Category: IFSRA

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

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.

Allied Irish Banks investigates itself

The latest in a long line of scandals involving Allied Irish Banks was reported by the Irish Times as earlier this week.

It emerged yesterday that AIB has been investigating new claims that AIB deliberately and repeatedly overcharged foreign exchange customers in its branches during the 1980s and the 1990s

Those unfamiliar with how things are done in the Banana Republic of Ireland may be surprised to learn that AIB, the largest financial institution in the country, is allowed to investigate itself with very little interference from the State. The full situation, however, is even more bizarre. The Sunday Business Post, who broke the story relates how AIB compliance officers from its business ethics unit grilled several staff members for hours.

The methods used by this unit are what one would expect in a… well, in a banana republic.
Those grilled were given no legal or union representation, warned (threatened?) about possible future consequences arising from the matter, sworn to secrecy and pressurised into informing on their colleagues.

It should be kept in mind that the Gardai, (the official state police force) have no involvement whatsoever in this matter. The Financial Regulator seems to play only a peripheral role in so far as AIB keeps the body informed of its activities. Indeed, a spokeswoman for the regulator said that its main priority in any investigation is (merely) to identify the customers involved. (My italics)

It is also likely that AIB will be permitted to act as judge and jury on staff members based on the results of its investigation. Last year, after a similar scandal, AIB handed down ‘punishment’ on several staff members for their misdeeds. One man, however, had the temerity to challenge his ‘sentence’ and took AIB to a ‘real’ court. He won his case and claimed he was very happy with the outcome. AIB, however, insisted that no special deal was done. Who do we believe? Was he paid off or did he suddenly realise that AIB was really only concerned with his best interests? The Financial Regulator, of course, had no comment to make.

To give a better perspective on how things are done in the Banana Republic of Ireland it can be useful to make comparisons with how other jurisdictions handle these cases. At the moment a case not unlike the AIB matter is under way in Australia. So far, two men have been sentenced, one to 16 months and the other to two and a half years in jail.

In real democracies, when white collar crime is detected, the following procedures usually ensue – Police investigation, arrests and trial if enough evidence is found, appropriate punishment including jail sentences for the guilty. In the Banana Republic of Ireland?… Ah,sure, you know yourself!

Toothless IFSRA

During the 80s and 90s, Irish banks and other financial institutions robbed tens of millions from the State through DIRT, Ansbacher and other frauds. During this time the Dept. of Finance, various Ministers for Finance, the Central Bank and the Revenue Commissioners all knew about this theft but took no effective action.

When it all eventually came to light, the most common excuse was: “we were afraid that any action would lead to a flight of capital out of the country’. Since then, hundreds of millions have been spent investigating this corruption in never-ending tribunals, all paid for by the taxpayer. One would imagine that after all this; the so-called State regulatory bodies would have got their act together and financial institutions would be more than willing to co-operate in cleaning up their business.

Not so, apparently. The so-called Irish Financial Services Regulatory Authority (IFSRA) has timidly proposed some modest regulations to test the integrity and competence of senior personnel in the banking industry. The arrogant response by various financial institutions demonstrates that they have no fear of the Financial Regulator and are determined to maintain the freedom that almost total self-regulation affords them.

Some of the objections to the modest proposals include: Unduly burdensome, deterrent to recruitment of personnel, overly bureaucratic or damaging to Ireland’s attractiveness as a base for international financial services and, yes, you’ve guessed it, fear of a flight of capital from the country. So, what is involved in this proposed oppressive and despotic regime? Well, just three requirements:

1. Directors will have to disclose that they are tax compliant and provide a tax clearance certificate every year.
2. A person would be unsuitable as a director if they had dealings with a tribunal of inquiry
3. A director would have his/her suitability examined if they failed to manage finances.

Now the banking industry is constantly reminding us of how important they are, how crucial their industry is to the financial health of the country. The employment of thousands, financing of industry, provision of mortgages, they have even claimed that they created the Celtic Tiger. So what is the problem with meeting a few modest and reasonable conditions in order to qualify to work in an industry that is apparently of such crucial importance to the future of this great little nation?

The problem is of course, accountability. Our bankers are not used to answering to anyone other than themselves. On a practical level, there is no problem meeting the above requirements but on a psychological level, it is an impossibility. The very idea that the great and good of our banking sector would have to submit to regulation, no matter how minimal, is, for them, simply outrageous and unacceptable.

So, how will this be resolved? Well, judging by how things have always operated in the Banana Republic of Ireland, the following is likely. A deal will be struck that will save face for both parties. The so-called Financial Regulator will issue yet another glossy pamphlet trumpeting how it is protecting the interests of the consumer and the banks will continue to do what they do best, make massive profits within their own self-governing financial republic where they are untouchable.

Guess who loses out?