Category: Corporate

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)

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.

Coillte: Profit or public service

The proposed sale of Moyode wood by Coillte (See below) was discussed on Today with Pat Kenny.

The item was light in that it concentrated on the environmental concerns of locals. It was left to Fine Gael senator Fidelma Healy-Eames to touch on the real problem at the heart of the matter – The status and ultimate commercial aims of Coillte.

The senator suggested that the Oireachtas should look at Coillte’s remit of making profit out of forests. She mentioned the recent sale of 40 acres of woodland at Derrydonnel to the Quinn Group. According to the senator, nobody knew about this deal in advance. She suggested that perhaps Coillte was preparing for privatisation.

The original letter sent to residents was clear; the forest was being put up for sale. Since the item became a news story, Coillte has backed off and now claims that nothing has yet been decided.

I suspect that this was a deliberate strategy by Coillte; put out the idea of selling the woods and see how the public/media reacted.

I wonder if Pat Kenny asked Coillte to participate in this morning’s show? In any case, it’s a pity there wasn’t a more robust questioning of Coillte’s activities and strategies.

Perhaps RTEs excellent Investigative Unit might do a special on the matter.

Copy to:
RTE

Stench from the woods

It was reported on Six One News (14th item) yesterday that the State owned forestry company Coillte is considering selling an historic 200 year old forest in Moyode Co Galway. The forest is to be felled so that the entire area of 175 acres can be turned into a giant limestone quarry.

Residents of the area are very upset at the plans but Coillte has stated that no decision has yet been made on the matter.

So why would a State owned company responsible for forestry, want to destroy such a valuable national asset?

The answer, I believe, lies in the actual status of Coillte. In effect Coillte is a private company owned by the State. Yes, I know what you’re thinking but please, keep in mind, this is Ireland.

Writing in 2006 (Sub req’d) about the farce that was the Millennium Tree Project, Irish Times journalist Fintan O’Toole had some interesting things to say about Coillte. Here’s some of his points (My emphasis):

“One of the reasons for the millennium forests debacle is the bizarre status of Coillte. When, in late 2000, environmental activist Tony Lowes wrote to Coillte seeking information of the environmental aspects of the millennium project, Coillte replied that it was a private limited company which operated on a commercial basis. It argued it had no public administration functions or responsibilities, and was not obliged to provide any information.”

“This is an astonishing position for a company whose only shareholders are the Ministers for Finance and Agriculture, and it has been repeatedly rejected by the European Court.”

“Coillte sees itself as a purely private, commercial operation, with no public responsibilities.”

Here are some important and interesting facts from the Coillte website.

In 1985/86 the Government set up a review body to advise on structures for the future management of State owned forests. Subsequently the Government decided to set up Coillte Teoranta as a private limited company to manage State owned forests commercially

Coillte was established in 1988 as a private limited company under the Forestry Act 1988.

When Coillte was established in 1989 it acquired ownership of the State’s forests in return for shares valued at IR£575 million (€730 million).

(No harm to remind ourselves that Haughey, the most corrupt politician in Irish history, was in power at this time).

The company is owned by the Minister for Finance and the Minister for Agriculture and Food. (Wrong; it belongs to the people of Ireland).

70% of all Irish forests today are owned by Coillte – 70%.

In 2005, Coillte had a turnover of €215.6 m, a profit of €19.6 m. All of these profits were re-invested in the business

Coillte owns approx. 7% of land cover in Ireland – just to repeat that – 7% of land cover.

I’m certainly no expert on high finance or legal matters but here’s what I believe is the situation.

The key fact is “acquired ownership of the State’s forests in return for shares valued at IR£575 million (€730 million).” This transfer of ownership under the Forestry Act of 1988 is the mechanism by which Coillte is, in theory, a State company but is in reality a private company. The Act and transfer of shares creates a clear divide between private and State ownership.

For the whole deal to work it only requires the acquiescence of co-operative politicians.

That’s why the company can tell Irish citizens to take a hike when they have the effrontery to question its motives. That’s why the company, which owns 7% of the land mass of our country, can buy and sell pretty much as it likes…

It’s yet another example of how things are done in Ireland. There’s absolutely nothing illegal about the deal, every angle is covered. But as with all these things the stench is overpowering.

DCC/Fyffes case: Curious RTE (non) coverage

The RTE coverage of the DCC/Fyffes scandal is curious. When the Supreme Court made its decision last July, RTE, of course, reported the event but there was very little in depth analysis.

The case was up again in the Supreme Court on 13th November last. RTE News at One (6th item) reported on proceedings and did an interview with Richard Curran, deputy editor of the Sunday Business Post, but after that it was a virtual blackout.

I have carried out a comprehensive (but not exhaustive) trawl of the various news/current affairs programmes on RTE and have found no further mention of the case.

This is curious because the case is not just run of the mill business interest but is a story of major national importance involving two very important companies that could see costs/awards running to well over €100 million.

It is also, to my knowledge, the first incidence of insider trading in modern Irish history. That fact alone should warrant extensive mainline coverage.

Even allowing that the RTE business section seems to be severely under resourced the lack of interest in the DCC/Fyffes case is puzzling.

Grotesque distortion of the English language

Michael Buckley is a former chief executive of Allied Irish Banks, an organisation responsible for the theft of millions from both customers and the State.

He is now the senior independent director on DCCs board, a board that is fully supportive of its executive chairman, Jim Flavin, who was found by the Supreme Court to have engaged in insider trading.

Buckley says that that the board’s stance is

“grounded in justice, fairness, honesty and decency”.

Words like justice, fairness, honesty and decency coming out of Buckley’s mouth in respect of these events can only be described as a grotesque distortion of the English language.

Later, he further justifies the board’s stance by saying:

“Anyone concerned for the reputation of the Irish market as a result of the affair would reach the same conclusion.”

This is a less than subtle message to regulatory agencies that if they make a big fuss about this it could make Ireland look bad internationally.

A similar strategy was employed during the DIRT scandal. Politicians, government departments like Revenue, Dept. of Finance and other so called regulatory agencies were warned that if they did anything to stop the mass criminality involved there would be a flight of capital out of the country.

This strategy worked until the only real regulatory agency, the media, got wind of the scandal.

Judging from the almost complete lack of action against DCC and Jim Flavin, it looks like the so called Irish regulatory/law enforcement agencies have again folded under pressure from the likes of Buckley.

Law enforcement in Ireland is a joke

The mosquito was focused, hungry and determined to get his fill of blood as he swooped towards the massive rump of the elephant’s rear end. Alas, all his ambitions, hopes and puffed up self importance were instantly snuffed out with one contemptuous flick of the elephant’s tail.

And so it was that Paul Appleby, Director of Corporate Enforcement, was summarily dismissed by the Supreme Court when he tried to obtain a disqualification order against certain personnel at DCC in relation to the recent insider dealing case.

The principal target of ODCE is Jim Flavin of DCC who was found guilty of insider trading by the Supreme Court last July (Sub. Re’q). One of the judges, Mr. Justice Fennelly, said;

“To trade on the use of inside information is recognised for what it is. It is a fraud on the market.”

Actually the judge is wrong. If insider trading in Ireland was recognised for the fraud it is there would have been immediate action from at least some of the many so called regulatory bodies involved.

Nobody has moved. All the so called enforcement and regulatory agencies of the state, the police, the Director of Public Prosecutions, Revenue, the Stock Exchange, The Association of Investment Mangers who allegedly oversee corporate governance in listed companies – all acting like frightened rabbits caught in the glare of a bright light.

The ODCE, in what can only be described as a laughable and pointless gesture, arrived unannounced in court to ask the judge to grant a disqualification order. The judge told him to take a hike.

Paul Appleby put a brave face on the humiliating dismissal (RTE News, 6th item).

“In dismissing my application, the issue of a potential disqualification in these proceedings is now open I have therefore achieved my primary objective in taking this application.”

I have no idea if Paul Appley lives his life under a constant state of delusion but if he thinks he is going to succeed in his aim of obtaining a disqualification order against Jim Flavin or any other dodgy character who may have been involved in this fraud, then in this regard at least, he is most certainly living a delusion.

For over three years Mr. Appleby has been trying to obtain a similar order against nine former National Irish Bank ‘characters’ who were in charge at a time when the bank robbed millions directly from customers accounts and indirectly from the State through the operation of major tax evasion scams.

Only one order has been successful and that’s because the man involved is retired, has no involvement in business and decided not to fight the case.

Mr. Appleby has also, to date, spectacularly failed (Sub. re’q) in his attempts to have the Bailey brothers disqualified. These fraudsters recently came to an ‘arrangement’ with Revenue for over €22 million.

The bottom line is that law enforcement in Ireland is a joke, a farce, especially when it comes to white collar crime.

I recently cited the case of P. Nacchio convicted in the US of insider trading. He was sentenced to six years in prison, fined $19 million and ordered to forfeit $52 he earned in illegal stock.

Now that’s law enforcement.

The cold and impartial hand of the law – mostly

I see republican Thomas ‘Slab’ Murhpy has appeared in court on alleged revenue offences. The police, Criminal Assets Bureau, Revenue and the courts all working together to make sure this citizen, who is suspected of cheating the state of about €2.5 million is brought to justice.

After all, it is only right in a functional democracy that people who cheat on their taxes should feel the cold and impartial hand of the law.

Meanwhile, that toothless tiger, the Director of Corporate Enforcement is still struggling to have the corrupt Bailey brothers disqualified from the management of any company (Sub. required) on the grounds of serious misconduct and fraud.

Last year, these corrupt businessmen made the largest tax settlement in Irish history, €22.17 million, when they came to ‘an understanding’ with Revenue.

We don’t know why the forces of the state failed to act in this instance but I would like to reassure any concerned citizens out there that it had nothing whatsoever to do with the fact that these fraudsters are major contributors to a number of political parties – the very idea!

(Previous post on this matter)

Insider trading? No problem

On 15th August last I spoke to Paul Appleby, director of ODCE about the DCC/Fyffes case. He informed me that they were examining the Supreme Court decision before deciding what action to take.

The case involves Jim Flavin, executive chairman of DCC who was found by the Supreme Court to have broken the law on insider trading (Analysis here).

One of the judges, Mr. Justice Fennelly, was clear.

“To trade on the use of inside information is recognised for what it is. It is a fraud on the market.”

(Full Supreme Court decision here).

Towards the end of September and beginning of October I made further enquiries to ODCE and eventually got through to Mr. Appleby’s legal advisor.

I expressed the view that the case seemed like an open and shut case and wondered why it was taking so long to come to a decision. He informed me that not every case is as easy as it seems to the general public.

Coincidently, on the same day that the Irish Supreme Court made its findings another case of insider dealing was reaching a conclusion in the United States, a jurisdiction where law enforcement is taken seriously.

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.

There is, of course, not the remotest possibility that Mr. Flavin will ever have to face such traumatic law enforcement in Ireland.

If the ODCE decide to act against him and by some miracle, actually win the case, Mr. Flavin, if he’s not retired by that time, will probably receive a small fine and be restricted from acting as a director for a short period.

To be fair to the ODCE, it is the only state agency showing even the slightest interest in the case. The Director for Public Prosecutions, Financial Regulator, Stock Exchange , Revenue Commissioners, An Gardai and body politic have all, apparently, decided that insider trading is not really a serious issue.