9 June 2015
Pearse Doherty TD speaking in Dáil to motion on IBRC Commission of Investigation
THE FOLLOWING is what Sinn Féin TD Pearse Doherty read into the Dáil record on Tuesday evening during the debate on the Commission of Investigation into IBRC*.
For weeks now this controversy has rumbled on with the Government stumbling from poor decision to poor decision.
We have seen an unprecedented legal situation which saw most of the state’s media afraid to report what a representative of the people here said in the parliament of this state.
We have seen a government in crisis failing to grasp the nettle time after time. We have seen an initial inside job with KPMG in charge of the investigation dropped after public anger forced the hand of the Minister and the hand of the Taoiseach.
We have seen a blundering Taoiseach throwing out suggestions that were never practical or even legal, like asking the Comptroller and Auditor General to investigate these matters. Now we have this attempt to set up a new investigation.
Unfortunately, the terms of reference fall short of what is necessary to win the support of the public and of Sinn Féin.
Yesterday, Deputy Mary Lou McDonald told the Minister for Finance that it was critical that the investigation be empowered to look at the dealings at IBRC post-liquidation in February 2013. We are disappointed that you didn't listen.
My colleagues will outline some of those concerns in greater detail in their speeches.
Today I want to concentrate on why the terms of reference need to be extended after 7 February 2013. Three years ago, I asked the Minister why IBRC agreed to write-down the debts of Siteserv by €100million while at the same time ordinary shareholders were paid €4.96million as part of a deal to sell the company. The Minister replied that it was a matter for the board and management to determine and implement such policy in their organisation and that commercial decisions in relation to IBRC were solely a decision for the bank.
Since then, Sinn Féin has asked hundreds of parliamentary questions relating to the establishment of IBRC, the actions of IBRC, its liquidation and the appointment of the special liquidator from KPMG.
We have said from the start that IBRC was no ordinary bank. The public funding that its core elements received – that is: Anglo Irish Bank and Irish Nationwide – meant that Irish citizens deserved answers to its operation. It has taken the Minister all this time to accept what was obvious back then and what is obvious now: that there is a public interest element to IBRC. And thanks to Deputy Catherine Murphy and her pursuit of FOI requests we now have before the House the terms of reference for an inquiry into certain aspects of IBRC.
It is important to point out at this juncture that I am not making any allegations of wrongdoing or incompetent governance at IBRC. And I have no wish to pre-empt or pre-judge in any way the findings of any proposed inquiry.
What we do have at the moment are facts. There are things that we know took place. The conclusions we may draw from them are for another day. This is about asking legitimate questions and the facts on the ground serve to inform those questions. So in this regard it is important that we know the facts, and that the facts are put on the record in order to help to frame the terms of reference of this proposed investigation.
There has been much commentary on the issue of the sale of Siteserv, both inside and outside the House. There have been concerns raised regarding the payment to shareholders, the size of the write-down received, and the apparent exclusion of other bidders.
The issue of Siteserv is covered by the terms of reference as laid out today before the House because Siteserv is a decision that deals with losses or possible losses during the relevant period. However, the issue of management decisions made during the tenure of the liquidators – decisions that could bestow on individual borrowers certain advantages – are not covered by the terms of reference (as they currently stand) beyond 7 February 2013.
For example, already-existing loans and the extension of such loans can also in some cases give rise to certain advantages for individual borrowers. I think we need to put this into context.
The person whose loan has expired, for example, the bank can put a call on that loan, requiring the borrower to pay the loan in full. Failure to pay that loan – for whatever reason – allows the financial institution access to the assets which underpin or which are secured against the loan, whether those assets are shares in companies, physical infrastructure, or personal guarantees.
Since the financial crisis of 2008 we are now all-too-familiar with how financial institutions have pursued this avenue, leaving many individuals bankrupt and stripped of their companies, sometimes right down to the family home. However, these type of management decisions which were made (or not as the case may be) under the tenure of IBRC will not be covered by the inquiry if these decisions were taken after 7 February 2013.
So this inquiry shouldn’t be just about losses and interest rates. It should also be about processes and relationships. The ability to have a decision deferred, a loan extended, terms changed and amended – these are all areas that are open to possible advantage.
If I may, I’d like to give some examples as to why managerial decisions and client relationships need to be covered by this inquiry, not just up to 7 February 2013 but beyond.
Only last week, in IBRC board minutes released by the Minister’s department, we saw that Richard Woodhouse, who managed Mr O’Brien’s loans with IBRC, was present at a meeting where the sale of Siteserv was discussed. The former Chairman of IBRC said that Mr Woodhouse played no part in the decision-making process around the sale of Siteserv.
In recent days, a series of documents have come into my possession which help to give a more complete assessment of issues relating to IBRC, to Siteserv and related matters.
Back in 2012, Denis O'Brien, the eventual owner of Siteserv had an agreement with IBRC whereby the bank “would receive 92.02% of all Digicel dividends in excess of 50million dollars” as part of a loan repayment agreement.
In that same year, there was a once-off dividend distribution of 300million dollars. The bank received a scheduled payment of 150million euro, which equated to 65% of the dividend distribution. The balance was then used by the owner of Siteserv to pay down a Bank of Ireland facility which had been used to fund the Siteserv deal. This was all approved by the IBRC’s Group Credit Committee.
In other words, we seem to have the terms of a loan agreement with IBRC being used to pay down a loan related to Siteserv but with another bank.
And there are other documents I have seen which lead me to ask legitimate questions of the way that IBRC was being run in the public interest. For example, in the documents I have seen I have seen letters and documents which outline details of this individual’s loans with IBRC, with four different proposals.
In a letter dated 7 March 2013, this individual requested approval for a proposal to repay his facilities over a three-year period with scheduled capital repayments. The request was discussed by the Case Team with Special Liquidators of IBRC.
On 17 March, an email was sent to this individual which advised that facilities could only be extended for up to 12 months, and only then if it was considered beneficial to do so in the context of asset protection and enhancement. This was Rejection Number 1 for the borrower.
On 26 April 2013, this individual requested a formal approval to extend his facilities for 12 months, to 30 June 2014, with no capital repayments. On 20 May, the Group Credit Committee approved a 12-month extension subject to a €100million capital repayment on or before 30 November 2013. This was a de facto second rejection of Denis O'Brien’s proposals.
On 21 June, the individual in question responded with a proposal for a one-year extension on his loans with a capital repayment of €100million in November 2013. This was rejected outright by the Group Credit Committee on 4 July 2013.
Rejection Number 3. The loan facility was expired at this stage. With no new agreement in place, and with his loan facility expired since 30 June 2013, it appears that Denis O'Brien faced the possibility of having his loan sold to a third party.
In August, the individual met with the Case Team and at this meeting the documents say he made it clear that he had a verbal agreement with Richard Woodhouse and Michael Aynsley which pre-dated the liquidation of IBRC. The individual said that this verbal agreement allowed him to repay his loans over a three-year period beginning in 2012. It was his view, and the view of his lawyers, that this verbal agreement still stood, even though the bank was now in liquidation.
In September, Denis O'Brien and his advisor met with the Special Liquidators at which they made it clear they would not commit to any capital repayment for a 12-month extension.
Although it is not clear from the documents I have seen as to the exact date of the following, the documents also say that Denis O'Brien made it known through his “advisors that he was not prepared to enter the process of having his loans sold on with an expired loan facility and so was likely to issue protective legal proceedings seeking an order for specific performance which would require the bank to honour the alleged three-year term on his facilities”.
Denis O'Brien made a fourth proposal to IBRC (on 10 October 2013) for a 12-month extension with no capital repayments which was, according to the document I have, it was approved on 14 November 2013. This was for a loan of in excess of €315million with a margin interest rate of 3%, amounting to €10million per annum.
The bank and special liquidators concluded that it was regrettable that it was not able to achieve consensual agreement from the borrower to maintain the expected repayment schedule by delivery of a further €100million capital repayment given the impending loan sale and the bank’s inability to extend facilities beyond 12 months.
How does a bank in liquidation create what is essentially a new €315million loan which its Group Credit Committee had rejected just a number of months earlier? Why didn’t IBRC place a call on the now expired loan? How did the verbal agreements between certain managers prior to liquidation outweigh the decision of the Group Credit Committee?
From documents I have seen, it appears that IBRC’s former Chief Executive, Mike Aynsley, along with Richard Woodhouse, made a verbal agreement with Denis O’Brien to give him an additional three years to pay off his loans with the bank. This is the same Richard Woodhouse who was present during the discussion of Siteserv. It is clear from the documents I have seen that Mr O’Brien did not wish to have his loans sold on to a third party but instead wanted a 12-month extension in order to work out the loan himself.
All of this, apart from Siteserv, took place after 7 February 2013 and because of this would not be covered by the terms of reference as presented this evening to the House. Minister, this is just one example why the terms of reference need to be expanded into the timeframe of the liquidation and KPMG.
This is a €315million that is extended and is the same as issuing a new loan being issued on the basis of an apparent verbal agreement despite its rejection on three separate occasions by the Group Credit Committee of a version of the same proposal? How is this not relevant to the inquiry?
There are many other areas that Sinn Féin have raised in relation to Blackstone, Blue Ocean, NAMA bonds, Racing Post, and governance issues. And we will argue strongly for their inclusion. Not once, not twice but three times you have made a mess of this. Minister, Taoiseach, Tánaiste – the public deserve answers. They demand a full and complete investigation.
You have fumbled and stumbled to this point. The public pressure and the work of the Opposition has brought you this far. But we are not there yet.
Given all I have just said I believe it is clear why Sinn Féin’s amendment is necessary. Let’s get this right once and for all. The Commission must be allowed look at deals and issues post the liquidation of IBRC. Public interest does not stop in February 2013.
We are talking about billions of the people’s money. My party wants the whole story to come out. We cannot say at some arbitrary point “here ends the story” – we must look at the whole story and that means examining some of the issues I have raised today which are beyond doubt in the public interest.
Minister, I call on you to support my party’s amendment and let every transaction of public interest be brought into the light.
What we have before us is not good enough and will not satisfy the people’s right to know what happened to their money.
*Motion re Commission of Investigation (Certain matters concerning transactions entered into by IBRC) Order 2015
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