Fintan O’Toole: Irish banks have got away with major fraud

Gardaí have yet to investigate how thousands were tricked into switching mortgages

by Fintan O'Toole

‘The governor of the Central Bank Philip Lane told the Oireachtas Finance Committee that it must wait and see what enforcement action will be taken against individuals in the banks. But we’ve waited at least six years and seen nothing.’ Photograph: Eric Luke

June 13th, 2013. Matthew Elderfield, the financial regulator who was brought in to restore some credibility to the Irish banking system after the great debacle, is at the end of his three years in Ireland.

He is making his final appearance before the Public Accounts Committee, and he wants to issue a warning.

“We must”, he says, “be wary of suffering amnesia when it comes to the financial crisis.”

He signals the onset of the smug belief that the banking system is now fixed for good.

“As a supervisor one is almost always playing catch-up with the industry, and it is dangerous to think one will get to a point when one can rest on one’s laurels … It is also especially important to be vigilant against backsliding.”

Then, as a very deliberate parting shot, Elderfield talks about impunity, the way the Irish legal system lets white collar criminals, including bankers, away with so much.

“If the committee would not mind a small digression about accountability for individuals … There is an open issue about how effective the system is, if I can call it that – that is, ourselves, the Garda and the Office of the Director of Corporate Enforcement – and about being able to ensure individual accountability through the enforcement and sanctions process.

“We have taken a lot of enforcement cases against firms – we have been very successful in that, I think, in terms of raising standards there – for systems and controls lapses, for misselling and for overcharging, but it is much harder to take cases against individuals … A reflection I have is that white-collar crime seems to be an area in which the system is just not operating well in terms of being able to tackle that. It is too protracted.

“The deterrent value of taking actions against firms is good, but the deterrent value of taking actions against individuals is much better.”

Tracker mortgages

Now fast forward to December 20th, 2016, and a meeting of the Oireachtas Finance Committee. Philip Lane, the relatively new governor of the Central Bank, is giving evidence.

One of the things he is asked about is the appalling scandal in which the banks deceived at least 15,000 of their customers into moving from tracker mortgages to considerably higher interest rates, often at dreadful personal as well as financial cost.

It is clear that this defrauding of customers was systematic and deliberate. It operated in 15 banks – essentially the entire Irish system – and so far as we know there is not one case of a “mistake” favouring the customer.

It raises in the starkest way exactly what Elderfield was talking about: individual accountability for misselling and overcharging.

Interestingly, Lane told the committee that the Central Bank would “take all necessary action to hold regulated firms and individuals to account for failures in regard to tracker mortgages” – “failures” and “individuals” being the interesting words.

In the first place there were no failures: the bankers succeeded in doing what they set out to do, which was to deceive their customers and take their money.

As for holding individuals to account, it sounds promising.

Until we remember that the Central Bank knew about much of this crookery going all the way back to 2010 when Bank of Ireland admitted fleecing 2,100 customers.

Deception

The Criminal Law (Theft and Fraud Offences) Act 2001 says: “A person who dishonestly, with the intention of making a gain for himself or herself or another, or of causing loss to another by any deception induces another to do or refrain from doing an act, is guilty of an offence.”

This offence is punishable by a fine and/or up to five years in prison. I can’t find the clause that says the law applies to misselling a second-hand car but not a mortgage.

We know that at least 15,000 people were deceived by bankers, and that they suffered considerable loss as a result. About 100 families lost their homes.

Over the lifetime of these mortgages the amount involved in this attempted bank heist was at least €500 million.

Yet in the six years since the Central Bank discovered this systematic deception we have no evidence of the Central Bank calling in the Garda to investigate what seems, on the face of it, to be multiple and organised crimes.

Legal consequences

Who devised this system-wide scheme? Lane thinks it a coincidence that all the banks did the same thing.

“I am pretty sure they know that the legal consequences of cartel-like behaviour would be devastating for them. I see no evidence of that kind of cartel-like behaviour.”

How does he know that when there has been no criminal investigation?

Who issued the instructions? Who ordered staff to keep schtum when customers were crying on the phone? And will any of these people be prosecuted?

Lane told the committee that it must wait and see what enforcement action will be taken against individuals in the banks.

But we’ve waited at least six years and seen nothing.

And there are words we have not read or heard: law, crime, police. Until we do it is hard to believe that the culture that led to the crash has not survived its consequences.

Source: Irish Times, Jan 3, 2017

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Tyrrelstown evictions show the nakedness of our democracy

by Fintan O'Toole

Martin Maloinowsk is among the familes facing notice to quit their homes in Tyrrelstown. Photograph: Nick Bradshaw/PA

One of the easiest things to remember when you study Irish history is the programme of the Tenant Right League, established in 1850. It campaigned for the Three Fs: fair rent, free sale and fixity of tenure. The eventual winning of those demands was a huge part of the emergence of modern Irish democracy: the underlings becoming a political force that had to be reckoned with. And now, 166 years later, we have the Three Fs again. As the people of Tyrrelstown know only too well, the new Three Fs are two fingers and a “feck off outta here”.

Or as Rick Larkin, the property developer at the centre of the Tyrrelstown evictions, put it in the Sunday Business Post: “As a tenant your accommodation is a temporary arrangement. It is not permanent because you don’t own the home and you don’t have security of tenure.”

These exact words could have been spoken by a titled landlord in 1850.

We have a weirdly contradictory relationship to our history. On the one hand it stirs us and moves us. The commemorations of the 1916 Rising have real force for most of us. Beyond the crassness and the flag-waving, there is a genuine desire for a connection to a common past, a shared inheritance of struggle for collective dignity. That is a fine thing.

Yet on the other hand this sense of history is curiously abstracted. It is cut off from any real notion of what’s actually happening in the place we inhabit.

The point of the shared inheritance of struggle should be that it makes us feel empowered. Instead, it tends merely to make up for our lack of power. The pride we take in the past seems only to compensate in some strange way for the shame of our current condition.

We are masters of irony, though some of it is so heavy-handed that it would get you thrown out of a creative writing class. Consider Boland’s Mills, one of the main sites of the Rising. It is a resonant place in the history of the State because it was his command at Boland’s Mills (and the luck of being the only such commander to survive) that gave Eamon de Valera his mythic authority as apostolic successor to Patrick Pearse.

Do you know what’s happening to Boland’s Mills now? It is being rebranded. Boland’s Mills is becoming Boland’s Quay. Nama is using €170 million of public money to develop, through the giant British property company Savills, an enormous scheme for 30,000sq m of office space, with some high-end apartments and shops. Planning process This is the biggest construction project in the city in the last decade. It was rushed through the planning process in less than a year under the fast-track strategic development zone process. And this scheme is in turn part of Nama’s €7.5 billion development programme for 20,000 new homes and four million square feet of commercial space in Dublin’s docklands.

Dublin has not seen a government-driven development scheme on this scale since the 18th century.

Apart from the symbolism of turning the historically laden Boland’s Mills into the history-free Boland’s Quay, this tells us about two big things.

One is the sense of priorities. Here we have the State mobilising vast resources to develop commercial offices and homes for the private market. Yet this same State is unable to stop communities like Tyrrelstown from being torn apart by the rules of that same market. And it’s unable to act as a developer of public and social housing. The power of the State is skewed away from the needs of citizens and towards market needs.

The other thing that is happening here is the absence of democracy.

Aosdána, the official body of artists, has accurately described the Nama plan as “one of the most significant actions ever proposed for the city of Dublin by the government”. It is being done by a public agency on behalf of the citizens. Yet those citizens are locked out of the process. Social needs None of us gets a say either on the principles of the State prioritising private commercial development over social needs or on the actual plans.

They may be on the same site but it’s a hell of a long way from Boland’s Mills to Boland’s Quay.

For all their failings, the rebels believed the point of a republic was to shift power from remote authorities to Irish citizens acting collectively. How’s that working out for us? Are tenants any more secure now than when they were subject to the whims of ascendancy landlords? Is Nama more answerable to Irish democracy than Whitehall mandarins were in 1916?

Next week we’ll be waving our Tricolours with pride. But we should not let them be used as fig leaves to cover the shame of our lack of collective power and the nakedness of our democracy. We need not just to celebrate our own history but to live it.

Original article: Irish Times, March 22, 2016

Read full story; RTE March 14, Tyrrelstown tenants meeting over eviction notices

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Top appointment at Irish Water does not suggest thirst for public service reform

Opinion: It’s simple – if you’ve been in charge during a major screw-up you don’t get promoted

Click to Play.  Top appointment at Irish Water does not suggest thirst for public service reform. Video: Darragh Bambrick

Fintan O'Toole
Tues Jan, 2014

The State lacks many things but a sense of humour is not one of them. Just as the head of Irish Water John Tierney was dropping the news that he had spent €50 million on consultants, Brendan Howlin was advertising for submissions to a consultation process on accountability for senior public servants, to “help build trust among citizens that effective and well-informed choices are being made as to how taxpayers’ money is spent”. The comic timing is exquisite.

So here’s my submission to the consultation process: if there were accountability for senior public officials, John Tierney would never have been appointed as managing director of Irish Water. It’s not a complicated rule: if you are in charge of a major screw-up, you shouldn’t get promoted. John Tierney was Dublin city manager from 2006 until last April. On his watch, we had one of the most egregious failures in the recent history of Irish local government: the almighty debacle of the Poolbeg incinerator. The handling of key parts of this project, involving close to €100 million, has been damned by the local government audit service (LGAS) and by the European Commission.

No detailed budgets
The LGAS report on spending by Dublin City Council for 2011 includes a special appendix on the Poolbeg project. It raises very serious concerns about the controls that were exercised in the spending of €80 million of public money (the cost has since risen to over €95 million): “it is evident that the financial management, as part of project management by the Environment and Engineering Department for this project, has been weak. There needed to be evidence of much more comprehensive oversight in monitoring and controlling expenditure. No proper classification of expenditure on an invoice basis was available to account for monies spent on this project at the initial audit stage (April 2012) . . . The lack of financial reports . . . indicated that the financial control procedures in place were not adequate for such a project. There is no evidence of monitoring of detailed budgets or financial forecasts tied into project schedules or that detailed monthly/quarterly reports were examined to control expenditure apart from client representative summary reports and cumulative cost centre reports presented to Dublin City Council Management. It is also noted that the Project Executive Board did not meet on a formal basis and therefore no minutes of meetings were retained.” To summarise: with €80 million of our money at stake, no adequate monitoring of detailed budgets and no minutes of board meetings.

Unlawful spend
One aspect of this lax control is especially relevant to Irish Water: a ballooning and unlawful spend on consultants. The project became a bonanza for a company called RPS Ireland. It was hired in 2001 to provide “client representative” and PR services, long before John Tierney became city manager. But the gold rush continued under his reign. RPS’s contracts in 2001 were for €8.32 million. By the end of 2011, it had been paid €28.44 million, which subsequently rose to €32 million. This includes, for example, €686,344 for “miscellaneous”, €1.9 million for “expenses” and €3 million for “public relations”.

This spending wasn’t just badly monitored, it was unlawful. By 2005, shortly before John Tierney took over, RPS was already receiving over 50 per cent more money than it had contracted for. When this happens, procurement guidelines demand that the contract has to be readvertised. This was not done. Effectively, RPS was awarded an additional contract worth €24 million without any public tendering process.

The European Commission, acting on a complaint from two citizens, Joe McCarthy and Valerie Jennings, found that this created an “illegal situation”.

The building of a replacement terminal for a firm that had to move to accommodate the incinerator was contracted at €11.9 million but the council under John Tierney paid €22 million. But the deal that RPS got is breathtaking in one specific respect: RPS, as a major beneficiary of the project, was also contracted to manage the project’s finances. It was in charge of managing its own expenditure. Even more wonderfully, it seems that one of the things we paid RPS for was defending the awarding of its own unadvertised contracts. Tierney told the LGAS that: “complaints to the Competition Authority and the EU Commission have all required the experience of the Client Representative [RPS] to prepare the responses.”

Damning report
The damning LGAS report was published in November 2012. John Tierney was appointed head of Irish Water in January 2013. Two of his key appointments for his new team at Irish Water had previously worked for RPS. Irish Water’s head of asset management Jerry Grant was managing director of RPS until August 2012. Its head of corporate services Elizabeth Arnett held the same position at RPS until December 2012. John Tierney has stressed that they were appointed through an “open recruitment” process.

Source: Irish Times Jan 14, 2014

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