Category: Banks & Finance

AIB – most corrupt?

Sensationalism is the second charge that the “Saint’ over at The Dossing Times makes against me.

‘I accept that Irish Corruption is solely about Corruption and is wee bit partial to the odd bit of sensationalism. (‘AIB, the most corrupt bank in Ireland“) I mean how does one know that for sure. Its like saying Roy Keane the Greatest Irish Player there ever will be.).’

While the Roy Keane analogy leaves me a bit puzzled, I am totally amazed that anyone could doubt the claim that Allied Irish Banks is the most corrupt financial institution in the State. Here are just a few figures (from recent times) to back up the claim.

€90 million – DIRT fraud.

€34 million – Foreign exchange fraud

€3.4 million – Trust customers fraud

€1.4 million – Student overcharging fraud

Not to mention the executive’s offshore tax-dodging scheme and the recent Prime Time special (This programme is well worth watching) where AIB staff outlined (through an actor’s voice) how they operated a long-standing, well planned criminal scheme that successfully robbed millions directly from customer accounts.

I would be fascinated and delighted if readers could come up with facts and figures that would establish another Irish financial institution as more corrupt than AIB.

I can only conclude that the “Saint’ is not Irish, lives in some remote part of the planet and is therefore unaware of the criminal record of Allied Irish Banks.

Legal actions, dodgy dealings and resignations

2005 ends on a note of high irony. AIB, the most corrupt bank in Ireland, is taking a 500 million dollar action against Bank of America and Citibank resulting from the 691 million dollar trading fraud at its former US subsidiary, Allfirst, in 2002.

Among other things, AIB is complaining of “unjust enrichment’. This, from a bank that has itself, raked in millions from a whole series of “unjust enrichment’ scams.

The Fyffes insider trading case has shone a light on some very dodgy activities in the murky world of the Irish financial sector. For example, it seems that Mr. Tom Healy, CEO of the Irish Stock Exchange was passing information to a Mr. Flavin, a man who the ISE had reported to the Director of Public Prosecutions as a suspect in insider trading.

The first reaction, as always, is denial.

‘I would be happy to see the whole issue go away”

, Mr. Healy is quoted as saying when things started to get a bit hot for him.
We are at the second phase now – Silence. ISE is refusing to make any comment on the matter.

All those involved will be hoping that by January, the whole thing will be forgotten about, and they are probably right. But, sooner rather than later, we will hear about the ISE again – why?

Because there are an awful lot of very greedy/ruthless people out there and the ISE is just one of the many so-called Irish regulatory bodies that are incapable of doing their jobs effectively.

I see poor old Antonio Fazio; governor of Bank of Italy has finally resigned. And what great crime did this man commit? He allegedly favoured an Italian bank in a takeover bid and may have dabbled in some insider trading.

In Ireland he would have been promoted and be first in line for entrepreneur of the year.

HAPPY CHRISTMAS AND A PEACEFUL NEW YEAR TO ALL

Two laws

After every horror involving child abusing priests (and there has been many) there is much wringing of hands and promises from the State and Church about accountability and bringing in laws to protect children.

When public anger subsides, however, the church and State usually revert to form – putting the interests of the church above the protection of children. The recent Ferns case is no different.

According to Colm O’Gorman director of One in Four, the Catholic church has produced guidelines that essentially will continue to protect the church and leave children open to sexual abuse.

‘Within the very policies they have issued today, they have one set of rules for those working within the church and another set for the rest of us. If an allegation is made against somebody working within church they adjudicate as to whether or not to refer to the civil authorities’

This system of protection for the church is similar to that afforded to solicitors and financial institutions, especially the banks. A filter is how Ken Murphy (President of the Law Society) described it on Liveline last Friday.

This is how it works. If an ordinary citizen rapes a child, robs a client or steals from a customer, they are immediately subject to the law and if found guilty, usually end up in jail.

Under the Catholic Church filter, the local Bishop will decide whether or not the civil authorities should be informed. To date, nearly all decisions have favoured the Church rather than its victims.

Solicitors operate a system of filters that gives them virtual immunity from the law. If a solicitor robs his/her client of thousands, the whole case is dealt with by other solicitors, behind closed doors. Neither the State, courts nor police play any part whatsoever.

The rogue solicitor can present all the evidence he wishes in his own defence in front of his own peers. The impression I picked up from last Friday’s Liveline is that the victim is afforded no such opportunity.

In addition, the Law Society operates virtually as a secret society. For example, try to find out how many solicitors have been reprimanded, fined or struck off in the last five years or just for the fun of it ask for access to the society’s annual reports – you’ll be waiting.

The filter for financial institutions comes in the guise of The Financial Regulator . Most people think that the regulator is there to protect citizens from the excesses of the financial world – Wrong. The regulator exists to protect the financial institutions, not Joe Bloggs. Here’s just one of many examples.

259 cases of overcharging have come to light since May 2004, involving 32 financial institutions. None of the offenders have been punished and all their identities are kept secret by the regulator. All they are required to do is repay the money overcharged/stolen.

This policy of secrecy is of enormous benefit to the financial institutions but puts the citizen at a great disadvantage in that he doesn’t know who the “cowboys’ are.

The only real protection the ordinary punter has from these so-called pillars of society is investigative journalism or whistleblowers.

So, the message is – if you want virtual immunity from the law, become a priest, banker or solicitor.

Irish (Banks) Mafia

Last night, RTE Television broadcast a Prime Time Special on the subject of ‘overcharging’ by Irish banks.

Over the last couple of decades, Irish banks have robbed millions from their customers and the State. Despite this, neither the State nor police have ever shown any serious interest in bringing those responsible to justice.

Take for example, Allied Irish Banks, the biggest financial institution in the State. This bank is permitted to carry out its own investigations into itself. It also operates its own court system whereby AIB ‘citizens’ who are found guilty of infringing bank ‘laws’ are appropriately punished. The State plays no part in this ‘justice’ system.

Incredibly, AIB also operates its own quasi police force ‘The Irish Business Ethics Unit’. The following is taken from the Sunday Business Post reporting on the latest scam being investigated by this ‘police force.’
(Do the tactics employed by this unit bring any particular historical era to mind?)

The new inquiry (conducted by AIB) relates to claims that AIB branches deliberately changed FX rates on a daily basis during the 1980s and 1990s at customers’ expense.

The Sunday Business Post has learned that AIB compliance officers from its Irish business ethics unit have conducted interviews at its headquarters in Bankcentre in Ballsbridge, Dublin, in recent weeks.

Former senior executives and current staff members were quizzed for up to two hours last month and were warned that any future tribunal of inquiry could use the evidence gathered as part of the investigations.

Those questioned were sworn to secrecy and were not offered union or legal representation. Staff and former executives were urged during the interviews to identify managers who allegedly encouraged the altering of FX rates. They were shown pieces of paper and asked if those named were responsible for the practices.

The so called Financial Regulator plays only a peripheral role in dealing with these activities. To date, the regulator has shown no interest whatsoever in taking effective action against criminal activities in the Irish banking sector.

The sheriff is not for the good guys

BANKING Rottweiler Liam O’Reilly still doesn’t trust the banking sector not to get up to mischief again. “There’s an old saying. Trust . . . and verify,” he smiles.

The above quote is from an interview with the Financial Regulator’s chief executive, Liam O’Reilly in last Sunday’s Independent .

Anyone unfamiliar with the fact that Ireland is a corrupt state might get the impression that O’Reilly is an Eliot Ness type figure relentlessly pursuing the corrupt and protecting the interests of honest citizens.

An analysis of the article will clear up any such misconceptions.

AIB will have more reason than most to cheer O’Reilly’s impending retirement from the Financial Regulator’s office, having been hit for €34m after the forex rip off

AIB were not hit for €34m. They were not hit for anything. The €34m in question was the amount they stole from their customers and that’s all they were required to pay back.

At the time the Financial regulator did not have the power (even if it wanted to) to impose any punishment on AIB because the civil servants who established the organisation did not provide for any such power. This is like a car manufacturer designing a car with no petrol tank – in other words, gross incompetence.

There was always a very clear determination by (AIB chairman) Dermot Gleeson and the board to sort it out. It’s not to say that in this room that there weren’t some very hard and tough conversations. But it was always businesslike. It was never personal,” he says. “A bit like the mafia.

Unwittingly, O’Reilly hits the nail on the head here. ‘A bit like the Mafia’ Can you imagine the Securities Exchange Commission (SEC) the American equivalent of our Financial Regulator, inviting Enron into the office to “sort out” allegations of very serious corruption? All done in private with no police involvement.

In the US, the police and SEC were involved from the start. Everything was done in public and through the courts, in other words justice was seen to be done. Our Financial Regulator operates, for the most part, in secrecy. This policy benefits the corrupt and damages the interests of ordinary citizens.

On the Cologne Re corruption, O’Reilly is quoted as follows.

“We were on top of that from day one…”We were quietly moving on it.’

Quietly is the operative word here. The Australians and the Americans immediately initiated legal action, keeping their public (customers) fully informed of events while our Financial Regulator kept things quiet preferring to merely “monitor” the situation. This is despite the fact that the corruption originated in Dublin’s IFSC centre. No wonder the New York Times labeled the IFSC “the financial wild west”.

‘Up until May of this year the regulator had secured over €69m in refunds for consumers’

‘In refunds’?? The consumer, somehow, is supposed to be grateful that the regulator managed to get refunds for stolen money. No fines, no police involvement, just quietly refund the stolen money.

‘Some 32 institutions have been nailed for 259 cases of overcharging since May 2004.’

What does O’Reilly mean by “nailed’?? None of these institutions were punished in any way whatsoever for their corruption. All of them are protected by the regulator through a policy of secrecy. This secrecy puts the ordinary citizen at a serious disadvantage in that he is unaware that he may be dealing with an organisation that has a record of stealing from its customers.

‘Perhaps AIB won’t be the only bank who’ll be happy to see the sheriff leave town.’

AIB were never afraid of O’Reilly nor do they care who replaces him. They are safe in the knowledge that his successor will maintain the policies that have always protected the financial institutions at the expense of ordinary citizens.

That’s how things are done in the financial ‘wild west’ sector in Ireland

Bank fraud v Welfare fraud

Still no accountability on the massive and well planned theft by National Irish Bank during the 1990s. The State’s corporate enforcer, Paul Appleby is still trying to get a number of NIB executives disqualified from working as senior company managers. The judge hearing the case adjourned until Thursday to consider issues raised by NIB executives.

It is interesting to observe the language used in reports about white collar crime and that used when reporting on social welfare fraud. The NIB executives who organised the theft of millions from their own customers and the State are merely referred to as being ‘involved in a number of improper practicesâ€?. When it comes to reporting on social welfare, however, there is no hesitation in using words like, “prison’ “fraud’ “criminal’ and “prosecution’.

For the record, 259 criminal prosecutions were taken against social welfare recipients last year with 36 of them going to prison. The total amount involved was just over €1 million. Hundreds of millions have been stolen by the banks in recent years but not a single bank official has even been charged never mind serve time.

Irish/Italian accountability

The ongoing case involving the Bank of Italy’s governor, Antonio Fazio makes an interesting comparison with how things are done in the Banana Republic of Ireland.

Fazio is facing questioning by magistrates for allegedly abusing his position by favouring Italian banks over foreign banks. If Italian standards of investigation and accountability were applied in Ireland, there would be dozens if not hundreds of Irish executives and politicians in jail.

Let’s just compare the Italian case with one of the hundreds of corrupt practices uncovered in the Banana Republic in recent years.

Irish banks and other financial institutions robbed hundreds of millions from the State through a well organised fraud involving DIRT tax. The Central Bank, Dept of Finance, Revenue Commissioners and various Ministers for Finance all knew that this fraud was in operation. Indeed, Revenue actually facilitated the fraud by issuing a memo that specifically prevented its own officials from checking the banks.

When the media (the only effective regulator in Ireland) uncovered the fraud, the banks were only required to pay back a portion of the money stolen, with some interest. No police, no magistrates, no courts, no jail, no accountability.

In Italy, Fazio is merely accused of favouring an Italian bank over a foreign bank in a takeover bid. For this he could be facing a three year jail sentence. In Ireland, this kind of activity would attract praise and promotion.

But most astonishing of all for Irish citizens, used to living in a state without integrity or accountability, is to witness the Italian Economy Minister, Domenico Siniscalco, resign in protest over the scandal saying that Italy’s reputation was being damaged.

Still waiting for action

I see Paul Appleby, the so-called State’s corporate enforcer (An impressive title for a toothless authority) is still in the High Court trying to get disqualifications for the criminality at National Irish Bank during the 1990s.

It is over a year since the inspectors report on this criminality was published, seven years since the criminality was uncovered (by a whistleblower and the media) and nearly a quarter of a century since the fraudulent schemes were first hatched at NIB and we are still waiting for even one bank official to be made accountable.

Banana Republic

One of the dangers of living in a banana republic where corruption is endemic at all levels of society is the tendency to slip into an ‘Alice in Wonderland’ mindset. An article by Claire Shoesmith in last Friday’s Irish Times about ethics in business serves as a good example of this phenomenon. In making her case, she compares recent financial scandals in America and Ireland. The first thing to notice is her use of language. Ms. Shoesmith describes the Enron and Worldcom scandals in America as:

Corrupt organisations, run by fraudsters who lined their pockets with millions of dollars while destroying billions of dollars of investors’ money’?

In contrast, here’s how she talks about scandals in the Irish financial world:

AIB and National Irish Bank, have played their part in eroding public trust in the financial sector and, in turn, prompted calls for tighter rules on corporate governance and increased scrutiny on individuals within the industry.

So, financial criminality in the US is described as corrupt organizations run by fraudsters while in Ireland stealing millions from the State and customers merely amounts to a factor in the erosion of public trust. Another elephant in the room that remains completely unnoticed is the consequences for the fraudsters when caught.

Ms. Shoesmith gives some examples from the US: Bernie Ebbers of Worldcom: 25 years in jail. Kenneth Lay of Enron: Awaiting trial. Denis Kozlowski of Tyco International: between eight-and-a-third and 25 years in jail. These people, and many others, found themselves in deep trouble because of their corrupt activities. Regulatory agencies, the police, the courts all became immediately involved and made sure these people suffered the consequences of their actions.

In the Banana Republic of Ireland, this does not happen. The examples used by Ms Shoesmith, AIB and NIB, will suffice to make the point. For 17 years, National Irish Bank (NIB) robbed millions from the State and its customers in well organised frauds. When this major criminality was uncovered (by the media), there was no police investigation, no arrests and no mention of trials or jail sentences. Instead, two High Court Inspectors were appointed to investigate. It took them six years, yes, six years to produce a report. The report was greeted with the usual shock and horror and promises were made that this time action would be taken. Nothing happened and the fraudsters are walking free as I write.

AIB has also robbed millions from the State and its own customers with no consequences for the bank or any of its officials. This is not surprising as AIB is allowed to investigate itself with no interference from the police. The bank is even allowed to operate its own internal justice and court system, passing judgements and meting out punishment on any staff found ‘guilty’. The so-called Financial Regulator only plays a peripheral and mostly supportive role in all this.

The term Banana Republic is not used lightly here; it is a true reflection of how things are done in Ireland. The difference between a banana republic and a real democracy can be measured by the action taken when corruption occurs. Let’s just compare the Worldcom and NIB scandals.

Here’s the reaction of Harvey Pitt, chairman of the Securities and Exchange Commission (SEC) to the Worldcom scandal

“I’m mad as hell and I’m not going to take it any more,” “The bubble has burst,”… “Serious jail time awaits serious crime.”

And here’s the reaction of Mr. Denis Kelleher, chief executive of investment company Wall Street Access:

“It is outrageous what is going on,” he said. “It is greed of the highest order. If the system does not put these people in jail, we have failed. If this is the system, we have, we’d better get it right in a hurry, and otherwise we are in deep yoghurt, as they say.

The American system went into action and only three years later, long jail sentences are being served.

It’s over a year now since the NIB report was published and seven years since the criminality was uncovered. So what has happened. Well, a High Court judge decided that the NIB should not be closed down because of the consequences for the bank, its customers and staff. (Just what does an Irish bank have to do to get shut down, genocide?)

Paul Appleby, the State’s Director of Corporate Enforcement tried to obtain the names of the bank’s audit committee with a view to taking legal action. He was firmly told by a High Court judge that

‘There was no real and pressing need for the order sought?’

(Major criminality and we can’t even get names). Last July, Mr. Appleby was back in court in an attempt to get the executives involved barred from acting as directors. He hasn’t a hope.

Will there be criminal prosecutions? No, because any evidence gathered for the inspectors report cannot be used as it was given voluntarily.

Welcome to the Banana Republic of Ireland.

On AIB

Ah, poor Tom, poor Tom Mulcahy. After 29 years of dedicated service, he is stabbed in the back by his former employer. The former chief executive of Allied Irish Banks recently claimed that he was squealed on to the Revenue Commissioners on alleged tax evasion charges. Tom, however, is determined to set the record straight.

He admitted to Revenue that he had an undisclosed non-resident account in England containing ‘several hundred thousandâ€? but there had been no transaction on it for years. This sounds like the “Father Ted’ defence; the money was just “resting’ in my account? Several hundred thousand? Sure, who could be expected to remember such a petty sum hidden away in an illegal account?
Anyway, Here’s how he described his settlement with Revenue “I am not saying that I was always compliant. I made a voluntary disclosure and paid what I thought was due, which is the right open to all citizens”

This is a very interesting statement, not just because it reveals that people like Tom are allowed to decide how much tax they will pay but also because he seems to genuinely think that it is a “right’ due to all citizens. He seems to be unaware that ordinary “peasants’ are not afforded this “right’.

Over the years, AIB has robbed many millions from the State and its own customers through various frauds. Tom defends his time as chief executive of this dodgy organisation between 1994 and 2001 by adopting the “I know nothing’ plea made famous by the Spanish waiter, Manuel’ in Fawlty Towers. ‘A chief executive’s role is to be positive and focus on driving the bank forward, rather than look for hidden problems.â€? He tells us.

Miraculously, Tom seemed to have developed a talent for finding hidden problems during his time as effective chairman of Aer Lingus. He’s very proud of the great job “he‘ did to turn the airline around, ‘I was in there seven days a weekâ€?, he tells us. Alas, once again, he was stabbed in the back, with all the praise going to that young whipper-snapper, Willie Walsh.

It seems poor old Tom just can’t win. He knew nothing about the dodgy dealings when he was the main man at AIB but still had to pay tax on his own dodgy account. He claims that he was the golden boy in turning Aer Lingus around but the credit went elsewhere – Ah, poor Tom, there’s just no justice in the world.