Mr. Mark Griffin:

There are a few issues involved in this, which is probably one of the more controversial aspects of the whole project. The Deputy is right that the letter of offer that was issued listed in the annexe an extensive list of items that the project promoters would fund themselves. That list included the €1.3 million Nortel equipment. When the payment claim was made we were not aware at the time that Aurora would not be part of the project ultimately. The payment claim was made in November 2004 and Aurora withdrew from the project in December 2004. At that time, on the face of it, the Nortel racks would have been required to light the Aurora dark fibre. That does not obviate the fact that the Nortel racks were meant to be a contribution-in-kind by Bytel to the project. The conclusion drawn in the Northern Ireland Audit Office, NIAO, report was that in the face of the possibility of EU funding being lost due to an impending N+2 deadline, it was agreed that the Nortel racks could be grant aided within the first claim. I presume the assumption was made that there would be an opportunity later in the process to claw back any moneys from the subsequent and final claims that would be made so that the overall figure of €4.3 million that was to be grant-aided from INTERREG would not be exceeded.

The other issue which arises with regard to the Nortel racks is that of their valuation. The ASM review and the whistleblower allegations that fed into that concluded that the Nortel racks were only worth a fraction of the value of the €1.3 million claim. I believe a figure of €30,000 was put on them. In mitigation, I would draw attention to the economic appraisal of the Bytel project that was conducted in 2004, prior to the project being approved. In that appraisal, Deloitte valued the Nortel racks and deemed that the figure of €1.3 million was more or less in line with the market price for these racks. The ASM report concluded that on balance, based on the information provided to ASM, it was appropriate in November 2004 "to rely on the Deloitte economic appraisal". When one looks at what ASM subsequently concluded following its evaluation of the four payment claims that were submitted to the Department of Enterprise, Trade and Investment, the €1.3 million racks were discounted in terms of their entitlement to be eligible for INTERREG funding and that was on the basis of the fact that they were to be a contribution-in-kind by Bytel to the project.

There is a range of issues surrounding the Nortel racks and I understand that they are one of the issues which are the subject of the statement of claim for the writ in Northern Ireland. That said, we need to distinguish between what was known at the time and the information that was available subsequently. What was known at the time was-----