their actions, will never see the inside of a prison.

The Supreme Court found that Jim Flavin of DCC had engaged in insider trading involving sums of over €83 million. If the same finding was made in a functional democracy strong, immediate and effective action would have been taken by the police and all associated state enforcement/regulatory agencies.

If we are to judge by a recent and very similar insider trading case in the US, Flavin would now be serving a lengthy jail sentence, he would have been forced to repay his ill gotten gains; he would have had his substantial wealth seriously reduced by the imposition of hefty fines and forfeits.

Nick Mulcahy’s amateurish and naïve analysis of this case is an important factor in how white collar crime is dealt with in this country. Government and so called regulatory agencies will continue to ignore allegations of serious fraud until they are brought under strong pressure by well informed and persistent journalists.

Mulcahy’s silly ‘nuclear button’ conclusion is an indication of just how far away we are from that ideal situation.

Copy to:
Business Plus
ODCE
Financial Regulator
DCC

‘Experts’ and law enforcement

June 1, 2008 in Banks & Finance, Civil Service, Corporate, IFSRA by Anthony | 1 comment

Sometimes I despair when I hear so called experts expound on the numerous cases of dodgy dealing and corruption in Ireland. I have no idea how educated these people are or what secret agenda they may hold but I do know that, for the most part, they talk drivel.

Take the issue of law enforcement for instance. When a law is enacted in most healthy and democratic jurisdictions it becomes instantly enforceable. The police/regulatory agencies do not require a lead in of years before they feel confident enough to actually enforce the law. In Ireland, according to these so called experts, things are different.

Case one:

Solicitor Barry Lyons in a discussion about the fallout from the Michael Lynn scandal cited a recent case taken by the ODCE as an example of how things were changing with regard to law enforcement (Sunday Supplement).

“I think this week that a prosecution was brought against the director of a company who borrowed in excess of what he should have from the company. It’s unfortunate that the act was introduced in 2001 but prosecutions are beginning at this stage. But, you know, it’s part of the process for the development of the economy.”

So, seven years later somebody has actually decided to enforce the law.

And what’s this thing about ‘part of a process for the development of the economy’? What has this comment to do with law enforcement? Nothing, it’s just part of the brainless waffle we are constantly subjected to from these so called experts.

Lyons may just as well have said – ‘But, you know, it’s part of the process for the development of efficient toilets on the International Space Station’ or ‘But, you know, it’s part of the process for the development of winter heaters for cows teats’.

Case two:

Economist Muir McDowell in a discussion about the fallout from Flavin/DCC insider dealing case (Marian Finucane Show, Sunday).

“Things are changing, under the Competition Act people can now get jail sentences and suspended sentences have been handed down.”

The problem with this ‘expert’ view is that the Competition Act has nothing to do with the Flavin case. The relevant legislation is the Companies Act, 1990.

Eighteen year old legislation and this is the first case of insider trading in Ireland. This can only mean that Irish businessmen are the most honest in history or the law is not being effectively enforced.

In any case, when McDowell talks about jail sentences, even under the Competition Act, he surely can’t mean jail for white collar criminals.

Allow me to enlighten any chronic optimists out there who may be under the illusion that Flavin may be charged or even end up in jail.

I can say with absolute certainty, he won’t. He will never be charged, he will never answer to a jury of his peers; he will never see the inside of a jail.

The Companies Act, 1990 is nothing more than window dressing, a sham piece of legislation designed to give the impression that Ireland actually takes white collar seriously.

Case three:

Niall Brady, Money Editor Sunday Times discussing the mis-selling of products by financial institutions to the elderly (Primetime).

It was put to Brady that perhaps the financial institutions didn’t have enough fear of the Financial Regulator.

“I think that attitude is changing because we tend to forget the regulator has only had a mandate and the powers to enforce consumer protection for about two years. So in a lot of cases the regulator is still feeling its way, but I think with the powers the regulator has now things are changing.”

The Financial Regulator was set up five years ago and was hailed as the great protector of the consumer, the organisation that was going to kick ‘ass big time. The vermin that had infested the Irish financial sector were going to be exterminated; the bad old days were over. Alas, it was not to be.

Initially, somebody ‘forget’ to give the regulator any enforcement powers at all. This is like designing a car but not bothering with a fuel tank. In any case, the Financial Regulator has been up and running with enforcement powers for at least four years.

So, how long does Mr. Brady think the regulator should be given to ‘feel it’s way’? How many more millions have to be robbed from consumers before the regulator feels it has a grasp of its powers? How long before the vermin infested financial sector is finally purged of its filth?

Consumers are advised not to hold their breath or listen to ‘experts’.

Secrecy law remains unchallenged

May 2, 2008 in Banks & Finance, Consumer interest, IFSRA, RTE by Anthony | No comments

Mary O’Dea, Consumer Director at the Financial Regulator’s office was asked about the Bank of Ireland lap top scandal on Drivetime (8th minute) yesterday.

“It’s a matter we are investigating so I can’t go into the specific details with you.”

When she was asked how and what they were investigating O’Dea replied.

“I can’t; unfortunately, I’m prohibited by law from going into the details of the investigation.”

It was at this point that RTE presenter, Mary Wilson, should have challenged this civil servant with basic questions such as;

What law exactly are you basing your refusal to provide this information?

Are you absolutely sure that this law forbids you from informing Irish consumers of even the subject matter of your investigation?

Can you email a copy of this particular law to this programme so that we can have our legal team analyse its contents to confirm for our listeners that your interpretation of absolute secrecy is correct?

Is the Financial Regulator happy with this high level of secrecy surrounding its investigative activities?

Is the Financial Regulator happy with the fact that this law poses a serious disadvantage for consumers?

If the Financial Regulator is not happy with this law has there being any attempt to have it repealed?

Are you prepared to come on air again in the near future to defend your position regarding this secrecy law?

Unfortunately, Mary Wilson asked none of these questions and so, in effect, consumers have been let down by two state agencies.

Copy to:
Drivetime
Financial Regulator

A rotten and intrinsically corrupt state

April 15, 2008 in Corporate, Government, IFSRA, RTE, Regulatory Agencies, The State by Anthony | No comments

According to RTEs economic editor, (8th item) George Lee, the Fyffes/DCC saga finally came to an end this afternoon – He’s wrong, it did not. We are also constantly told by George Lee and other so called experts that this is a complex case – It is not.

In 2000, Jim Flavin of DCC illegally traded in Fyffes shares making a profit of €85 million. Fyffes took a civil case against DCC to get their money back.

It’s likely they took a civil case because if they took a criminal case they would have had to answer questions about their own dodgy behaviour. For example, Fyffes issued options to senior executives and allowed a senior executive to sell shares when they should not have.

Fyffes lost their case in the High Court but went to the Supreme Court where they won. One of the judges, Mr. Justice Fennelly was crystal clear:

To trade on the use of inside information is recognised for what it is. It is a fraud on the market.

There’s nothing complex about that. It’s a simple case of greed and fraud.

But Flavin’s fraud pales into insignificance when compared to the real scandal surrounding this case – The absolute failure of any State agency to take any real action against this fraudster.

It is also an absolute disgrace that RTE has completely ignored this aspect of the scandal. Hence George Lee’s assertion that this saga has come to an end when in fact the real scandal has never even been addressed.

In functional democracies, insider trading is a very serious crime. When it is uncovered there is immediate and strong action by all relevant law enforcement authorities.

I have already cited the recent Nacchio case in America. Joseph P. Nacchio, former chief executive of Qwest, was sentenced to six years in prison, fined $19 million and ordered to forfeit $52 million he earned from illegal stock shares in 2001 – That’s real law enforcement in a real democracy.

Let’s be absolutely clear about what has happened here in this corrupt Republic.

Jim Flavin has been exposed as a fraudster in a case involving millions of Euros and nobody, absolutely nobody is going to act against him. The law will not be enforced; the law is being deliberately and consciously put to one side so that Flavin can remain a free agent.

In effect, the State has decided that this fraudster is to be treated as if he deserves the same status of innocence and respect as all law abiding citizens.

Let’s also name the so called State enforcement/regulatory agencies that have, to date, failed in their duty to enforce the law, to do their duty, to act as they should in the best interest of the State and its citizens.

The Director of Public Prosecutions
The Financial Regulator
The Stock Exchange
The Revenue Commissioners
Institute of Chartered Accountants (The fraudster is a member of this organisaton)
Irish Association of Investment Managers (IAIM) (Which, allegedly, oversees corporate governance in listed companies)

The Director of Corporate Enforcement, Paul Appleby, made a pathetic attempt to get some of those involved in the fraud disqualified from acting as directors; his plea was rejected out of hand.

He now has to decide whether to pursue a petition through the High Court. If he decides to go ahead the case will take years and consume a large portion of his meagre resources and finances.

Considering his options he must be aware that he hasn’t a hope in hell of succeeding but even if he does it won’t matter a damn because Flavin the fraudster retires in two years time anyway.

This case is very important not just because it is such an outrageous scandal, not just because the State blatantly refuses to take any effective action, not just because there is no doubt and virtually no argument concerning the facts of the case but because the scandal exposes and confirms the indisputable fact that the Republic of Ireland is a rotten and intrinsically corrupt state.

Copy to:

Director of Public Prosecutions.
Financial Regulator.
Irish Stock Exchange.
Irish Revenue Commissioners
Institute of Chartered Accountants
Irish Association of Investment Managers
Director of Corporate Enforcement
DCC
Fyffes
RTE (News)

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