In the last year of the boom, the bust still out of view, billionaire Denis O’Brien welcomed a new neighbour to the Mount Juliet Estate in Kilkenny.
he 500-acre estate includes a Jack Nicklaus-designed golf course and exclusive housing developments designed for the wealthy. O’Brien’s holiday home was right beside the 18th tee.
His new neighbour was Niall McFadden, Siteserv co-founder and a corporate financier acquaintance, who recalled: “In 2007, myself and my wife bought another house off him and became neighbours of his in a holiday resort and would have been in his house once or twice I think for entertainment. When he was having guests over, he would have invited us, as one of many people. So, we knew each other at a distance.”
Their friendship grew. Within a couple of years, in the throes of the downturn with mounting debts, McFadden found a sympathetic ear in O’Brien.
“In 2009 when I was beginning to get myself into trouble, I think I was at an event one night in his house and I mentioned bootcamp and he was interested in that, and my wife at the time was quite upset about everything and he gave her a lot of comfort that he was going to do his best to assist me.”
O’Brien went on to join McFadden on the “bootcamps” he liked to organise for friends and business associates, essentially holidays with exercise: one in Kenya and two in Crete, afterwards flying McFadden home on his private jet.
O’Brien liked him. He described McFadden as “a deal a minute”, “loves talking about business and he is interesting about it”.
“As you get older you don’t… you’re very careful who you pick as your friends because your older friends are your best friends. But you know, I have to say, people who I have become friendly with in the last 10 years or more, I have to say, he is one of the more interesting people and enjoyable people to hang out with,” O’Brien told the Commission of investigation into the controversial sale of the building services company, Siteserv.
The friendship between O’Brien and McFadden was teased out in detail over hours of interviews both gave to the commission chaired by Brian Cregan. The investigation examined the sale of Siteserv for €44.3m to O’Brien back in 2012 when it was close to collapse and in debt to the former Anglo Irish Bank — renamed IBRC.
The sale incurred a €118m write-off of the €150m debt Siteserv owed IBRC, at a time when homeowners were crippled with mortgage debt, against a backdrop of the 2011 Moriarty Tribunal on payments to politicians, which reported that O’Brien had made two payments to Michael Lowry when he was government minister. An anonymous “whistleblower” fanned flames by circulating allegations that were later raised in the Dáil.
Cregan’s long-awaited 1,500-page report debunks rumour and reveals key allegations to be unfounded, against the bank and Denis O’Brien. It also uncovers wrongdoing, most of it in Siteserv, unacceptable practices that leave the sale “tainted by impropriety” and some serious revenue issues.
According to the commission report, O’Brien said he never would have gone for Siteserv were it not for Niall McFadden.
McFadden was a “highly sophisticated” corporate financier, according to the report. He went to Gonzaga and then to UCD, where he met his good friend, Brian Harvey. They founded Siteserv together in 2004. By 2008, as the country was facing collapse, the company owed €155m to Anglo Irish Bank.
McFadden and Harvey were personally on the rack for millions. McFadden had personal borrowings of €7m with Anglo and had signed personal guarantees amounting to €74m.
“Now, I borrowed too much, and he lent me too much,” McFadden told the commission, referring to his lending manager. “He was the drug dealer and I was a drug user. It was quite a, as my wife tells me, it wasn’t a great place to be.”
By 2009 Anglo was state-owned and on a mission to recoup some of the €34bn bailout for the taxpayers who had stumped it up. McFadden defaulted on his debts, and the bank came after him. His former lending director at Anglo, Michael O’Sullivan, said when he pleaded with McFadden to co-operate, he replied: “My wife has money and you’ll never see a penny of it.”
IBRC took McFadden to court and started bankruptcy proceedings, and hired a private investigator. McFadden described it as “all-out war”. He turned to O’Brien, an important client of Anglo, to help. “And then I went out to bat for him, basically,” O’Brien told the commission. O’Brien found the complexity of McFadden’s affairs were “just mind blowing”.
O’Brien set up a meeting with Michael O’Sullivan at his office. O’Sullivan and McFadden could barely look at each other, according to the latter’s account of the meeting.
McFadden said when “Denis” asked if they could “talk about some of this” to get a better outcome for everyone, O’Sullivan said: “No, I’m bankrupting. Bankrupting him. He’ll never borrow again.
“And I’ve got private investigators on him, which is why I’m off the case, because they’re outside his house every morning and his wife’s got tinted windows in her car and we’ve got to follow her around everywhere to make sure he’s not in the car. We have them under surveillance. We’re going to stay on it until we’ve finished this project.”
McFadden said he realised then “there’s really was no fixing it”.
McFadden was facing bankruptcy, with judgments of €30m hanging over him. Siteserv was on the rocks with debts of €155m to Anglo. He had a €150,000 consultancy contract, advising his friend and chief executive, Brian Harvey, first trying to find investors in Siteserv, and then buyers.
By September 2011 a formal sales process was under way. Siteserv would manage the sales process, with advisors KPMG, the bank advised by PwC, and with an observer, Walter Hobbs, acting as the bank’s “eyes and ears”.
“They needed to sell it and needed to do a sale process that would stand up to scrutiny. They were going to take a huge hit and they asked me to go on the board to oversee the whole thing,” Hobbs said.
Robert Dix was appointed as chair of Siteserv’s sale sub-committee. Dix was a senior non-executive director of the company. He and McFadden were good friends, sharing business interests — both were involved in Grafton Recruitment — and had an interest in health and fitness, according to Dix.
He was in McFadden’s “bootcamp” circle and, through this, met Denis O’Brien, first in Crete in 2010 and again in 2011. On each occasion, Dix, like McFadden, flew home on O’Brien’s private jet. But they didn’t consider themselves friends.
McFadden saw an opportunity in selling Siteserv. He wanted to keep a stake in the business after the sale, according to the commission.
He knew that O’Brien was the most likely of the bidders to allow that, “given their close friendship — whether as a finder’s fee or as part of the management incentive plan. He knew that if O’Brien was successful, he would “have an opportunity to rebuild his wealth”, the report said.
McFadden worked in the background, concealing his involvement from the bank, and the company advisers, KPMG.
He was supposed to have quit employment at Siteserv at that point; the bank insisted that his contract should be terminated. What IBRC did not know was that Brian Harvey continued to pay him as a consultant adviser.
O’Brien said McFadden was “central” to getting him involved, telling him “what a great business it is” and sending him a copy of the Information Memorandum — a highly confidential document setting out key information about Siteserv for bidders.
O’Brien hadn’t asked for the document and the commission said “no blame attaches” to him for this “unauthorised disclosure”.
McFadden got the document from a corporate financier who in turn got it from Des Carville of Davy’s, who was advising Siteserv. The commission described this as an “unauthorised disclosure”.
Denis O’Brien emerged as a bidder when the first rounds came in in December 2011 — a late arrival that took the bank by surprise, and with a bid range of €42-€48m, that ranked him in the final two of six.
At a meeting of Siteserv and advisers on December 9, 2011, there was much discussion about O’Brien’s bid and whether it was genuine. Both Dix and Harvey knew that McFadden was responsible for bringing in O’Brien but neither disclosed that. Dix said it “just didn’t occur to him” to say anything — he “certainly wasn’t hiding anything”. Dix did not disclose either that he was preparing to go on holiday with McFadden and O’Brien.
On Saturday, January 28, 2012, McFadden and Dix flew to Zurich together on one-way tickets with a commercial airline. They travelled to In Lain Hotel, near St Moritz, Switzerland. O’Brien and his friend, Paul Connolly, arrived the next day.
The Siteserv sale process was at a “crucial” stage, when second-round bids were due to land, according to the commission. But it was coincidence that the holiday was organised at that time.
On Monday morning, they rose at 6.30am, went for an early-morning run, followed by an afternoon of cross-country skiing and dinner in the hotel that night.
Over breakfast, McFadden talked to O’Brien about his debts and his and Harvey’s potential shareholding in the new company if the tycoon’s bid was successful. When Dix turned up at their table to join them, McFadden said: “Oh Denis, here comes the Siteserv man, we better shut up,” and they switched subject to the “weather”.
Later that morning, O’Brien broke his heel and Connolly went with him to hospital. The group had one last dinner that night at a restaurant in the village, O’Brien with a boot strapped to his ankle.
Before dinner, Dix took an important conference call in his room from Siteserv’s corporate finance advisers. The second-round bids were in, including O’Brien’s. Dix said he didn’t disclose the phone-call over dinner that night and the commission concluded that there was “no discussion about, or reference to, Siteserv that evening”.
O’Brien flew home next day on his private jet. Dix and McFadden finished the holiday and booked their own flights back.
Back in Dublin, Dix was straight back into chairing meetings about the Siteserv sale with advisers and with IBRC. He didn’t disclose that he had been skiing with one of the bidders.
A few days later, an email arrived requesting exclusivity for O’Brien in return for increasing his bid to €48m.
It was one of the most important decisions made by Siteserv during the sale process, according to the commission. It would make O’Brien the preferred bidder, to the exclusion of all others, for a defined period, with a view to concluding a transaction.
Four days after returning from holiday, Dix “led the meeting at which it was decided that exclusivity should be granted to Mr O’Brien”, and a subsequent meeting to approve that decision.
Siteserv was sold to Denis O’Brien’s Millington company for €45.4m with a write-off of €118m.
There were grounds for granting exclusivity. The bank believed Siteserv could collapse, there was a threat that O’Brien could walk away and his was the less conditional deal.
But the commission found the process was “tainted”. Dix did not disclose the holiday with O’Brien. Harvey did not disclose that he stood to gain from O’Brien’s bid, with the prospect of shares in O’Brien’s new company, or that McFadden had been helping O’Brien.
McFadden said bootcamp was just a holiday. The commission found that ultimately it had no influence on O’Brien’s bid. However, it noted: “It is clear Mr McFadden thought that this bootcamp trip with Mr Dix might assist Mr O’Brien’s chances of being successful in his bid,” and help McFadden secure a finder’s fee if it was successful.
Before the sale was final, Harvey had also asked O’Brien to help get him a writedown on his IBRC debt. O’Brien called Richard Woodhouse, who said ‘no’, and that was it. The commission found nothing improper in O’Brien doing this but Harvey never disclosed this to his board.
Certain directors of Siteserv paid themselves generous bonuses. Three of the directors did not disclose this to the IBRC or Siteserv shareholders.
Harvey’s bonus was €350,000, Niall Deveraux’s €175,000, Dix was paid €100,000 and Hugh Cooney €60,000. IBRC would have objected, had it known, according to the commission, and the money would have been put against Siteserv’s debt.
The bonuses cost the bank — ultimately the taxpayer — €802,000
Harvey left Siteserv in 2013 with an exit package worth €3.196m, including more than €2m for his shares and a €243,000 bonus, a “consultancy agreement” of €9,000 a month for 18 months and €40,000 to pay off his car loan.
McFadden got a finder’s fee of €480,000. Harvey and McFadden were each found by the commission to have concealed their assets from their creditors, from the Revenue Commissioners and in McFadden’s case, an adjudicated bankrupt, his official assignee.
Two O’Brien companies used to acquire Siteserv, Cathkin Holdings/Millington, were drawn into McFadden and Harvey’s complicated arrangements. A submission said the companies were categorically not party to any “plan” on the part of McFadden and Harvey.
The Taoiseach sent the commission’s report to the Revenue Commissioners, the Special Liquidators of the IBRC, the Corporate Enforcement Authority, the Central Bank and the Official Assignee in a bankruptcy case.
Timeline of investigation
March: Siteserv sold to Denis O’Brien’s Millington for €45.4m, with state bank IBRC writing off €118m in loans
April: Rival bidder Altrad says it would have paid more, generating political storm
July: Siteserv subsidiary wins contracts for installing water meters
April: Catherine Murphy TD obtains FOI records disclosing tensions between IBRC and finance officials
Government announces review of IBRC deals, including Siteserv
May: O’Brien injuncts RTÉ over planned report on his banking affairs with IBRC based on leaked records
Murphy makes new Dáil claims, including that IBRC gave a preferential interest rate to O’Brien
June: Government establishes
commission to investigate IBRC decisions, starting with Siteserv
September: Commission report finds:
IBRC acted in good faith
Allegations of insider trading, and any preferential treatment of O’Brien by IBRC, unfounded
Siteserv provided bank with misleading and incomplete information
“Below the surface” activity during the sale process “manifestly improper”.
Sale was so “tainted by impropriety and wrongdoing”, that the transaction was not commercially sound
IBRC could have recouped €8.7m more than the €44.3m it got for Siteserv
Catherine Murphy “fully entitled” to protect her sources in refusing to give evidence to commission
https://www.independent.ie/irish-news/news/siteserv-the-story-behind-an-incendiary-deal-41979516.html Siteserv: The story behind an incendiary deal