Category: Regulatory Agencies

Bord na gCon report – A cleverly written whitewash?

A special investigation by the Comptroller and Auditor General into the activities of the Greyhound Board (Bord No gCon) has found evidence of mis-management and financial irregularities over a ten year period up to 2006.

Despite these findings the C&AG also found that in general the funds of Bord na gCon were properly applied.

It should be noted at this point that the C&AG was appointed auditor of Bord na gCon in 2001. In his report the C&AG states; “In my annual audits of Bord na gCon I have satisfied myself that the broad framework of financial administration and internal control was appropriate.”

So the state agency responsible for both auditing and investigating Bord na gCon was satisfied that the broad framework of financial administration and internal controls were appropriate during a period when very serious irregularities occurred.

The core work of the C&AGs office should also be kept in mind as we analyse this very questionable report.

The core work of the Office is the conduct of financial audits which culminates in an annual opinion on all accounts of State and State-sponsored bodies falling within the audit remit of the Comptroller and Auditor General (C&AG). This work entails examining the accounts and underlying records and transactions of those entities in order to ensure that
• the accounts properly reflect the transactions
• the transactions recorded in the accounts are regular – have been applied for the purposes intended and in accordance with rules governing them.
For each account an examination is also made of the internal financial control arrangements.

We at Public Inquiry would ask – Why was a state agency that has responsibility for signing off on the finances of a semi state body also investigating that same body? At a minimum there is a serious conflict of interest.

We would also call into question the C&AGs conclusion that “in general the funds of Bord na gCon were properly applied.” A look at just some of the more serious irregularities clearly contradicts that conclusion.

A building overseer was given authority over a €12 million redevelopment of Shelbourne Greyhound Park between 2000 and 2002 in the absence of the managing director due to illness.

When this overseer was in charge, control over the project was not being exercised by either Bord na gCon or its subsidiary, Shelbourne Greyhound Stadium Limited.

The same overseer was given a contract to manage security at Shelbourne Park without advertising or a recruitment process.

The same overseer organised a fraud (See Paschal Taggart’s comments at Appendix D) involving the purchase of a ‘new’ generator that cost €124,704 but which was subsequently found to be 20 years old.

The overseer had instructed the services consultant retained to manage the tender process to add to the list of those tendering for the contract a company of which he, the overseer, was a director. Not surprisingly, that company got the contract.

After discovering this fraud, Bord na gCon sought legal advice and were told that it would be futile to take the matter any further as there was insufficient evidence.

Despite the central part played by the overseer in this scandal the contractual relationship he had with Bord na gCon remains unclear.

Obviously, the overseer is the central character in all these activities but when I questioned a spokesperson at the C&AGs office I received a somewhat muddled response.

Why weren’t names named, the overseer, for example?
It’s our policy not to include names in our reports.
Who makes that policy?
It’s an office decision, an internal decision.
If I ask for names can I get them?
There are names at Appendix C.
But it doesn’t give the name of the overseer.
The overseer wasn’t examined, the overseer can’t be found.
He can’t be found? You must be joking?
We had no one to correspond with.
But this man played a major part in the fraud.
We were examining Bord na gCon; the overseer is not and never was an employee of Bord na gCon. As auditor of Bord na gCon, we’re not the police; we don’t go chasing people around.
But surely somebody in Bord na gCon must know who he is?
No, we went and enquired and, we know who he is, just can’t contact him.
Could you give me his name; I might be able to track him down?
I’d have to come back to you on that one.

Fortunately, through an impeccable source, Public Inquiry has learned that the infamous overseer is a Mr. Dan Lannon. The report says Mr. Lannon has “extensive experience in the construction industry”, which could mean a number of things, including possible conflicts of interest.

It is crystal clear that the C&AG has failed in his duty to ensure that transactions of public bodies are in accordance with legal authorities governing them. It is also clear that there are still many unanswered questions surrounding this scandal and that the report submitted by the C&AG is nothing more than a cleverly written whitewash.

Copy to:
Comptroller and Auditor General
Bord na gCon
Minister for Arts, Sports and Tourism

An appalling vista beyond contemplation

On the 27th July 2007 the Supreme Court found that Jim Flavin, chief executive of DCC, had committed the crime of insider trading. Apart from a pathetic and doomed to failure attempt by the ODCE to have Flavin disqualified as a director no other state agency or authority has acted against Flavin.

Even though insider trading is a very serious crime Flavin’s activities pale into insignificance when compared to the scandal of the State’s absolute refusal to act against Flavin and DCC. It is inconceivable in a functional democracy that such a blatant case of insider trading would remain unpunished.

The case is very important because it proves conclusively what this blog has always maintained – that Ireland is an intrinsically corrupt state. Broadly speaking, a corrupt state can be defined as one that fails to act when corruption is uncovered, where the state actively protects the corrupt. We have witnessed countless examples of such inaction and collusion over the past number of decades in this country.

The Flavin case is also important because it is so clear cut, there can be no fudging on this scandal. The Supreme Court decision was unanimous and unequivocal.

“Trading on secret or privileged information is now recognised for what it is – a fraud on the market.”

(Justice Niall Fennally).

In a non corrupt state such a decision by the highest court in the land would trigger an immediate and effective train of events that would see Flavin and other board members of DCC explaining their actions in a court of law. By failing to act the State is effectively protecting Flavin and the board of DCC from being brought to justice.

It is now ten months since the Supreme Court decision and nothing has happened. The entire regulatory/ law enforcement mechanism of the State is reacting like rabbits caught in the glare of a bright light.

Disturbingly, the body politic has had absolutely nothing to say about the scandal. For over a month I have been trying to have the matter raised in the Dail. The Green party fobbed me off by saying a question has already been asked and so there’s nothing more that can be done. Similarly, Fine Gael TD, David Stanton, has been unable, for one reason or another to have the matter raised.

The scandal has been widely discussed in the media; even RTE has begun to take proper notice. Unfortunately, all analysis and comment has focused on the narrow question of whether Flavin should resign or not.

There seems to be an unwritten but widespread assumption that if only Flavin could be persuaded to go everybody could go back to pretending that Ireland is a normal functional democracy.

Apparently, the suggestion that Flavin might be hauled before the courts is an appalling vista beyond contemplation.

Copy to:
DCC
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)
All political parties

Banana republic business ethics

Letter in today’s Irish Times.

Madam,

On July 27th last year the Supreme Court found that DCC executive chairman Mr. Jim Flavin had traded illegally on the stock market. Mr. Justice Niall Fennally said: “Trading on secret or privileged information is now recognised for what it is – a fraud on the market.” Profits of €85 million were made on the trading.

Since that judgment the Office of Corporate Enforcement has tried but failed to have Mr. Flavin disqualified as a director. Such a disqualification represents the minimum sanction available for such activities.

In your edition of May 20th Mr. Flavin is quoted as saying confidently that he intends to stay on until his planned retirement in mid- 2010. His decision has the full support of the board of DCC.

Also on July 27th, 2007, an American federal judge sentenced former Qwest Communications chief executive Joe Nacchio to six years in prison for insider trading. In addition, Mr. Nacchio was fined $19 million and had to forfeit $52 million in stock profits.

When the allegations against Mr. Nacchio first came to light he was treated like any other American citizen in the circumstances. The state investigated, he was tried before a jury of his peers and, when found guilty, was given appropriate punishment.

This has not happened in the Flavin/DCC case. Apart from the Office of Corporate Enforcement, no other state or law enforcement agency has acted against Mr. Flavin in response to the Supreme Court decision.

For so long as this situation prevails Ireland can rightly be seen as a country with standards of business law and ethics on a level with those of a banana republic.

Yours, etc,

ANTHONY SHERIDAN

Referendum Commission: We're neutral but will be intervening

According to the Referendum Act, 2001 the Referendum Commission has three principal functions.

To explain the subject matter of the proposed referendum.

To use all means at its disposal to publish the explanations to as many people as possible.

To promote public awareness and encourage people to vote.

At the launch (2nd report) of the Commission’s campaign of information on the Lisbon Treaty last Tuesday, its chairman, Mr. Justice Iarfhlaith O’Neill, reiterated these functions and was crystal clear on the strict requirement for neutrality by his office.

“We do not intend to engage in the debate, we see our role as explaining to the people what is in the proposal. We are not going to supervise, control or try to influence that debate beyond discharging our statuary function to explain what’s in the treaty.”

In the same interview, and in complete contradiction to the above statement, Judge O’Neill also said.

“We will be monitoring the debate to see what happens and if we feel that there is serious confusion or that people are being confused or misled in a serious way on issues arising directly out of the treaty we may then issue clarifying statements.”

The judge is, in effect, bestowing upon himself and the Commission extra powers not contained in the Act. He is not going to ‘supervise, control or try to influence the debate’ but he is going to monitor the campaign and intervene when the commission thinks it necessary to help the ‘confused and misled’.

The Commission has already given its ‘considered position’ on the question of tax and neutrality, two of the main planks of the No campaign. According to the judge these elements will not be altered by the treaty.

The Commission, to date, has not issued any ‘considered position’ on claims made by the Yes campaign. For example, Bertie Ahern’s assertion that those who vote against the treaty are lunatics.

It is reasonable to assume therefore that the Commission is in full agreement with this claim.

Copy to:

Referendum Commission

A rotten and intrinsically corrupt state

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)

Theft and fraud continues with impunity

“Help consumers to make informed decisions on their financial affairs in a safe and fair market.” (Dishonest claim made by Financial Regulator).

Irish financial institutions continue to rob and defraud consumers with impunity. The latest theft, by insurance brokers, involves a whole raft of scams including failing to fully disclose fees and charges, overcharging and selling consumers optional extras which they have not asked for. All these activities are banned under the Consumer Protection Code (Irish Independent).

The so called Financial Regulator has reacted as it always does; no charges, no fines and total secrecy on the names of the thieving companies. Consumers are not even to be told how many companies are thieving.

In other words; the criminal financial institutions are afforded full protection by the regulator while the consumer is kept in the dark and forced to take his chances in an extremely unfair and unsafe market. The only recourse consumers have is to treat all insurance brokers as suspect.

Copy to:
Financial Regulator
Professional Insurance Brokers Association

NCA – Please, stop that naughty behaviour

John Shine of the National Consumer Agency was on Drivetime (7th item) yesterday talking about a recent case of car clocking. This practice, which is prohibited by the Consumer Protection Act 2007, involves tampering with the odometers of used cars to significantly reduce their mileage readings.

According to Mr. Shine this lucrative criminal activity is widespread. In addition to being a major rip off, the scam could also pose serious safety problems for consumers.

We’ve been told for some time now that the NCA has new powers, that they are prepared to use them to protect the interests of consumers and Mr. Shine was clear; the NCA considers this kind of activity quite a significant problem.

So, what action did they take to protect the consumer when Orange Motors Limited of Limerick was caught in the act? Well, they politely asked the company to give a formal undertaking not to engage in such naughty activities in the future.

So, why didn’t the NCA prosecute these people? We find the astonishing answer on their website.

“While the NCA has power to prosecute the company for engaging in these practices, this could take some time, and, in the meantime, other consumers could be misled.”

I could make an attempt to analyse this idiotic statement but I don’t think my sanity could stand the test. This episode does, however, tell us a number of things.

The NCA is still a useless defender of consumer interests. It is a lightweight organisation hopelessly out of its depth in a sea of sharks.

Dodgy car dealers all over the country will be greatly encouraged by the pathetic efforts of this toothless tiger.

As for long suffering consumers – The will continue to be victims.

Copy to:
NCA

Pensions Board moves

Hallelujah; praise the Lord; break out the champagne – The Pensions Board is taking action against a construction company (Irish Time, sub req’d) (RTE, 4th item).

For more than fifty years construction firms have been bullying, robbing and generally abusing their employees while the Pensions Board wrung its hands (See here for details).

Mary Hutch is apparently head of investigations and compliance with the Pensions Board –surely the cushiest job in the country.

Here’s a brief but entertaining account of events.

The Board first suspected something dodgy was going on from a report in the media, effectively the company concerned was going under.

So, straight away we can say that the workers will not get justice and those responsible will not be brought to account.

When the Board informed the company of its intention to bring court proceedings the company did what construction companies have been doing for fifty years – Gave it the two fingers.

The judge dealing with the case, Ms. Mary Laffoy, said there was some urgency in the matter. Yes indeed, the need to tackle illegal activities within the construction industry has been ‘urgent’ since the 1960s.

Millions being robbed as State stands idly by

In absolute desperation, Paul Hansard chairman of SIPTUs Dublin Construction Branch; put his life at risk by climbing to the top of a 52 metre crane in order to highlight the pension rights of builders. Hansard is alleging that his employer, Gmac Scaffolding, is breaking the law by not paying pension contributions (Six One News, 9th item).

Hansard displayed a pay slip from a previous employer that had detailed all deductions and compared it with a pay slip from Gmac that did not itemise deductions or carry any mention of mandatory pension contributions.

“How could anyone expect the chairman of Dublin’s construction branch (SIPTU) to work for a non compliant contractor on a Government project? What chance have ordinary workers out there got? So I had to make a stand.”

His stand cost him his job and for good measure, Gmac also sacked his son.

This might seem like a minor industrial dispute and indeed it was treated as such by the media, especially RTE. But in fact what’s happening here is criminality on a massive scale. Criminality that politicians, police, unions and so called regulatory agencies are all aware of but do little or nothing to stop, criminality that has been going on since the 1960s.

By law, all building firms must register workers in the Construction Federation Operatives Pension Scheme (CFOPS) and pay pension and sickness contributions. The company share of the pension contribution is just over €6 per week. For this employees receive sickness benefits and a €65,000 mortality lump sum, payable to their families in the event of death.

The scheme is allegedly policed by the Construction Industry Monitoring Agency, the Pensions Board and the Pensions Ombudsman Paul Kenny.

So why did Paul Hansard feel the need to risk his life and livelihood in order to obtain his most basic rights when all these so called enforcement agencies are supposed to be working on his behalf?

The answer is simple – Ireland is a rotten and corrupt state where law enforcement is for the little people, where white collar crime has yet to be recognised never mind tackled.

Government agencies like the Pensions Board and the Pensions Ombudsman do a lot of talking but make very little effort to protect workers from white collar criminals.

Here’s a list of media reports that prove the point (My emphasis).

2004/13th January – Irish Examiner.

It is estimated as many as half the country’s 4,000 construction firms have illegally avoided their pension obligations since the scheme began in the 1960s.

An Irish Examiner investigation subsequently named and shamed some of the country’s largest firms and exposed them for ripping off workers. These included some of the country’s leading construction companies with lucrative contracts on major Government infrastructure projects.

2004/ 9th February – Irish Examiner.

Pensions Ombudsman Paul Kenny is to investigate the widespread abuse of pensions law in the construction industry.

Mr. Kenny said he was extremely worried that construction firms were failing to pay pension contributions for workers, with families being deprived of badly needed mortality benefits.

I would say this is an extremely worrying situation that people seem to have been able to ignore legal obligations,” said Mr. Kenny.

Up to 50,000 construction employees are being cheated of their pension and sickness benefits worth an estimated €35m annually.

Mr. Kenny said he was anxious to pursue any company responsible for seeing families lose benefits.

The survivors of anybody who dies on a building site or, indeed, anyone who should have been in that scheme who dies of natural causes are entitled to that benefit,” he said.

Mr. Kenny said he could investigate all cases of companies depriving families of mortality benefits going back six years to April 1996

2005/20th October – Irish Times.

The Ombudsman has signalled a tougher stance against construction industry employers, saying he will refer complaints where the law has been broken so that prosecutions can be taken.

Complaints received include failure to register employees; failure to pay over contributions already deducted from employees’ pay, which Mr. Kenny described as “theft and nothing more”; and unethical practices in which workers are forced to pretend to be self-employed.

Since its establishment in April 2003 up until the end of 2004, the Ombudsman’s office received over 450 official complaints and his office handled over 1,500 telephone queries. In 2004, the Ombudsman made 23 determinations, but only upheld seven complaints. So far this year, he has made 46 determinations, upholding 12 complaints.

A further 43 cases were also settled by mediation last year, with 33 per cent ending in some concession to the complainant.

2006/16th February – Irish Times.

Construction bosses are stealing at least €120 million a year from workers but “not one of them has faced any serious rigour of the law”, Socialist TD Joe Higgins claimed yesterday.

He was referring to the statement by the pensions Ombudsman that between 70,000 and 120,000 construction workers were being denied their legal and mandatory pension rights.

Taoiseach, Bertie Ahern said. It was a long-term issue and “having stronger legislation, a pensions ombudsman and proper investigation of the operation of pension schemes” were hugely beneficial.

2006/14th September – Irish Independent.

The Ombudsman also warns that construction firms which deduct workers’ pension payments and do not remit them to the scheme will be reported to the Garda Fraud Office for investigation.

“There are still depressing numbers of complaints about the failure of construction employers to register employees, or pay contributions or, worst of all, the theft by employers of contributions which have not been remitted.”

He made clear that builders would have to pay any pension arrears owing before new legislation came into force in July – and delay could cost them even more.

State authorities have the power to put an immediate stop to this outrageous abuse, theft and fraud. The legislation is there, the enforcement agencies are there and the State has full knowledge of the crimes being committed.

The obvious question is – Why isn’t the State acting against these criminals?

The answer is obvious to anyone with even the remotest knowledge of how things are done in this country.