Category: Corporate

Hot air and cynical strategies

On 13th May last I discussed the DCC/Fyffes case with Fine Gael TD David Stanton.

I wanted the matter raised in the Dail; specifically I wanted to know why the State was failing to take effective action against a man who the Supreme Court found had engaged in insider trading.

In addition, knowing that I would be wasting my time, I requested that deputy Stanton ring the Director of Public Prosecutions to enquire if his office had received a report from the Garda Bureau of Fraud Investigation who, it was reported, was investigating the case.

The DPP told deputy Stanton that they could not give out such information over the phone and that I should put my request in writing. I phoned the DPPs office myself and was given to understand, just as deputy Stanton was, that my question would receive a favourable answer if I put it in writing.

With a great deal of skepticism I wrote to the DPP.

To Whom It May Concern,

It was reported in the Irish Times on the 22nd December 2005 that the Garda Bureau of Fraud Investigation had started an inquiry into the share trading activities of DCC.

I would be grateful if you could confirm or otherwise whether the Garda Fraud Squad submitted a report or file on this case to your office.

I would also be grateful if you could say whether your office has ever considered the DCC/Fyffes insider trading case in any other form or under any other heading.

I am aware that your office cannot comment on the details of any individual case and want to emphasise that I am not looking for details but merely to ask if the DCC/Fyffes case has ever come under consideration by your office.

Yours sincerely
Anthony Sheridan

Over a month later and after a number of phone calls to remind the DPP that I was still around I received the following letter.

Dear Mr. Sheridan,

I refer to your letter of the 29th May 2008 in relation to the case of DCC/Fyffes.

“By way of general comment I would say that it is not the practice of this Office to confirm whether or not a file has been sent here by the Garda Siochana or other investigative agency, other than to people directly involved in the matter.”

Yours Sincerely
Barry Donoghue
Deputy Director

What happened here was the age old and cynical ‘make them put it in writing’ strategy. The DPPs office could have given this information to me or deputy Stanton over the phone in about 15 seconds. Furthermore, I simply do not accept that the information I was seeking is in any way sensitive.

So where does this leave the DCC/Fyffes case?

Well the DPPs office is a dead end as is the Garda Bureau of Fraud Investigation because both agencies are protected by state secrecy laws.

In my opinion neither of these agencies have any intention of acting against DCC. Neither has any other state agency, apart from the ODCE, shown the slightest interest in acting in response to what is the most serious financial fraud in the history of the state.

Paul Appleby of OCDE, to his credit, is attempting to have the High Court appoint an inspector to investigator the case. He is, of course, wasting his time and taxpayers money.

He has already been to the High Court twice where a lot of hot (legal) air has been expended but as yet no inspector has been appointed.

I spoke with a staff member from the ODCE and asked him when we could expect a decision from the judge. Sometime in the immediate to medium future he replied vaguely.

White collar crime in Ireland? – Where?

Crackdown, fraud, hundreds of arrests, greed, fraud charges. These are some of the words used by RTE in a report (6th report) on the action taken by US law enforcement agencies against those involved in the sub-prime scandal.

In the same report we see film of two executives from Bear Stearns bank who were charged with fraud being led away in handcuffs.

It really is fascinating to compare this report with how RTE (1st report) covered the resignation of Jim Flavin when he resigned from DCC recently.

Keep in mind that the Supreme Court found that Flavin fraudulently engaged in insider trading involving sums of over €83 million.

Not once in the report are the words fraud; greed, charges or arrest mentioned. RTE economist George Lee is also interviewed on the scandal and again no mention whatsoever of fraud, greed or crime.

RTE, in common with the rest of official Ireland, simply refuse to accept that white collar fraud exists in Ireland.

Meanwhile, Flavin remains a free man with not the remotest chance that he will ever be charged much less filmed being led away in handcuffs.

Copy to:
RTE News

'Experts' and law enforcement

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’.

Abusing the English language

Here’s how Senator Shane Ross reacted to Jim Flavin’s resignation (Morning Ireland, 2nd report)

“It’s a really sad end to a career…that started in 1976…and despite the fact that he’s now coming to a really tragic and final chapter in that he’s resigned it’s only fair to say that he’s been an extraordinary successful businessman.”

For ripping off the stock market of over €83 million Flavin has been forced to resign two years earlier than planned. That’s it; that’s the only price Flavin has or will have to pay and Ross describes that as tragic.

One wonders what word the good senator would use to describe the earthquake in China.

Copy to:
Senator Ross

Flavin resigns

“Mr Flavin informed the Board today that, due to the continuing uncertainty arising from the outcome of the litigation with Fyffes, it was in the interests of the Company and its shareholders for him to resign as Executive Chairman and a director of DCC.”

Mr Flavin told the Board: “While I am resigning, I firmly hold the view that I have always acted honourably and in what I believe to be the best interests of the Company and all its shareholders”.

The Board has appointed Mr Michael Buckley as non-executive Chairman also with immediate effect.”

It took a while, didn’t it? Except Flavin always did not always act “honourably and in the best interests of the Company and all its shareholders”. He committed a fraud on the market, and and those shareholders.

Of course resignation is the very minimum punishment. If we applied international standards, Flavin would be doing hard time.

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

Something rotten in the woods

As I wrote in a previous post, the stench emanating from the State forestry company, Coillte Teoranta, is overwhelming.

In yesterday’s Sunday Independent we learn the following;

Despite making profits of over €200 million since it was set up in 1989 the company has steadfastly refused to hand over a single penny to the State.

State officials have been asking the company nicely for the past eight years to pay at least some of its profits back to the taxpayer. On each occasion the officials have been told to take a hike – and they have.

The company is 100% owned by the taxpayer but is run as a private company on behalf of the State.

The company has a dismal business strategy record and has been heavily criticised for its poor environmental policies. The company illegally obtained EU grants over a five year period. Nobody was made accountable for this fraud and the taxpayer was forced to repay the grants.

Despite this, senior management have awarded themselves performance bonuses of between €200,000 and €400,000 each year since the company was set up.

The company owns seven per cent of the country. This has to be said again – seven per cent of the country but is apparently permitted to do as it pleases.

No further comment required.

Has RTE repudiated a core value?

As I expected, the RTE weekly radio business programme The Business made no mention whatsoever of the Fyffes/DCC case even though it is one of the biggest financial scandals in the history of the State.

Neither was the scandal mentioned on The Marian Finucane Show on Sunday, a programme that features a panel of commentators specifically invited to discuss the major media stories of the previous week.

RTEs weekly flagship news and current affairs programme, This Week, also kept mum on this major financial scandal.

RTE must be aware that this story is of huge importance, they must be aware that their coverage of the scandal borders on a virtual news blackout.

An objective observer can only come to one conclusion – RTE has joined all other State authorities who have steadfastly refused to take action against DCC or Jim Flavin.

If that is the case, if a decision was made within RTE to keep the reporting of this scandal to an absolute minimum then we are looking at the appalling vista of news manipulation by the national broadcaster.

Even a suspicion that this scenario may be true, and that suspicion now exists, does serious damage to the credibility and professional respect of RTE as a balanced and independent broadcaster.

According to RTE, one of its core values is to:

“Operate in the public interest providing News and Current Affairs that is fair and impartial, accurate and challenging.”

I believe that this core value has been repudiated in favour of some other agenda.

(See previous posts on this matter here and here)

Copy to:
All RTE News and Current Affairs departments

Is RTE afraid to cover Fyffes/DCC story?

RTEs Today with Pat Kenny describes itself as a current affairs programme that

“assesses the main news stories of the day and goes behind the headlines to bring you the very latest.”

Today’s programme led with a story about a man who operated a sheebeen from his home in Limerick.

Yesterday, a settlement was reached between DCC and Fyffes bringing to an apparent end the biggest corporate scandal in the history of the State.

The programme that claims to provide listeners with the very latest in news and current affairs has ignored this major news story, giving priority instead to an obscure story about an alleged breach of the licencing laws.

See previous post for a proper, no punches pulled analysis of this major corporate scandal.

Copy to:
Today with Pat Kenny