Category: IFSRA

Mulcahy's silly nuclear button

I know only two things about Nick Mulcahy. He is the editor of the Irish business magazine Business Plus and he knows very little about corporate fraud.

I gleaned these facts after reading an article in the Irish Independent by Mulcahy in which he analyses the latest developments in the DCC/Fyffes case.

According to Mulcahy, ODCE ‘pressed the nuclear button’ when they asked the High Court to appoint an inspector to investigate DCC/Fyffes over allegations of insider trading.

Pressing the nuclear button or taking the nuclear option means taking an action of last resort. In other words, only taking the most serious action after all other avenues have been exhausted.

So what action did so called Irish regulatory/enforcement authorities take in relation to the €83 million fraud perpetuated by Jim Flavin of DCC before being forced to press the nuclear button?

Initially, not a damn thing. When it became obvious that something very strange had occurred on the Irish Stock Exchange (ISE) regarding DCC/Fyffes shares not a single Irish authority acted.

It was only when the London Stock Exchange, a regulatory agency operating from a functional jurisdiction, insisted that an investigation be carried out that the ISE finally took action.

The manner in which the ISE investigation was conducted has itself raised very serious questions regarding ethical and possibly illegal interactions between the ISE, DCC and the DPP. In the best traditions of ignoring suspected wrongdoing in Ireland, this aspect of the scandal has been practically ignored to date.

After the (suspect) ISE investigation was completed, again, nothing happened. The ISE, Irish police, Financial Regulator and the Government simply buried their collective heads in the sand.

It was only when Fyffes, fearing possible financial consequences if it failed to protect the interests of its shareholders, was forced to take a civil action against DCC that the case became active again.

It is entirely from this civil case and the publicity that it generated that the ODCE, possibly the weakest financial regulatory agency in the State, was embarrassed into taking action.

If the ODCE action is successful, and that is highly unlikely, and if it decides to punish DCC/Jim Flavin for any wrongdoing then that punishment will represent the absolute minimum action that the State can take in the case.

ODCE boss, Paul Appleby, knew that he hadn’t a hope in hell of a successful action if he was depending on his miniscule legislative power and resources. That’s why he scuttled over to the High Court and the Supreme Court when they were adjudicating on DCC/Fyffes, to make a pathetic plea to these courts to use their considerable powers to act against DCC/Flavin. His pleas were rejected out of hand.

As a last resort (and there’s certainly nothing nuclear about the effort) Appleby made a formal application to the High Court for the appointment of an inspector. The only advantage Appleby and ODCE will enjoy from this appointment is that their meagre resources will not be totally obliterated as they would have been if they were forced to take the action themselves.

So, what happens now? Well, the farce continues. The High Court inspector will take years to complete his investigation (The NIB investigation took six years).

ODCE then have the option of seeking to have those involved in the scandal disqualified from involvement in the management of a company (This is the absolute minimum punishment available to the State). This action will also take years (ODCE has only just completed action against those in the NIB scandal after years of legal wrangling).

By that time Jim Flavin and many others involved will have retired (and may even have died) and the whole matter will be seen as historical. It is an absolute certainty that those involved in the scandal will never be subject to a police investigation, will never be brought before a court to give an account of their actions, will never see the inside of a prison.

The Supreme Court found that Jim Flavin of DCC had engaged in insider trading involving sums of over €83 million. If the same finding was made in a functional democracy strong, immediate and effective action would have been taken by the police and all associated state enforcement/regulatory agencies.

If we are to judge by a recent and very similar insider trading case in the US, Flavin would now be serving a lengthy jail sentence, he would have been forced to repay his ill gotten gains; he would have had his substantial wealth seriously reduced by the imposition of hefty fines and forfeits.

Nick Mulcahy’s amateurish and naïve analysis of this case is an important factor in how white collar crime is dealt with in this country. Government and so called regulatory agencies will continue to ignore allegations of serious fraud until they are brought under strong pressure by well informed and persistent journalists.

Mulcahy’s silly ‘nuclear button’ conclusion is an indication of just how far away we are from that ideal situation.

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Business Plus
ODCE
Financial Regulator
DCC

'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’.

Secrecy law remains unchallenged

Mary O’Dea, Consumer Director at the Financial Regulator’s office was asked about the Bank of Ireland lap top scandal on Drivetime (8th minute) yesterday.

“It’s a matter we are investigating so I can’t go into the specific details with you.”

When she was asked how and what they were investigating O’Dea replied.

“I can’t; unfortunately, I’m prohibited by law from going into the details of the investigation.”

It was at this point that RTE presenter, Mary Wilson, should have challenged this civil servant with basic questions such as;

What law exactly are you basing your refusal to provide this information?

Are you absolutely sure that this law forbids you from informing Irish consumers of even the subject matter of your investigation?

Can you email a copy of this particular law to this programme so that we can have our legal team analyse its contents to confirm for our listeners that your interpretation of absolute secrecy is correct?

Is the Financial Regulator happy with this high level of secrecy surrounding its investigative activities?

Is the Financial Regulator happy with the fact that this law poses a serious disadvantage for consumers?

If the Financial Regulator is not happy with this law has there being any attempt to have it repealed?

Are you prepared to come on air again in the near future to defend your position regarding this secrecy law?

Unfortunately, Mary Wilson asked none of these questions and so, in effect, consumers have been let down by two state agencies.

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Drivetime
Financial Regulator

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.

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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)

Theft and fraud continues with impunity

“Help consumers to make informed decisions on their financial affairs in a safe and fair market.” (Dishonest claim made by Financial Regulator).

Irish financial institutions continue to rob and defraud consumers with impunity. The latest theft, by insurance brokers, involves a whole raft of scams including failing to fully disclose fees and charges, overcharging and selling consumers optional extras which they have not asked for. All these activities are banned under the Consumer Protection Code (Irish Independent).

The so called Financial Regulator has reacted as it always does; no charges, no fines and total secrecy on the names of the thieving companies. Consumers are not even to be told how many companies are thieving.

In other words; the criminal financial institutions are afforded full protection by the regulator while the consumer is kept in the dark and forced to take his chances in an extremely unfair and unsafe market. The only recourse consumers have is to treat all insurance brokers as suspect.

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Financial Regulator
Professional Insurance Brokers Association

Mafia country

Padraic O’Connor, the former director of NCB has stated that he is not and never was a friend of Bertie Ahern’s. In spite of this Ahern is adamant that they were very good friends. In effect, Ahern is calling O’Connor a liar. It’s as if O’Connor said that black is black and Ahern retorted, no; black is white.

This kind of fantasy world speak is common throughout all of Ahern’s evidence to the Tribunal. Only a fool would believe he is telling the truth and only someone from Mars would be in any doubt as to what really happened.

So why is he still the Prime Minister, why isn’t he being questioned by the police, why is it that, as sure as black is black, Ahern will never be brought to account for any of his actions?

Less than a week ago it emerged that the UK Labour Party had received large donations from a businessman using middlemen to pass on the money.

The next day there was a resignation. Three days later an opposition politician asked the police to investigate the matter. To my knowledge this has never happened in Ireland despite years of rampant political and business corruption.

Four days later the UK Electoral Commission also asked the police to investigate. The Irish equivalent, The Standards in Public Office Commission is debarred by law from initiating an investigation until it first receives a formal complaint.

This commission is a joke. The law debarring the commission from acting seems to have had only one function – to assist and protect the corrupt.

The reason Ahern will not be brought to account is because Ireland is a corrupt state. There is no authority in Ireland with the power, will or courage to bring rogue politicians or corrupt businessmen to justice.

This is why corrupt politicians like Haughey and Burke can successfully live out careers of rampant corruption doing untold damage to Ireland and its people.

It’s the reason politicians like Lorcan Allen can go on RTE and arrogantly admit that he doesn’t bother with obeying the law.

He knows with absolute certainty that nobody, no authority in the land can touch him. Allen is merely doing what any ruthless and unprincipled politician will do when he knows that the country he operates in is a corrupt entity. He allows his greed and arrogance full rein despite the massive damage done to society by his actions.

Jim Flavin of DCC possesses the same arrogant confidence that is common to those who know they are untouchable.

Found guilty (2nd item) of insider trading by the highest court in the land, a crime that sees long jail sentences in real democracies, Flavin knows he has nothing to worry about, he knows that there is no authority in the land that will take any serious action against him, he knows that the pathetic attempts by the ODCE to make him accountable are just that – pathetic.

Financial institutions and in particular the banks have robbed millions from consumers over the years. Not a single bank official has ever been questioned by the police. The banks too are supremely confident that they operate in a country where the system is specifically geared to protect their criminal behaviour.

The so called Irish Financial Regulator is a joke, it monotonously issues just one piece of advice to consumers –shop around. You want advice on buying a car, a house, a condom, a politician, the regulator has the answer – shop around.

In the meantime it enthusiastically enforces a secrecy law that forbids any consumer from knowing which financial institution is engaged in criminal activity and which, if any, is honest.

Nobody has even hinted that Ahern should resign or be fired for his behaviour. The only discussion that comes near to any possible consequences is that he might have damaged his chances of landing a job in Europe or that the controversy might damage his legacy – that’s it.

A Prime Minister who, when he was Minister for Finance, accepted very large amounts of cash from ‘friends and businessmen’ who insults the intelligence of all thinking Irish citizens with his ‘Alice in Wonderland’ explanations is not expected to resign, not expected to be accountable, not even expected to come up with a decent lie.

Let’s be absolutely clear about the situation. Ireland is not a normal country, it is not like any other Western democracy. It is a country run more along the lines of a mafia operation than a modern democratic state. It is a country where the powerful can do as they wish without the slightest fear that they will face justice.

David Cameron, leader of the UK Conservative Party speaking about the ongoing scandal said;

“There is a time in the life of every government when it slips over from complacency into arrogance, and from arrogance into even indifference for the law”.

To paraphrase him, I would say: There is a time in the life of many states when they slip over from the democratic process and become a country that operates principally for the benefit of the rich and powerful.

The corrupt Haughey began that process in the 1980s and his faithful and admiring protégé Bertie Ahern, has been successfully following his masters low standards ever since.

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Fianna Fail
Standards in Public Office Commission
ODCE
Financial Regulator
Revenue
ISE
Dept. of Finance

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.

Protecting the vultures

On July 13th last I wrote about the many excuses given by the Financial Services Ombudsman, Joe Meade, to avoid identifying the greedy vultures that infest the Irish financial sector. Joe added one more excuse today on RTEs News at One (5th item).

The latest case involved an 86 year old farmer. The man had just sold his farm for €1.4 million and was advised by his bank to invest in two long term insurance bonds. The capital was guaranteed provided they were kept in for four and six years.

The man died seven months later by which time the bonds had dropped by €50,000. Joe told the bank that it was inappropriate to sell these bonds and directed that the €50,000 be refunded.

Hilariously, Joe appealed to the banks to look into their hearts and review all accounts to see if they are appropriate.

When asked why he won’t name the low life bank, Joe said he didn’t have legal coverage.

Let’s remind ourselves of the extensive legal powers that Joe does have. He has the power of entry and seizure, he can require employees to provide information under oath, he can enter premises and demand documents and the High Court is the only external party that can overturn his decisions – but yet, according to Joe, he doesn’t have the simple legal power to name the vultures. The obvious question is – Was this a deliberate omission when the legislation was being drawn up?

Bizarrely, Joe justified his stance by reference to a recent High Court decision that went against him on a matter completely unrelated to the ripping off of the elderly.

So what hope does Joe offer the many vulnerable customers out there that his office is allegedly protecting?

Well, he wants to start a public debate on the matter. Just think about that suggestion, a public debate on whether the financial vultures that prey on the elderly should be named and shamed.

Joe then suggests that perhaps the Minister for Finance and the Dail could pass legislation on the matter. Let’s see; public debate and then action by a Government minister and the Dail, give it about ten maybe fifteen years. Meanwhile, the greedy vultures continue to enjoy the great benefits of state protection.

The reality is that, from a consumer point of view, the Financial Services Ombudsman is a useless organisation. It operates on the same basis as the equally useless Financial Regulator.

When the financial vultures are caught picking over the bones of a customer’s account they are merely required to pay back their ill gotten gains. No police, no fines, no names.

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.