Quinn Insurance fines – Suspicious

My first reaction to the news that Sean Quinn is standing down as director and chairman of Quinn Insurance following breaches of regulatory requirements is – Suspicion.

The punishment meted out to Quinn Insurance is what we would expect to see imposed by a real regulator in a functional democracy. And this is what bothers me – The Irish Financial Regulator doesn’t really regulate but rather acts as facilitator to help financial institutions get out of trouble.

We know, for instance, that for years the Financial Regulator stood idly by as various financial institutions robbed millions from consumers. We also know that the regulator strictly enforces draconian secrecy laws that are designed to protect the financial institutions to the detriment of consumers.

Last week, for example, I rang the regulator to confirm reports that the chairman of Anglo Irish Bank, Sean Fitzpatrick, was under investigation over allegations of insider trading.

I was firmly told that section 33AK of the Central Bank Act 1942 that was inserted by section 26 of the Central Bank and Financial Services Authority of Ireland Act 2003 prevented the regulator from answering my question.

This law and its strict enforcement protects Sean Fitzpatrick and Anglo Irish Bank but puts consumers and especially shareholders in Anglo Irish Bank at a very serious disadvantage.

Keeping all this in mind let’s look at some of the details of the Quinn case and how it was handled.

The Financial Regulator imposed a fine of €3,250,000 on Quinn Insurance and fined Sean Quinn €200,000 because it had

“reasonable cause to suspect that breaches of regulatory requirements occurred in relation to QIL.”

What? The largest fines ever imposed in the history of the State on the basis of a ‘reasonable cause to suspect’. Over the years the Regulator has had incontrovertible evidence of widespread fraud in the financial sector and failed to take any action whatsoever.

So what, according to the Regulator, was the great crime committed by QIL?

“These breaches related to contraventions by QIL of obligations under the Insurance Acts and Regulations, including failure to notify the Financial Regulator prior to providing loans to related companies.”

This seems pretty tame stuff in comparison to other breaches of the law throughout the Irish business world. For example, in 2004 the Director of Corporate Enforcement (ODCE) reported that directors and connected persons returned approximately €100 million in loans from their companies.

The law prohibits directors from taking loans from their companies in excess of 10 per cent of relevant assets yet some of these directors had potentially illegal loans in excess of €1million from their companies.

According to the ODCE:

“In a number of individual cases these loans were for substantial sums or represented a large part of the value of the company and were very substantially in excess of the permitted limits.”

To my knowledge no action was taken against any of these directors, they just paid back the money and all was forgiven.

I suspect that there’s more to all this than meets the eye, it’s all too pat. Substantial details are thin on the ground and the manner in which the whole matter has been dealt is very suspicious.

Quinn himself is far too relaxed in the face of such a massive fine, even if he’s a billionaire. The ODCE is also very coy about the whole matter, simply stating that he was informed of the regulator’s sanction.

Can we take a clue from Quinn’s auditors and lawyers when they say that there are no corporate governance issues? Could the imposition of these extraordinary sanctions be a cover for something even more serious? Time may tell.

Copy to:
ODCE
Financial Regulator

Musings while waiting for the Tsunami

Some musings on recent events

Minister for Finance, Brian Lenihan, said his budget was designed to ‘help the little people’. ‘Little people’ is an interesting choice of words, it suggests an aristocratic mindset of rulers and the ruled.

Lenihan said he wanted to protect the vulnerable. So, why did he attack the elderly, cut school class sizes, abolish the Combat Poverty Agency and slash the budget of the Equality Authority and the Human Rights Commission?

Lenihan had no problem helping out the ‘big people’. He gave about €1.5 billion to Fianna Fail’s property developer friends and pledged €485 billion (that we don’t have) to bail out the banks.

When Mary Harney was asked about imposing a 1% levy on the lower paid she said:

“We’re saying somebody on €10,000, yes a small salary, will pay €100 a year – we’re all in this together.

“The levy is on gross income and I do not think it’s unreasonable that somebody that earns €100 would pay one euro out of that towards the difficult challenges this country faces. I think we’re all being asked to make a sacrifice.”

This woman, who is paid (but doesn’t earn) about half a million per annum, has absolutely no idea what it’s like to survive on a poverty wage of €10,000.

Somebody mentioned during the week that politicians are paid ‘walk around’ money of €12,500 per year. Apparently, this is used to buy drink, raffle tickets and whatever else they like – to buy votes.

Of course, there’s nothing to stop politicians from keeping the money for themselves – there are no spot checks on the honesty of those who rule us.

Nice to hear though, that Harney, in her uniquely condescending way, is confident that the ‘vast majority’ of over 70s are honest and will hand back their medical cards if they’re earning above the rate.

But she did let slip in an interview that the HSE would be carrying out spot checks – just in case. The Mail on Sunday reported recently that the HSE was determined to severely punish any elderly citizen who tried to cheat the State by imposing heavy fines and, if necessary, jail.

Ah yes, the HSE. An organisation set up by Harney and now completely out of control. A bureaucratic monster responsible for immense suffering; that regularly puts the lives of citizens in danger in order to cover up gross incompetence. Can we be confident that this monster will hunt down and punish every elderly citizen that tries to cheat the State – Yes, we can.

It’s amazing to see how quickly the Greens’ have become totally assimilated into the Fianna Fail world of double speak and hypocrisy.

The sat at the Cabinet table and said nothing, they gave Lenihan a standing ovation when he delivered his ‘little people’ budget, they ran for cover when the wave of anger began to build and finally, when they realised which way the wind was blowing, they tried to return to principles and honesty. How pathetic is that?

Where are all those journalists and commentators who bowed down before the Great Cowen? This man, they said, was the Second Coming, Bertie, apparently was the first.

Cowen, they said, was a man of immense intelligence, a man not to be trifled with, a man who gave and demanded total loyalty, a man who modeled himself on Lemass; a man of action who was going to lead his country to the Promised Land.

Now we know that he’s just an ordinary backwoodsman Fianna Fail bluffer who, when the going got tough, legged it off to China to hide from the wrath of pensioners.

Feck, Joe Behan ???? Completely threw me, still haven’t got my head around the fact that a Fianna Fail TD could resign on principle and for the good of the country – Don’t think I ever will.

Final thought:

All this local excitement has distracted us from the global financial crisis, the full affects of which have yet to hit. Most other countries have recapitalised their banks, we haven’t because we don’t have the money. When the banks come calling we’ll be depending on the likes of Lenihan and Cowen to look after our interests.

We’re in a moment just like that before a Tsunami strikes. The sea is sucked out a great distance from the shore and people, in their ignorance and excitement, rush out to stare at beached fish flapping about. There’s absolutely no realisation of what’s just beyond the horizon.

Waiting for visionary leadership

”We still call for political reform to get rid of the current political system plagued with corruption and abuse of power.”

(Irish Examiner).

No, unfortunately, it’s not a call by Irish citizens but citizens in Thailand where former Prime Minister, Thaksin Shinawatra has been sentenced to two years in jail for corruption.

The red hot anger demonstrated by the elderly over the medical card debacle is impressive but it is focused on a narrow sectional interest. Once the politicians satisfy their demands the anger will dissipate and it’s business as usual.

Real change will never happen in Ireland until the people en masse realise that the entire political and bureaucratic administration of the country is seriously dysfunctional. And that will never happen until we see the emergence of a visionary and courageous political leader.

It’s worth noting that Thailand, in common with most countries, has a raft of laws for dealing with political and business corruption. The system they use is also common in most countries – police, prosecution, courts and appropriate punishment.

No such system exists in Ireland.

Some light relief

Young Paddy moved to Roscommon and bought a Donkey from a farmer for €100.00. The farmer agreed to deliver the Donkey the next day.

The next day he drove up and said, ‘Sorry son, but I have some bad news, the donkey died.’

Paddy replied, ‘Well, then just give me my money back.’

The farmer said, ‘Can’t do that. I went and spent it already.’

Paddy said, ‘Ok, then, just bring me the dead donkey.’

The farmer asked, ‘What are ya gonna do with him?

Paddy said, ‘I’m going to raffle him off.’

The farmer said, ‘You can’t raffle off a dead donkey!’

Paddy said, ‘Sure I can. Watch me.. I just won’t tell anybody he’s dead.’

A month later, the farmer met up with Paddy and asked, ‘What happened with that dead donkey?’

Paddy said,’I raffled him off. I sold 500 tickets at two euro’s a piece and made a profit of €898.00.’

The farmer said, ‘Didn’t anyone complain?’

Paddy said, ‘Just the guy who won. So I gave him his two euro’s back.’

Paddy now works for the Irish Government

An open letter to Minister for Finance

I received the following by email yesterday. I’ts an open letter to the Minister for Finance from Justine McCarthy. It’s worth reading.

Dear minister,

You told us not to be frightened. You said you would make the budget “as fair as possible”. You promised us you were going to challenge the vested interests and protect the vulnerable.

Did you mix the two of them up? Have the vested interests so roundly usurped the position of the vulnerable that you can no longer tell them apart?

If the budget is your answer to our problems, I can only say, on behalf of the old, the sick and the handicapped – to use a phrase your own party coined to maximum effect 21 years ago – thanks, but no thanks.

They say it’s an ill wind that doesn’t blow somebody some good. Tom Parlon was testament to that truism last Tuesday. After hearing you pledge eight different times in your Dáil speech that you were protecting the vulnerable, the OPW could have illuminated the Rock of Cashel with Parlon’s satisfied grin.

Now there’s a man who is delivering for his generous paymasters, having segued without statutory impedimentfrom managing the state’s property portfolio as junior finance minister to lobbying for the Construction Industry Federation. Parlon’s denies this is a blinding conflict of interest.

Minister, you gave the builders fillip upon financial fillip, using the first-time buyer as a fig-leaf. Their increased tax relief on mortgages, the lowering of stamp duty on commercial buildings, the tax reliefs for decontaminating docklands sites and the new restriction on Housing Finance Agency loans exclusively to new-builds amount to a sedative prescription for nervous property developers and speculators.

Next, you turned your attention to established homeowners and your motto was ‘if it moves, tax it’. It is no coincidence that the rich men who told you how to fashion the budget got their way while the elderly, the ill, the children and the socially marginalised got bled dry.

Seán Fitzpatrick, whose Anglo Irish Bank is a beneficiary of the citizens’ €480bn bank guarantee, said you should terminate universal state pensions. You did.

The financier Derek Quinlan, whose investment consortiums pushed development land and property prices to Monopoly levels during the boom times, said you should announce incentives to kick start the property sector. You did.

Tom Parlon told you to cut stamp duty on commercial buildings. You did.

And they are just the ones we know were bending your ear. You even indirectly acceded to the Small Firms Association’s callous demand that you cut the minimum wage by imposing the 1% levy without exception.

The demarcation between winners and losers that hallmarked the Celtic Tiger as indelibly as the gulf between rich and poor is more pronounced than ever after your budget. The ethic of the survival of the fittest continues to flourish.

It is bad enough that older people are left fearful and fretting about how they will manage to pay the doctor but worse is that ordinary decent citizens who have tried to live responsible lives have been made to feel they are a burden on their country.

An 83-year-old lady, who suffers from two chronic conditions and lives alone but whose income is a paltry sum above the eligibility threshold for the medical card, said: “I think they’re trying to kill us with the stress of it all. That way, they’ll save a few quid.”

It might sound melodramatic to you, minister, but the likelihood is that people will die avoidable deaths as a result of this budget. Not everyone will be lucky enough to live to regret it. Ireland already records a 21% surge in winter deaths; between 1,500 and 2,000 people, or virtually double the incidence they have in Finland.

Most of these deaths are caused by cardiovascular and respiratory illness. After your predecessor introduced the medical card for everyone over 70 in the 2001 budget, an academic study threw up some interesting observations.

One was that possession of a medical card prompted people who were previously reluctant to go to their GP to do so. The other was that it did not make those who had the card go to the doctor more frequently. In other words, they did not abuse the facility.

Unlike, say, members of the medical profession with whom your colleague, the minister for health, negotiated the financial terms of the scheme, conceding such lucrative terms as to make you deem it untenable. So the doctors creamed it, and the elderly got punished.

The medical card provided an entry to a comprehensive community healthcare network for older people who are often intimidated into passivity by fast-paced modernity. It was an encouragement to look after themselves; something invariably absent when someone lives alone and does not want to be a bother to anyone.

According to Age Action Ireland, the people they represent are expert at developing coping mechanisms to deal with their financial situation. They go to bed early and get up late to save money on light and heating. They eat less than they should. They wear inadequate clothing.

There are 121,000 pensioners residing on their own. The living-alone allowance was designed specifically to protect these people from dangerous isolation.

Do you know what the living alone allowance is, minister? It is €7.70 a week. It has not been increased by a minister for finance since 1996, throughout all those years of squandered slap-ourselves-on-the-back prosperity.

There are people in their 70s and their 80s and their 90s, living alone with a small independent income to supplement their state pension who will now pay the 1% emergency levy along with the increased tax on their savings and, having lost their medical card, will be subjected to the €100 A&E charge and the 20% rise in hospital bed fees.

If they have medical insurance, the cost of that will go up 6% because of the hike in hospital charges. If they are admitted to a nursing home for long-term care, the exchequer will take 15% of the price of their house and call it a “Fair Deal”. You know, sometimes it is quite a challenge to feel patriotic love for a country that would do this to its people.

Speaking of patriotism, let’s examine this cherished value. Ireland is supposed to be a republic. That means its principal ethos is equality but, in reality, we gave up pretending a long time ago.

Eight years from now, the state will celebrate the centenary of the Easter Rising when Pearse and his compatriots envisaged in the proclamation that all the children of the nation would be treated equally. I can only imagine how mortified our patriots must be in their graves.

One of the most shameful legacies of the Celtic Tiger is Ireland’s 22nd place ranking for child poverty of 26 of the world’s richest countries in an ESRI report from December 2006.

Your solution, minister, was to give no increase whatsoever in child benefit and, moreover, to abolish benefit for 18-year-olds, the age when teenagers are recognised as being most prone to poverty.

These decisions represent a fundamental and seminal shift in Ireland’s attitude to its once cherished children. People are already holding their breath for your announcement that the child benefit that remains is to be taxed.

Your budget was so packed with landmark departures from erstwhile core values that many of them have slipped through almost unheeded. Because of the collective anger over the treatment of older citizens, the total abandonment of the long-articulated commitment on maximum class sizes for primary school children has barely been mentioned. So too with the deferred implementation of the Education for Persons with Special Education Needs Act.

You might, minister, have hoped that, at this stage, nobody was going to notice the 1% cut you announced in funding for voluntary disability bodies. That, however, isn’t even the half of it.

The HSE already imposed a 1% funding cut on the same organisations this year. When the deficit naturally arising from inflation is added, the true loss to the disability sector is 4-6%.

One of the starkest consequences of your budget is that those who were already treated as voiceless in our society will now become invisible too. The erosion of the Equality Authority and the Combat Poverty Agency, among others, will exacerbate inequality in our already unconscionably unequal society.

Yet, while the establishment is content to dispense with egalitarianism, it cynically uses another pillar of republican ideology – namely, fraternity – as a rallying call.

If you thought the cabinet’s 10% pay cut would shame everyone into following suit, it’s not going to work. Hard lessons have been learned about political cynicism since last we were in this economic hole.

The last time a politician went on television and told us to tighten our belts his name was Charlie Haughey and, unknown to us then, he was living off the beneficence of rich and powerful men.

While he was shopping for monogrammed silk shirts in Paris, we were donning our hairshirts. The last leader of Fianna Fáil, Bertie Ahern, eulogised Haughey’s patriotism at his graveside. Since then, Ahern’s own relationship with his country has come under the microscope in Dublin Castle. So don’t blame the citizens, minister, if you find your call to patriotic duty goes unanswered.

The trust that made us so acquiescent in the 1980s no longer exists. Nor is it about to come rushing back in light of your disingenuous announcement that you and your cabinet colleagues are taking a 10% pay cut.

What you failed to mention was that your €12,000 unvouched expenses – your ‘walking around money’ is not included in that or that your fabulous pension entitlements will continue to be calculated on the basis of the salary you were being paid before the budget.

Perhaps if politicians had vowed to work harder (I mean more than the 90-odd days you turn up in the Dáil in a year), if Enda Kenny had promised to provide an effective opposition and if you had sought ways to make real, lasting economies in the Oireachtas, you might have got a more enthusiastic response to your green-flag clarion call.

Instead of TDs claiming expensive accommodation expenses for attending the Dáil, why not adopt the Swedish model by accommodating deputies and senators in a dedicated Oireachtas hostel. I’m sure one of your builder pals would have a convenient place to sell you at a reasonable price.

One other thing, minister: could you not think of any ways to make the very rich contribute their fair share, having benefited so handsomely from the good times? Why did you not, for instance, impose a 3% levy on people with income exceeding €300,000, 4% for income exceeding €400,000, and so on?

Did you consider reintroducing probate tax on wills worth over a specific value, something on a sliding scale that would reflect the emergence from the Celtic Tiger of an inheritance class? Did any of your advisers recommend closing the ‘Cinderella’ loophole in the tax residency law that deprives the exchequer of millions upon millions of euro?

It would appear not. The solution you came up with was a €10 airport departure tax for Joe Citizen while Mr Moneybags flies out free gratis in his private jet.

You will be relieved to know, minister, that the single most unedifying spectacle of the entire budget was the sight of your backbenchers leaping to their feet at the end of your budget speech to raucously cheer you to the rafters.

Unless they do not read newspapers and listen to radio and television, Fianna Fáil backbenchers will have known as well asthe rest of us that the abolition of the medical card for people over 70 was being floated well in advance of the budget. Not one of them said boo.

It was only when they realised their constituents’ anger might jeopardise the security of their Dáil seats that they manfully revolted. These were the same backbenchers who drooled over the show of macho defiance by your predecessor, Charlie McCreevy, when the ESRI tried to warn him in 2002 that fiscal caution was required. His way of thanking them was to ridicule them as “pinko-liberals”.

You know, minister, if we had seen true patriotism being respected in recent years, we might be better disposed to donning the green jersey. But what we saw was naked cynicism bolstering naked greed.

Last year when, again, the ESRI raised concerns about the direction of the economy, Bertie Ahern, as Taoiseach, made a novel suggestion of his own. He told the economists to go off and kill themselves.

Forgive me if I sound dispirited. I am.

Justine McCarthy

A flawed and deadly assumption

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

Doctor's greed defended by Fine Gael

Fine Gael health spokesman Dr. James Reilly just couldn’t bring himself to admit the reality of his situation on the Marian Finucane Show on Sunday.

It was Dr. Reilly who negotiated the grotesquely greedy deal that saw doctors receive €640 for every patient over the age of 70. Now he’s trying to condemn the Government for attacking the elderly while at the same time defending his part in the deal.

When asked did he think the fee was a valid one he replied:

“I do because it works out at €55 per patient per visit and that is not excessive in my view.”

This was a cynical attempt to suggest that the fee is dependant on patient visits. In fact the €640 is paid whether or not a patient visits. I assume the €55 fee Reilly mentions is an additional fee for every visit making the deal even more objectionable.

On Liveline during the week another doctor moaned about overheads in an attempt to justify the greed. A doctor’s receptionist told me recently that her pay is so low she qualifies for a doctor only card.

Reilly would be better advised to come out straight and admit that doctors, like most other professions in Ireland, have lowered their moral standards in exchange money.

Copy to:
Dr. Reilly