The Ibrc Commission on the Sale of Siteserv shows how we still lack an efficient, fair and timely method of investigating allegations of corporate wrongdoing. It took seven years and more than 10 million euros to determine that Ibrc acted appropriately in selling Siteserv.
The commission’s report also concluded that businessman Denis O’Brien did not receive preferential treatment from the bank when it came to interest rates on his loans.
The report uncovered “unacceptable practices” by people associated with Siteserv and criticized former CEO Brian Harvey. It also describes how Ibrc was not made aware that Harvey and Siteserv founder Niall McFadden had acquired a sizable stake in the new entity the company had purchased.
The report recommends a referral to Ibrc’s Special Liquidator, the Revenue Commissioners, the ODCE and the Central Bank. However, it’s hard to see where much of this might actually end.
Ibrc made its decision to approve the sale of Siteserv to a Denis O’Brien company in good faith but based on misleading and incomplete information provided to it by the Siteserv company itself. (O’Brien was not found to be part of the deceptive practices.)
The problem here is that Brian Harvey, Siteserv’s former CEO, didn’t tell the bank the full story about bonuses when it came to his own loans at Ibrc or his stake in the company the company was planning to buy.
I’m sure he won’t be the first or last businessman to mislead his bank about his personal financial situation or that of the company he’s trying to sell.
But the lack of transparency and Harvey’s withholding of information helped put the taxpayer at a disadvantage. That made it of public interest. Ibrc was funded by the taxpayer and in this case could have received about 8.7 million euros more for the company than was realised.
The degree of “inappropriateness” of some parties associated with Siteserv may or may not have been illegal. Others have to decide that. And yet it took seven years to unravel the full narrative of what transpired.
What happened at Siteserv reflects the business culture in Ireland so poorly. But is it worth spending seven years and over 10 million euros to find out? The answer to this question is not clear.
The methodology of the investigative commission entitles witnesses to be informed of everything that other witnesses say about them during the course of the investigation and not only at the end of the trial.
In some respects, it is like conducting a private tribunal, but with all the rights that the judicial process accords to individuals.
In 2019 it was estimated that the six courts set up between 1997 and 2006 cost more than 340 million euros. The 11 investigative commissions set up since 2004 would have cost around 28 million euros.
Inquiry commissions seem to be a cheaper way of investigating. This Ibrc commission was set to examine a further 37 transactions during the crash years, in which a total of €1.88 billion in outstanding loans were written off.
The Siteserv model included an Ibrc debt write-off of around 100 million euros. Given that the major impropriety in this case involved a very different narrative than the one that initially prompted the investigation, who knows what that €1.88 billion in loan write-offs could raise.
Likewise, an investigation of this scope and cost cannot simply be a “fishing expedition”. The government will now proceed to end the Commission. Judge Cregan pointed out in 2020 that he could not determine whether or not some transactions were financially sound unless he could obtain documents, statements and evidence, which can be difficult with companies in bankruptcy or those in other jurisdictions.
Potential further impermissibility that may be uncovered and cost taxpayers money certainly deserves consideration. It’s not just about the cost. It’s also about whether it’s realistically feasible.
Dishes are expensive and take too long. But they create a certain fear that can deter future wrongdoing.
Commissions of inquiry should become cheaper and faster. If they aren’t both and don’t seem a deterrent, something needs to change.
The government will have to go back to the drawing board when it comes to finding a new way of looking at companies.
A tale of two housing markets
Two contrasting housing market histories, one here and the other in the UK, show how precarious the sector can be.
Dublin-based company Cairn Homes reported very strong half-year earnings during the week and continues to build a strong order book for new homes. The order book rose to 1,988 in September from 1,750 apartments in July.
In the UK, a survey by the Royal Institution of Chartered Surveyors (RICS) showed that inquiries from new buyers fell last month at the sharpest rate since 2008.
Real estate agents expect home prices to remain largely flat next year, but that’s looking optimistic for now. The decline is due to the prospect of a recession, higher mortgage rates and lower living standards.
The situation in Britain was underscored by the sterling’s fall to its lowest level against the dollar in decades when Liz Truss became Prime Minister.
Truss is planning a £150bn (€172bn) energy support package at a time when the country’s current account deficit is 8 per cent of GDP, the government said financial times. Truss is taking massive fiscal risk.
In a note titled “Crunch Time for Sterling,” Deutsche Bank FX analyst Shreyas Gopal said a large, unfunded and untargeted package of tax cuts and spending commitments could alarm global markets.
He said investor confidence shouldn’t be taken for granted. Under Truss’ energy program, energy suppliers are required to pay enormous amounts of money and are required to sell to customers below cost.
The spending commitment comes at a time when Truss is talking about “small governments” but is committed to putting billions into the pockets of households that can actually afford to pay their bills.
With high energy prices likely to persist for several years, there are real risks to the UK treasury and economy.
The bad news flow continued in the retail sector as Primark owner ABF issued a profit warning over lower than expected earnings next year due to weaker disposable income. This is where the energy crisis is really starting to impact jobs.
In Ireland, we are going into the crisis with a strong economy but with a huge national debt. We haven’t seen any job losses yet and the economy remains at full employment. But some companies are talking about cutting spending, and multinationals, particularly in tech, are opting for a hiring freeze. On the housing front, the market is being hit by similar things to the UK – higher interest rates and an erosion of living standards due to rising inflation.
However, industry indicators do not predict any real slowdown in housing demand and continue to indicate that we will build around 10,000 fewer homes this year than the market requires.
Demand for housing will continue, but it’s hard to see how it can continue to support prices at current levels if there’s a serious downturn.
The container shipping boom was the biggest of all time
The incredible worldwide boom in the shipping industry seems to be coming to an abrupt end. According to analysts, in just three years the container shipping industry is expected to make as much profit as it has in all of the previous six decades.
Shipping research group Drewry estimated that the entire industry generated operating income of $7 billion in 2019 and $26 billion in 2020. Last year, profit reached $210 billion and is expected to reach $270 billion this year.
These wins are said to be “once in a lifetime” but are likely even rarer. It points to some of the places money has gone in this inflationary crisis. The industry had higher fuel costs but was able to push up prices due to the huge demand and tight supply of containers.
Higher costs and an economic slowdown will burst this particular bubble starting next year. With so much money made in such a short amount of time, nobody cares what happens now.
https://www.independent.ie/business/irish/siteserv-report-time-for-a-return-to-the-drawing-board-on-state-methods-of-corporate-inquiry-41975675.html Siteserv Report: Time for a Back to the Drawing Board on Government Methods of Corporate Investigation