Chairman:

Before we begin I remind members, witnesses and persons in the Visitors Gallery to make sure their mobile phones are completely turned off for the duration of the meeting. It is not sufficient for members to put their phones on silent mode as this will maintain a level of interference with the broadcasting system.

I welcome Mr. Joe Keeling, chairperson of Horse Racing Ireland, Dr. Meta Osborne, vice chairperson, and Mr. Moloney and Mr. John Powell who are members of the board. I thank them for coming before the committee here today to discuss the issues surrounding the reappointment of the chief executive of Horse Racing Ireland. I also welcome other board members to the Visitors Gallery.

Before we begin I am required to read the privilege notice. Witnesses are protected by absolute privilege in respect of their evidence to the committee. However, if they are directed by it to cease giving evidence on a particular matter and they continue to do so, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable.

Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official either by name or in such a way as to make him or her identifiable.

Before I call on Mr. Keeling to make his opening statement, I understand that Dr. Osborne, vice chair, and other members of the board, Mr. Moloney and Mr. Powell, wish to make opening statements. Is that correct? Yes. The procedure is that I will ask them to make their opening statements then I will go to the members for three questions at a time and then I will revert back to the witnesses. Is that agreed? Agreed. I Invite Mr. Keeling to make his opening statement.

Mr. Joe Keeling:

I thank the Chairman for the invitation to attend here today. The board agreed that I would appear today with my three fellow board members, Dr. Meta Osborne, Mr. John Moloney and Mr. John Powell. I am chairman of Horse Racing Ireland. I am also chairman and former CEO of the Keeling Group that employs in excess of 1,700 people. I have a number of my board colleagues here with me today.

Horse racing is a life long passion of mine. I have been a sponsor, an owner, a breeder and a racegoer for many years. Our industry returns over €1 billion every year to the Irish economy and employs more than 14,000 people. It is one in which Ireland has natural advantages. I am confident that we can grow it into a €2 billion industry, but to do so we need to have the best team in place.

I apologise to this committee about the way that the appointment process was handled. It could have been done better and I take responsibility for this matter. When I became chairman of Horse Racing Ireland, I became aware that Mr. Brian Kavanagh’s contract was due to end in September 2016. I decided to look for an extension because I took the view that Irish racing needed to retain his skills and expertise. This was due to the specialist knowledge that he brought to the position and the need for stability and experience at a time of much change for the organisation.

The Government's guidelines on this area allow exceptions to be made where the person brings scarce expertise or special qualifications to a role, and I believe that this is a case in point. In 2011, the HRI board asked the then chairman, Mr. Denis Brosnan, to deal with the Department of Agriculture, Food and the Marine regarding the CEO’s contract and his ability to be reappointed. This task passed to me when I took over from Mr. Brosnan. I accept that there were problems with the sequence of events and the communications between myself, the Department and the HRI board but that is all. There have been errors but no wrongdoing. I reject claims that Departments or Ministers were intentionally misled or that I misrepresented the views of the board in my dealings with the Department. The board has since confirmed this, most recently in a statement that was issued after its meeting on 27 September.

There has been much said on the issue of a business case for Mr. Kavanagh’s reappointment that the board had not reviewed. What is referred to as a business case is in fact points made in a series of letters between myself and the Department of Agriculture, Food and the Marine in terms of extending the contract. The Department used the term business case in its briefing notes to the new Ministers that were published on its website in May.

I was always aware that it was a decision for the board of HRI to approve an appointment of a chief executive but first I needed to establish the position of the relevant Departments. I made this my priority so I could present the full facts to the board. This took longer than expected, partly due to a general election and the absence of a Government for three months. The matter has been dealt with by the HRI’s remuneration committee since April of this year but, with hindsight, should have been brought to the board earlier.

The appointment was approved by the board at its meeting on 21 July on the same terms, conditions and salary as the previous contract. At that meeting, the board agreed that Mr. Kavanagh was the right person for the role. The concerns raised were around the process and the issue of succession planning within the organisation. Dr. Meta Osborne, vice chairperson of HRI, will shortly outline the measures that the board has now put in place to ensure that such a situation does not arise again. The board is satisfied that Mr Kavanagh’s reappointment is the best outcome for the HRI and the industry at this time. Both the board and Mr. Kavanagh have agreed that this will be his final term as chief executive.

Horse racing is a great industry. Only last week, in the most prestigious flat race in the world, Irish bred horses filled seven of the first ten places and Mr. Aidan O’Brien became the first person ever to train the horses ranked first, second and third in the race. 2016 has been a record year on the track for Irish horses and we have just completed a successful yearling sales season. Racecourse development is happening around the country and, thanks to the new offshore betting tax regime, the net cost to Government of funding horse and greyhound racing this year will be almost €20 million euro lower than last year.

In conclusion, I once again express regret at the issues that have arisen from this process and confirm that the board have taken measures to address this governance matter for the future. I ask all parties to unite behind this industry and work together in facing the challenge of delivering a €2 billion annual return to the Irish economy.

Chairman:

I thank Mr. Keeling for his presentation. I call Dr. Osborne, vice chair of the board, to make her opening statement.

Dr. Meta Osborne:

I thank the Chairman for the opportunity to appear before the committee today.

My name is Meta Osborne. I am a veterinary surgeon with my practice being predominantly focused on mare reproduction and stud medicine. My husband and I are also thoroughbred breeders and operate a stud farm in County Laois. I have served as a member of the Veterinary Council Of Ireland from 2000 to 2013 and was president of the council from 2005 to 2007. I was appointed to the board of Horse Racing Ireland in December 2013 for a four-year term. I have been a member of the Turf Club since 2005 and was appointed senior steward in December 2015. Following my appointment to the board, I served on the audit committee of the HRI for two years until last December.

I am on record at the board as saying that I thoroughly enjoyed my time on the audit committee. It gave me a fresh perspective on the work of HRI and reassured me that our processes and procedures stood up to scrutiny when audited. This is confirmed by the fact that the annual audit reports by the Comptroller and Auditor General have never been qualified in any respect. The specific formal audit of corporate governance within HRI by our internal auditors, that was carried out most recently in 2015, has never given rise to any significant concerns.

In my experience, both as a board member and audit committee member, I can confirm that the importance of proper corporate governance is recognised within Horse Racing Ireland. Corporate governance is one of those abstract phrases that must be lived to become a reality. We are a diverse board that is comprised of people from a variety of backgrounds. We are here before the committee today because, in the matter under scrutiny, we may not have lived that reality and our processes have been found wanting. We recognise this, and the chairman of the board has already expressed his regrets.

I fully supported a recent request for mandatory training in corporate governance for all board members. At our next board meeting at the end of this month I understand that we are due to have a detailed briefing on the new code of practice for the governance of State bodies from our legal advisers, which I welcome.

I first became aware that there was a process under way regarding the reappointment of the CEO when I was asked to attend a meeting of the appointments and remuneration committee on 14 April of this year. I was uncomfortable that the committee had a membership of just two and that the terms of reference had not been updated since the days of the Irish Horseracing Authority. It was explained to me that revision of the terms of reference had been on hold pending the enactment of the new legislation. One of the items on the agenda was the reappointment of the CEO. I felt at that first meeting that I did not have enough time to consider what would be a very important issue for the board. I believed that it was imperative that our processes, procedures and decision-making stood up to the closest scrutiny.

Given the extreme complexity involved, I felt it prudent, as a board member, to invoke my right to seek independent legal advice. I also requested that the committee be expanded to three members and this was sanctioned by the board.

In the light of the reservations I had expressed and pending receipt of the external legal advice, the committee was not in a position to make a recommendation to the board meeting scheduled for 18 April on the reappointment of the chief executive officer. I was given the opportunity to review two legal opinions which had previously been prepared on the legal complexities surrounding the chief executive officer’s contractual history and was happy a third opinion would not change matters.

The remuneration committee, now expanded to three members, subsequently met on three occasions in May and June. After extensive deliberation we were satisfied to recommend to the board the reappointment of the chief executive officer, mindful of the fact that the decision was ultimately one for the board.

The board then met on several occasions to consider the reappointment of the chief executive officer. These meetings involved open and frank discussions, both about the reappointment which I fully supported and the processes involved. Arising from this, the board has put in place robust and detailed procedures to cover management development and succession planning in the organisation and the timings and processes to be adopted in the recruitment and appointment of the next chief executive officer. In particular, I welcome the proposal for the introduction of a performance management and development programme for senior executives within HRI.

I am absolutely satisfied that there has been no wrongdoing and no bad intent throughout the process. As a vet, my training has taught me to look at the reasons a problem has developed. More importantly in the here and now, it has taught me to carry out a clinical examination and formulate a treatment plan to make the sick foal better or to help the barren mare go into foal. The priority for me is the patient and its prognosis. We ask about what happened previously in order that we can learn for the future. There were problems with the process for reappointing the chief executive officer of HRI, but lessons have been learned. I believe the prognosis for the patient is excellent. It is a robust board and we will be stronger because of what we have been through.

Chairman:

I thank Dr. Osborne and ask Mr. Moloney to make his opening statement.

Mr. John Moloney:

I am chairman of the Association of Irish Racecourses and last year retired as manager of Galway racecourse. I have been on the board of Horse Racing Ireland, HRI, since December 2010. I am grateful to have the opportunity to appear before the committee.

I have two simple points which I would like to make. First, there is no question in my mind that Ministers were not intentionally misled. The committee heard from the chairman, Mr. Keeling, and I would like to speak as one of the other board members. I have been on the board throughout the process and it is worth noting that five of the current board members were also members in September 2011 when the chief executive officer’s previous contract was concluded. It is a board which represents all sectors of the industry. From 2011, I was aware that there were outstanding issues with the chief executive officer’s contract. I was satisfied that the chairman was dealing with the relevant Departments and would come back to the board when he was ready to do so. The preference of the board would have always been to receive permission to extend the chief executive officer’s contract. However, all options could be considered once the position of the Department was known.

The legislation is clear. It is a function of the board to appoint the chief executive officer. At our last meeting the chairman brought the board through all of the correspondence on this matter, including the various letters and meetings with the Department of Agriculture, Food and the Marine. I have read all of these letters and I am satisfied that they reflect the wishes of the board. At our meeting on Tuesday, 27 September, the board agreed that there was no intention to incorrectly inform the Minister, nor had the board’s views been misrepresented. I am clear that I was not misled and do not believe the board was misled. I accept that the timing and communication could have been better, from which there are lessons to be learned.

There is no doubt in my mind that Mr. Brian Kavanagh is the correct person to fill the position at this time. I have worked with him for several years and witnessed him doing his job at first hand. He has been particularly helpful to racecourses in securing new media rights deals and helping to create racecourse capital development funds. The job is a complex one, with many stakeholders and interests to be managed, and requires a knowledge of and expertise in all aspects of the racing, breeding and betting sectors. Mr. Kavanagh possesses this knowledge and experience and is well respected in international racing circles. His reappointment has been broadly welcomed within the industry.

We all regret the fact that this situation has developed. There is no doubt that the process could have been managed better, but I am confident the measures that the board has now put in place will ensure it will not happen again.

Chairman:

I thank Mr. Moloney and call on Mr. Powell to make his opening statement.

Mr. John Powell:

I was nominated to the board of Horse Racing Ireland, HRI, by the joint racing regulatory bodies and received my letter of appointment from the Minister on 30 May 2016. As one of those who voted against the reappointment of the chief executive officer for a third term, I wish to explain that this was because of a concern shared by others that it would be in breach of the Government’s guidelines and fail the test of good corporate governance. I expressed my concerns at what was effectively my first board meeting in July. It was not about the individual and it should never have been dealt with as an eleventh hour issue. It was based on my belief it was a collective failure and that the matter should have been dealt with in the context of an open competition several months previously. The board voted by a majority to accept the reappointment. I accepted the majority decision.

Chairman:

I thank Mr. Powell.

Charlie McConalogue (Donegal, Fianna Fail)
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I thank the four members of the board of Horse Racing Ireland, HRI, for explaining their positions to the joint committee. I agree with them on the value of the horse racing industry to the country and the importance of the work carried out by HRI. I have no doubt that they would want to be somewhere else other than here today. However, there are significant questions to which we require answers.

Since the regulations on the appointment of chief executive officers to semi-State boards were introduced by the Government, a third extension was granted to the term of appointment of the chief executive officer of HRI who has been in place since 2001. There are questions about the thoroughness of how the Government approached this unprecedented appointment. There are also serious questions about the role of HRI which were not completely answered in the presentations.

Mr. Keeling accepted that things could have been done better and that there was no intention on his behalf to mislead the Minister or the Government. In his letter requesting a third extension of the term of appointment to the Secretary General of the Department of Agriculture, Food and the Marine on 16 December 2014 he stated:

Given his unique qualifications for the post, the positions he holds in international racing bodies and the value of his experience and expertise in the coming years, the board wishes to confirm Brian as chief executive officer and, I am, therefore, seeking consent to conclude a further contract.

This letter is presenting it as the board wished to confirm Mr. Kavanagh as the chief executive officer. Will Mr. Keeling elaborate on this? When we asked the Minister last week about this, he indicated that it was his view that it was the wishes of the board which were being expressed. Mr. Keeling outlined in his opening statement that it was his own view that it would be in the best interests of HRI.

Certainly, it was presented at the outset as the board's view. As such, I ask Mr. Keeling to elaborate on why that approach was taken and whether it would have been misleading in terms of the message being given to the Government.

A second extension of term was given to the CEO in 2009. Was it clear at that stage and did the Government clearly impose a requirement on HRI in giving that second extension that there should be no further or third extension and that should be the end of it in terms of any further extension? If that was the case, surely it was very remiss of the board and, in fact, a dereliction on the part of Horse Racing Ireland to fail to plan for that and to fully discuss at the board how that eventuality could be planned for.

There are questions about the handing down of the mandate which the previous chairman received from the board to Mr. Keeling on taking up the position. I would like clarification as to Mr. Keeling's exact understanding of the mandate and of what was asked of his predecessor. Did Mr. Keeling feel there was an onus on him as chairman to bring these matters to the board and to have them discussed? Why did he not do that? The following is something for the four board members to address. Were questions ever raised over the last three to five years at board level as to what the plan was for when the current CEO's contract extension would run out? If so, were the issues addressed? On the request the board made for a third extension, the case has been outlined as to the experience of the incumbent CEO, but were there other contractual considerations which were informing its view also? If so, can the board elaborate on them?

Dr. Osborne indicated that when she was on the remuneration committee she was given the opportunity to review two legal opinions which had been prepared previously on the legal complexities surrounding the CEO's contractual history. She said she was happy that a third opinion would not change these matters. Can she elaborate on those because it is a very distinct matter from the experience and credentials of the CEO in that it deals with contractual issues which seem to be very much at the heart of the considerations of the remuneration committee to the extent that two legal opinions were received? Dr. Osborne also indicated in her presentation that she first became aware that there was a process under way on the reappointment of the CEO when she was asked to attend a meeting of the appointments and remuneration committee on 14 April. Who asked her to attend that committee meeting? Was she appointed to it by the board? It does not say that certainly, but she says she was asked and has outlined that she had concerns following on from that in that she was one of two people on the board and was there because she was asked to be. Mr. Powell referred to the issue of a breach of Government guidelines and a failure of corporate governance and indicated that as the reason he opposed it. The contractual issues seem to run through the presentations as being very much to the forefront of considerations. Certainly, we need further clarification on that.

Did the chairman, Mr. Keeling, at any stage inform either the Minister or civil servants that he was scoping out the potential for a third reappointment and that it had not been discussed by the board? Was the Department made aware that it had not been discussed by the board and that he was scoping out its reaction and whether it would approve it or was the Department working on the basis, as far as Mr. Keeling was concerned, that he was engaging with it with full board approval and authority to seek this unprecedented third extension?

Tim Lombard (Fine Gael)
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I thank the board members and chairman of Horse Racing Ireland for their contributions this evening. It is very important to bring clarity and, hopefully, closure to this issue. We are all aware of the importance of the horse racing industry to the economy. Can I get some clarity on the actual process? It was well flagged five years ago that a new CEO would be in place by this time 2016. What succession planning and processes were put in place? It was not a surprise that the CEO contract had to be renegotiated or a new CEO appointed. What independent external advice did the board get on that? Did it advertise the role, were there applications and, if so, how many? If it did not advertise, why did it not take that step? It comes down to the whole issue of due process and the actual corporate governance. In a nutshell, as an entity, what process did the board put in place five years ago for the succession planning around this event? Did the board have a view five years ago that it had its man and would hold on to him in five years' time? Some people looking in take the view that this was never going to change. I assume we can get clarity on those issues because in a position of such importance for the Irish racing industry, transparency was very important for everyone. As such, we need to get clarity on the whole process, the timelines and how this decision was arrived at to bring us to where we are today. It is unfortunate because the board members are busy men and women and do not want to be in front of the joint committee.

Going forward, what process has been put in place to ensure that we are not in the same position in five years' time? The board has seen the mistakes of the past. Have we learned from them moving forward? Clarity is required. The witnesses might explain what advice the board got, from whom and when the process started. Did it start two years ago or five years ago? Was the position advertised? How many people applied? If it was not advertised, why was it not?

Paul Daly (Fianna Fail)
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I welcome the board and compliment them. While we have an issue at hand, the horse racing industry in Ireland is very strong. It is a matter of sentiment for many of the individuals here and the organisations who are represented. That cannot go unsaid. One glove does not fit all. While there is a negative aspect here today and this is the one we need to get to the kernel of, we cannot overlook all the positives. The chairman admits in his statement that this could have been done better and says he takes responsibility for it. If he could wind back the clock, what would he have done differently, if anything, to avoid the situation, the questions being asked today and the negative spotlight being put on this scenario?

Mr. Joe Keeling:

I will start with the succession planning. The hand-over to me took place over a three-month period prior to my start date in March 2013. Prior to March, I had meetings with the previous chairman. Part of that process involved issues regarding the chief executive's contract which were not addressed. I took it from that meeting and from my first meetings with him that the succession plan was Brian Kavanagh. When I took over in March 2013, I waited for 12 to 15 months until I was sure that I concurred with that myself. I used my experience over 40 years as director, chairman and chief executive of the Keeling Group. It was my decision and my judgment and I took the view that Brian was the best person for the job.

I took that view and I had unofficial contacts.

I believed the biggest issue with Mr. Kavanagh's reappointment was getting permission from the Minister. I had unofficial meetings with him. Members have all seen the letters. I was reflecting the informal board decision. Having been on a board for 45 years, I know when people are with one or not. I felt the board supported the view, and I proceeded with that. I believed there was no point in going to the board — this comes from my experience in a private company — until I was ready. To me, the big decision was getting permission from the Department. I focused on that. At all times, I acted in the best interest of Horse Racing Ireland.

Senator Paul Daly asked whether I would have acted differently had I to do this over again. I do not believe so. I would always have acted in the best interest of Horse Racing Ireland.

Dr. Meta Osborne:

I wish to add to this. There are two parts. I was asked when I was asked to attend the meeting of the appointments and remuneration committee. I was actually appointed to it in January and it did not meet until April. There was the usual notification that a meeting was to take place. At the committee meeting, we eventually got around to discussing the reappointment of Mr. Brian Kavanagh. Something that came out of that process was that we needed a succession plan for the future. When we came to the board with the recommendation that Mr. Brian Kavanagh should be reappointed, one of the very useful points that emerged from the discussions was that we should set up a special committee to examine that particular issue. That is what we did. There are three strands to it.

The first strand concerns having management development processes for senior management at executive level in Horse Racing Ireland with a view to identifying internal candidates who might be in a position to compete for the role of chief executive officer in five years' time. That was a very useful exercise.

Second, there is now a defined timeline that works backwards from 2021, when Mr. Kavanagh's contract is to terminate. There is a process working backwards whereby a job specification is to be drawn up, the position is to be advertised and an appointment is to be made with a six-month transition between the person taking office and Mr. Kavanagh finishing in the role. That has been a positive lesson learned from what has happened over the past little while.

Chairman:

The issue of the contract arose. Mr. Joe Keeling said-----

Mr. Joe Keeling:

I never focused for one moment on any legal issues. I focused on Mr. Brian Kavanagh, the most senior horse racing administrator in Europe, if not the world. He has done specialised work. He has a complete knowledge of the racing and breeding industry and holds senior positions with various international racing bodies. He has an unparalleled reputation nationally and internationally. I did not focus for one moment on the legalities.

Dr. Meta Osborne:

To balance that, I, as another member of the remuneration committee, did have some concerns about the legalities and that is why I asked for the third legal opinion. There were two legal opinions received by Horse Racing Ireland, one in 2011 and the other this year. They both concurred that there were complexities in this area regarding the potential for a contract of indefinite duration. In any of these circumstances, one puts all the issues on the table and balances out what is in the best interest of the organisation. I concur with the chairman when I say that, on balance, and with the contractual difficulties notwithstanding, the fact that Mr. Brian Kavanagh was the best man for the job would have been the point that swayed us in his favour.

Mr. Joe Keeling:

With regard to the fact that the role was not advertised, I took the view that Mr. Kavanagh had competed twice and won easily. I believed it was a waste of money to have him compete a third time because he still would have won, if that was the issue. That is why I did not focus on that.

Chairman:

Mr. Keeling could not have been convinced he would win it, of course.

Mr. Joe Keeling:

I was.

Chairman:

He was, even though there was no-----

Mr. Joe Keeling:

I was convinced he was the right man for the job.

Mr. John Moloney:

As one of the people present in 2011, I believe we had every confidence that the chairman was to deal with the outstanding matter of the chief executive officer's contract. As I said in my statement, the chairman was dealing with the relevant Departments and was to come back to the board when ready to do so. The then chairman, Mr. Brosnan, passed on the task to Mr. Keeling. I was waiting for Mr. Keeling to come back to us regarding this chief executive officer's position.

With regard to the view that Mr. Brian Kavanagh was the best man for the job, it is fair to say he has a wonderful record in Irish racing. He is a chartered accountant by trade. He was manager of the Curragh Racecourse and financial officer and chief executive officer of the Turf Club. He has been chief executive officer of Horse Racing Ireland since 2001. His experience and knowledge of this great industry, as it was referred to already today, is very good. He is chairman of the European Pattern Committee. He is chairman of the European and Mediterranean Horseracing Federation and also vice-chairman of the International Federation of Horseracing Authorities, which has 69 members. He has an excellent record.

The chairman was asked about whether there was an interview for the job. As the chairman stated, Mr. Kavanagh has gone through two interviews and won them. The possibility of anybody beating him would not have arisen.

Michael D'Arcy (Wexford, Fine Gael)
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Dr. Osborne said the legal advice was that there was potential for a contract of indefinite duration. Mr. Kavanagh had one or he did not.

Dr. Meta Osborne:

The advice was that there was potential that he had.

Michael D'Arcy (Wexford, Fine Gael)
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So the two legal opinions were that he had a contract for indefinite duration.

Dr. Meta Osborne:

Yes.

Michael D'Arcy (Wexford, Fine Gael)
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The important point to tease out is that there was no advertisement. The individual had indicated he wanted to stay on and the legal opinion was-----

Mr. Joe Keeling:

I asked him. I wanted him to stay on.

Michael D'Arcy (Wexford, Fine Gael)
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It was not Mr. Keeling's choice.

Mr. Joe Keeling:

It was not but I asked him.

Michael D'Arcy (Wexford, Fine Gael)
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There was no advertisement and the individual wanted to stay. The legal advice to the board was that he had a contract of indefinite duration.

Dr. Meta Osborne:

Mr. Brian Kavanagh never claimed to have a contract of indefinite duration. Our advice was that there was potential for that to exist.

Michael D'Arcy (Wexford, Fine Gael)
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I want to clarify this because it is the really important part. Although Mr. Kavanagh did not claim it, Dr. Osborne sought a legal opinion on his contract with Horse Racing Ireland. Did she ask whether he had one?

Dr. Meta Osborne:

Potentially.

Michael D'Arcy (Wexford, Fine Gael)
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Did Dr. Osborne ask whether he had one?

Dr. Meta Osborne:

Neither of the opinions I saw were ones I had requested. They were previously requested by Horse Racing Ireland. I was going to ask for a third one but when I saw that the two existing opinions were in agreement, I decided it would not be worth it.

Michael D'Arcy (Wexford, Fine Gael)
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Was Mr. Kavanagh made aware that if he wished to claim a contract of indefinite duration, he would potentially have been awarded it?

Dr. Meta Osborne:

I do now know.

Mr. Joe Keeling:

I never discussed it.

Michael D'Arcy (Wexford, Fine Gael)
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The conversation never got to that point.

Mr. Joe Keeling:

No, not with me.

Michael D'Arcy (Wexford, Fine Gael)
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I wish to draw attention to a letter to Mr. Keeling from Mr. Brendan Gleeson, not the actor but the assistant secretary general. Consider the last paragraph of the letter, which is dated 25 July. It is stated that, in addition, there are a number of points sanctioning the reappointment of Mr. Kavanagh. It claims that, in addition, the objective grounds for not offering the chief executive officer a contract of indefinite duration should be provided to the chief executive officer in writing prior to the date of renewal in accordance with section 8(2) of the Protection of Employees (Fixed-Term Work) Act 2003-----

Chairman:

Will the Deputy clarify the correspondence to which he is referring?

Michael D'Arcy (Wexford, Fine Gael)
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It is a letter dated 25 July 2016 from Mr. Brendan Gleeson, assistant secretary at the Department of Agriculture, Food and the Marine, to Mr. Keeling. The pages are not numbered but I am referring to the last paragraph on the bottom of the page I indicated.

Dr. Meta Osborne:

Will the Deputy clarify what point he is making?

Michael D'Arcy (Wexford, Fine Gael)
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I am asking the witnesses to explain the last paragraph.

Dr. Meta Osborne:

I am not an employment lawyer but I understand that provision must be included in a contract to ensure it does not continue to be a contract of indefinite duration. However, it is not my area of expertise.

Michael D'Arcy (Wexford, Fine Gael)
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The letter is addressed to Mr. Keeling. Will he explain the paragraph to me?

Dr. Meta Osborne:

To clarify, this was a request from the Department of Agriculture, Food and the Marine.

Mr. Joe Keeling:

Yes, and our human relations department would have replied to it. I did not get involved in the issue.

Michael D'Arcy (Wexford, Fine Gael)
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Will the witnesses clarify whether the Department was notified of the two legal opinions to the effect that Mr. Kavanagh potentially had a contract of indefinite duration? Was the Department aware of those opinions?

Dr. Meta Osborne:

I have no idea.

Mr. Joe Keeling:

The Department may have taken its own legal advice.

Michael D'Arcy (Wexford, Fine Gael)
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Does Mr. Keeling agree he should have made the Department aware of the two legal opinions received by Horse Racing Ireland?

Mr. Joe Keeling:

The Department may have known about them. It is too hard to recollect now. As I said, the Department may have taken its own legal advice.

Michael D'Arcy (Wexford, Fine Gael)
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However, HRI had two legal opinions and considered getting a third. On the basis of what the board had in front of it, the decision was taken not to go for a third legal opinion, which suggests the board members were satisfied with what was presented to them. My question is, if Mr. Kavanagh had a contract of indefinite duration and wished to stay in post, the role should not have been advertised and, in fact, it was not advertised. The point is that the position was not really vacant. Mr. Kavanagh's term may have ended but it was only a matter of course to have him reinstated.

Mr. Joe Keeling:

I never looked at it that way. I just made the case to the Department that he be reappointed. I never got into that.

Michael D'Arcy (Wexford, Fine Gael)
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I have another question but the Chairman has indicated my time is up.

Chairman:

I will allow the Deputy a supplementary question later.

Willie Penrose (Longford-Westmeath, Labour)
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When we had the Minister before the committee some weeks ago to discuss this matter, the first thing that struck me was that a cock-up was made in September 2011. Mr. Kavanagh signed his contract but two issues remained outstanding. In fairness to Mr. Keeling, who is doing his job for nothing and whose commitment to the industry is evident, he was left with a fairly difficult situation. The contract was never concluded as such and Mr. Kavanagh's employment, in effect, was left in free flow. Does Mr. Keeling agree that is what happened? The appointment in 2001 stretched out to 2009, which was beyond the seven years, 2009 stretched out to 2016, and now we are off again. Mr. Keeling was trying to resolve the matter because he knew there was a problem. He cannot deny that.

Mr. Joe Keeling:

I do not deny it.

Willie Penrose (Longford-Westmeath, Labour)
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I can see it all in black and white without even needing to see the correspondence. I put it to the Minister the last day that it was clear there was a problem. Mr. Kavanagh signed his contract but there was disagreement over two issues. One of the issues which held up the show, as I understand, was a provision that he was not to be reappointed to any position within HRI after his contract expired in September 2016. Is that correct?

Mr. Joe Keeling:

Yes.

Willie Penrose (Longford-Westmeath, Labour)
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Why was that not concluded as part of the contract? It is a difficult one for Mr. Keeling, in fairness, because he was not there. However, five of the members of the board at that time remain in position and should be able to deal with it. It is an important issue.

In 2011, the board failed in its duty to finalise matters and did not carry out its functions satisfactorily. Does Mr. Keeling agree with that? The effect was that he was left carrying the baby, which is the kernel of the problem. Is that not the reason Mr. Keeling wrote to the Minister in December 2014? He has told us there was no business plan but merely a series of letters put forward. To clarify, this is not about the individual in question. Mr. Kavanagh is clearly a highly competent, well qualified person, apart altogether from his horse racing expertise. However, it is somewhat unusual to make the case that because somebody is good at his or her job, that it is the end of the matter. It is far fetched to claim that the development of the Curragh would fall asunder if that person was not in position. There were a lot of other people who put their shoulder to the wheel to advance the Curragh redevelopment and all the other work that is going on.

We should not forget that €60 million of hard-earned taxpayers' money was given to Horse Racing Ireland. I was my party's spokesperson at the time and supported that allocation, notwithstanding that those were very lean times for most ordinary people, not many of whom would have had horses competing at the millions races. I was somewhat bemused to read a reference in the Irish Independenttoday to a member of the board of HRI congratulating Mr. Keeling and Mr. Kavanagh on playing their parts in securing funding for the organisation. This was great news, according to the board member, which put everything else into context. The message was that it was all about getting the loot and the corporate governance thing was only a side issue. It is not very encouraging for anybody to read that, especially people, for example, who are struggling to get a child into special needs provision. I was very irked when I read it.

The delegates have devised a succession plan that is effectively an insider's charter. It seems clear their intention is not to allow any outsider to compete for the position of CEO. This insider's charter means there never will be fresh blood at the top of the HRI. That is what the corporate guidance amounts to. HRI executives are being guided to compete for the position and, lo and behold, one of their names will come out of the drum. Why was there not an open competition? Mr. Kavanagh did attend for interview in 2009, but how many others were interviewed? We had a notorious row over anti-competitive practices at this committee a few weeks ago. What we are hearing today puts that in the shade.

As a barrister, I cannot understand why legal opinions were sought if no issue had arisen. The last thing one does is chase barristers or solicitors looking for legal opinions if there is no issue. It seems there was sufficient concern for somebody on the committee or board to be wise enough to seek an opinion in that regard.

When Mr. Keeling first communicated with the CEO, he was seeking a three-year extension of Mr. Kavanagh's term. Why was that changed to five years? On 2 May 2016, Mr. Keeling wrote to the Department indicating the CEO's salary would be lower than that paid to the CEO of the Turf Club. Does Mr. Keeling maintain that is the factual position? I contend it is not. There are very few CEOs who have exceeded the guidelines laid down by Government. I was there when those guidelines were drawn up and when there were cuts to the pay of every public sector CEO, withdrawal of cars and bonuses and so on.

I am very grateful to the delegates for coming here today voluntarily and if I am wrong on the next point I wish to make, I will be glad to be corrected. As I understand it, the board of HRI was not unanimous in its view on the reappointment of Mr. Kavanagh.

Mr. Keeling went to the Department with a letter listing all the positive things the outgoing CEO had done, including his international appointments and expertise and how important they were on the international stage - I do not doubt that for a minute. Then when he got the okay from the Minister, he brought back the consent. The Minister was going to hand out €64 million. No board could turn this down and say, "Well, Penrose has the approval of the Minister and with that is the €60 million. We would be shown to be very ungrateful souls". Mr. Powell has submitted a simple note, which I appreciate. I assume it was his board meeting in July that he was referring to.

Mr. John Powell:

That is correct.

Willie Penrose (Longford-Westmeath, Labour)
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In fairness to him, he still said that notwithstanding the €60 million coming to HRI, he was not happy with the corporate governance. That took a bit of doing and I salute people who stand by the correct thing to do in that regard. If the big issue in 2011 was the reappointment procedure, how can we say five years later there will not be another row? Is it written in a contract that the term is five years and that is it?

The Indecon report in 2012 was important and it made many recommendations. We went through them ad nauseamin committee and during the passage of the Bill. Will the board members commit to ensuring a value for money audit is carried out immediately in line with the recommendation in the Indecon report in the context of the funding that is made available to HRI? Will that be done without any further delay? Perhaps an independent review of corporate governance might be initiated as well.

Martin Kenny (Sligo-Leitrim, Sinn Fein)
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I thank the board members for attending. When the Minister appeared before us, he assured us that the questions we had would be more appropriately directed to them. I have no doubt that we will have to call him back because there are still some questions that need to be answered by him. Mr. Keeling said he met the previous chairman on a number of occasions when he was taking over. He said, "Brian Kavanagh was the plan". I do not understand how he could have been the plan when his contract clearly stated that his appointment could not be renewed for a third term. Mr. Keeling said he also did not focus on the legalities. As chairperson of the board, it is his job to focus on the legalities. He also said there was no point going back to the board with this because he knew when he had the board with him. I do not mean to be personal but that is quite an arrogant way of explaining the position. Surely, Mr. Keeling's job was to bring the board with him and to ensure if there were legal issues, he was aware of them and they were addressed. The legal position was Brian Kavanagh was barred from a third term and, therefore, the plan should never been Brian Kavanagh.

The business case, which was talked up a great deal when this issue emerged, turns out be a series of letters and correspondence that went over and back between board members. The Minister said when he appeared that the big part of the business case was the five-year plan for HRI. I have looked through the plan and while I expect the management of the industry is important, the plan does not state that it hinges on any single individual on this planet, let alone Brian Kavanagh. I, therefore, do not understand how he could be the only person that could possibly run this organisation. With the best of good wishes to the man, if something happened to him tomorrow morning, somebody else would have to be found. I do not understand how the board of an organisation in receipt of €60 million in taxpayer's money could act in such a way and expect to get away with it, and then say it had no other plan and it did not focus on the legalities. It is a flippant way of dealing with this issue.

Are many people awaiting reappointment who are not full members of the board? Were they all properly appointed by the organisations that were supposed to have nominated them? This comes back again to proper governance.

HRI is a sporting body. Yesterday evening, Special Olympics Ireland, SOI, was rightly commended by the President at Áras an Uachtaráin. SOI received €1.4 million in 2015 and €1.2 million in 2016 compared to €60 million for HRI. That is a huge issue. In 2015, €53.4 million was awarded in prize money at horse racing meetings and HRI contributed almost €35 million of that. I come from County Leitrim and I know many farmers and ordinary people who are struggling to survive and who have a nag or two. None of them makes it to the winner's enclosure. I expect that the €35 million was won by 20 wealthy individuals. We represent the people here and this represents a huge transfer of public money to the wealthiest in our society and I have an issue with that. As members of the board of a State body, the witnesses should also have an issue with that. Many issues in the horse racing industry need to be addressed but the issue of where all this money is going is one of them.

I have a question for Mr. Moloney. Has HRI just agreed to put €6 million into a champagne bar at Galway racecourse? If so, is that a proper use of taxpayer's money? Does Galway racecourse have other properties at home or aboard? Why should the taxpayer put money into this industry?

Chairman:

We are dealing with the appointment of the CEO.

Martin Kenny (Sligo-Leitrim, Sinn Fein)
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I understand that but we are also dealing with good governance and the expenditure of taxpayer's money. I rang about a medical card on behalf of a man last week and I had to explain everything about him. It is only right that the people involved in spending €60 million of taxpayer's money should be able to explain themselves.

Chairman:

Point taken.

Mr. John Moloney:

The Deputy specifically asked me a question about Galway racecourse. I am no longer manager of the racecourse but I represent Irish racecourses and HRI and the grant aid for the Tote hall and champagne bar and other amenities at Galway racecourse is €2.1 million. The racecourse is funding it to the value of more than €4 million.

Mr. Joe Keeling:

I will address the question of Brian's salary. The point made in the letter was that if his salary was reduced in line with the new guidelines, he would be paid less. That seemed to come out wrong. If his salary complied with the guidelines, he would be paid less. He is paid more now but if his salary complied with the guidelines, it would be less. That was the point that was made but it was taken up wrongly.

On the betting tax, the thing that stuck me when I came in initially was that I could not understand why the betting tax was so low. We have been pressurising the Government to increase the tax and there would then be no commitment from the Government to reduce the spend enormously. I agree with ccc. I could not understand over the past five or six years why the money should go to racing when it could be got back in betting tax. We have a proposal in front of the Minister to increase the betting tax to 2%, which would reduce all payments coming from the Government. However, that is a matter for the Government.

When I came in initially, I could not understand why the revenue from betting tax was so low. We have been pressurising the Government to increase the tax as there would then be no need for it to reduce the spend enormously. I agree with the Deputy in that regard. We have a proposal in front of the Minister to increase the betting tax to 2%. However, that is a matter for the Government.

Chairman:

What about Deputy Willie Penrose's questions on the value for money report?

Mr. Joe Keeling:

We have absolutely no problem in that regard. We are delighted with it. It is not an issue.

Willie Penrose (Longford-Westmeath, Labour)
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What about conducting an independent review of the corporate governance structure?

Mr. Joe Keeling:

I would have no problem with it, although I think the other one is more important. We did have a corporate governance structure going back to 2014. Every time we bring in new board members, we need to do it in accordance with governance procedures. We did it in 2014 and are still waiting. When I was appointed to the job in 2013, I was told I would have a new board by 1 March that year, but I still do not it. We are waiting for two Government appointees and it might be 2017 before it happens. It makes things very difficult when we are missing two Government appointees.

Mr. John Moloney:

To deal with one of Deputy Willie Penrose's points, he said the board had failed in its duty in 2011. I was a member of it at the time and, as I said in my opening statement, we instructed the then chairman to resolve the two issues that were outstanding. I cannot see why Deputy Willie Penrose says we failed in our duties.

Willie Penrose (Longford-Westmeath, Labour)
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Of course, it did.

Mr. John Moloney:

Everybody is talking about the €60 million of taxpayers' money. Betting duty receipts in 2015 amounted to approximately €31 million and the figure will rise to roughly €56 million in 2016 as a result of the Minister putting a 1% levy on all bets struck in Ireland with offshore companies. We were requesting him to increase the levy on betting to 2% in the budget, which would have ensured taxpayers would have had no liability. However, we would like to thank him for the funding of €6 million for the horse and greyhound racing fund. It was a three-year agreement.

Dr. Meta Osborne:

I would like to address Deputy Martin Kenny's point about sport. What is often forgotten is that while racing is a wonderful sport, it is also an industry. The €64 million coming into the industry is like a stimulus package. The Irish racing and breeding industry is worth something like €1.1 billion to the economy. We have a strategic plan from the board of Horse Racing Ireland, HRI, whereby we hope to grow the figure to €2 billion. It is not just a case of taxpayers' money going one way; it is actually stimulating growth.

This industry, business and sport has been my life. We have a stud farm in County Laois which my husband and I started in 2002, just after the new board of HRI and the new funding model came into being. The development of our farm has been in parallel with what HRI has been trying to do. A framework has been put in place to give people confidence to breed and raise horses in this country. People talk about where the prize money goes and say it goes to wealthy individuals. In fact, it encourages individuals to keep horses in training and pay training fees which help to pay stable staff, vets and farriers and for feed. That is where the €1.1 billion comes from. As I said, it is a wonderful sport, but it is also a very important part of the rural economy. There are stud farms and training establishments, if not precisely in the Deputy's constituency, pretty much all over the country, certainly in areas where there might not be other employment opportunities. It is very important that we get the message across that this is a positive story. While there may have been lapses and we are here to express our regret about the,, we want to look forward and make sure, first, that they do not happen again, and, second, that we concentrate on our big job, delivering that sum of €2 billion.

Chairman:

Deputy Willie Penrose referred to the unanimous decision of the board. Was that the case?

Mr. Joe Keeling:

Yes, at its last meeting on 27 September.

Willie Penrose (Longford-Westmeath, Labour)
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Mr. Powell has indicated he was not in favour.

Mr. Joe Keeling:

He did at the last meeting.

Mr. John Powell:

To clarify for Deputy Willie Penrose, I voted against the reappointment at the meeting on 21 July. At the meeting in September, after which a statement was issued, there was a concern that we had embarrassed not just one Minister but two. The motive behind making the statement was to try to bring some clarity to the position. The statement could and should have been better and should perhaps have brought clarity to the matter.

Martin Kenny (Sligo-Leitrim, Sinn Fein)
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My question about members of the board being properly appointed was not answered.

Mr. Joe Keeling:

Everyone who is on the board at the moment has been properly appointed.

Chairman:

Mr. Keeling said the board was still short two members.

Mr. Joe Keeling:

We are short two and there are a few changes to be made also.

Clare Daly (Dublin Fingal, Independent)
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I understand the other Deputies' frustration and I am not sure the delegates get it. It is a debacle and I am not sure they realise the seriousness of the issue. In layman's language, the reason we are here is that there is a belief the board, or at least a substantial part of it, was, in essence, bypassed by Mr. Keeling and perhaps one or two others who, basically, more or less went a solo run to strike a deal with the Department of Agriculture, Food and the Marine to reappoint Mr. Brian Kavanagh, specifically against the wishes of the Department of Finance and all rules of corporate governance for State bodies. That is serious. The board may ultimately have voted to back that position, but it is not accidental that it was faced with the decision initially in July, when the Dáil was in recess, and finally in September, when, exactly as Mr. Powell said, the spectacle of two Ministers being embarrassed was evident.

The Minister has questions to answer also. We were told at the time that the reason was a business case had been submitted by Horse Racing Ireland, HRI. It is now clear that the business case which it has reiterated was along the lines of, "Big Brian is the best man for the job and everybody knows it. What is your problem? Move on." That is not good enough and Deputy Martin Kenny's question has not been answered. I honestly thought the delegates would come up with a different answer, but they have said that the succession plan was Mr. Kavanagh. It was unlawful for HRI to do this. The Horse Racing Ireland (Membership) Act 2001 specifically states the office shall be held for five years.

Mr. Joe Keeling:

I am sorry-----

Clare Daly (Dublin Fingal, Independent)
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I will finish the point and Mr. Keeling can then come in. That has not been changed in the legislation in 2016. We have a system of governance which is in accordance with the obligations laid down under the codes of practice. The obligations of the board of Horse Racing Ireland are governed by two documents, the codes of the practice of 2006 and 2016. I note that Mr. Keeling said the guidelines allowed an exception to be made where a person brought "scarce expertise or special qualifications to a role" and that that applied in this case. I cannot find that reference in either of the two codes of practice. It simply does not hold sway. If Mr. Kavanagh were to get sick or die, would the racing industry be on its knees? How is he going to juggle being a CEO in the organisation and all of his other international duties which the delegates have outlined?

There is a reason the guidelines are in place and State bodies are governed in this way. Nobody should be in that position. The only organisations in which it happens are in dictatorships such as North Korea. I think the only other one is the Olympic Council of Ireland and do not think HRI wants to move in that direction. It does not add up. Mr. Keeling has admitted that he specifically went off to achieve an outcome that was against the guidelines. There was no back-up plan; the plan was Mr. Kavanagh.

I would like Mr. Keeling to elaborate. Does he accept that, under the code of practice, making appointments, remuneration and succession planning are matters reserved for the board?

The use of the word "reserved" in the code is significant. That is the board's job. The fact that a remuneration committee went off and did that behind the back of the board is a real problem. The minutes would seem to back this up. It is a real corporate governance problem. I would like to know why in a letter to the Department, information was given that the board was to be informed about what was going on behind the scenes to reappoint Brian Kavanagh. We were told in April that the board would be told. Subsequent to that, however, the remuneration committee, which is subservient to the board, decided to exclude the board from that information. That is a huge problem of corporate governance. I would like to know who decided to bypass the board in that way. Why did they decide to do that? What could possibly be the rationale for that?

I notice in the opening statements that Mr. Keeling places a lot of stock in the press commentary that Horse Racing Ireland has put out. It goes back to the historic dealings in September 2011. As the witness said in his opening statement, "This task passed to me when I took over from Mr. Brosnan". I would like to know who passed it to him. Where was this documented and what was the involvement of the board in that situation? What was the change? A lot of what is coming out from the witness and in the press commentary is that this was an historical thing and that everybody was on board with Brian Kavanagh being reappointed. I would like the witness to address the change in personnel on the board. Did he talk to the board at that time? Was the issue of Brian Kavanagh's reappointment discussed at the board in 2014, 2015 or 2016? We know Mr. Keeling was going to a lot of effort behind the scenes to try to clarify that position with the various Departments in order that he could take up that position. I would like an accurate appraisal of how much the board was kept on board on the basis that its members are the people under statute and under law who are charged with overseeing the remuneration in that regard.

I would like to tap into the question from Deputy Penrose. The idea of a full inquiry into the whole area of corporate governance of Horse Racing Ireland over the last five years would be very good and beneficial. I do not know what Mr. Keeling's attitude would be to that. I need him to answer the point as to why Horse Racing Ireland thought it could break the legal restrictions put there for very good reason as to why people are not appointed. Does the witness now accept that the salary is well in excess of the guidelines that are there now? Is that the clarification? I presume he accepts that now.

In her opening remarks, Dr. Osborne made the point that the importance of corporate governance is recognised within Horse Racing Ireland. I put it to her that maybe that is contradicted by what she said later in her statement that Horse Racing Ireland has only now put in place procedures around these matters. Is that not an admission that it did not have it before and in essence failed in its responsibilities in that regard?

Jackie Cahill (Tipperary, Fianna Fail)
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I welcome the delegation. They are getting a lot of questions put to them. There are a couple of points on which I would like some clarification before I go into the issue of the CEO. I come from a constituency in which the horse racing and horse breeding industries are hugely important. There is the issue of the €64 million and the value for money. There is a split between national hunt racing and flat racing. I would rather the split was more favourable towards the national hunt. It is of greater benefit to many individuals. While the prize money might seem strong, there was a time when all of our best horses left this country. Thankfully now many of them stay here to race. We have many big owners here but that prize money filters down through the sales. Many small owners are able to make the selling of store horses a profitable business. The distribution of the prize money should be something that should be looked at into the future.

Before I get into the CEO issue, I want to make a point about the betting tax that was talked about. I am a man who enjoys a day at the races. Track bookmakers are coming under serious pressure. I refer to the 1% tax and the need to have the licence. We still have a lot of people who are betting illegally outside the licences and who are not paying the 1% tax on their turnover. Track bookmakers and the way they are treated with regard to this tax have to be examined. At any racecourse, whether it is horse racing or dog racing, the number of bookmakers has diminished very significantly. I think the board should look at the way this tax is operating and the way track bookmakers must operate under it. Bookmakers are the heart-throb of the industry and of racing. It would be a shame if we lost track bookmakers. That is something that should be looked at.

Mr. Moloney said that when the chief executive was reappointed in 2011, he raised the two outstanding issues on the contract and that he wanted the chairman of that time to sort him out. I have sat on many different boards down through the years. How many times was it brought up over the following three or four years as to what progress was being made on those two issues? In terms of succession planning, in 2011 it obviously was the view of the board that a new CEO would be appointed in 2016. Was there ever a formal discussion over the following two or three years as to what was going to be done? If not, why not? As a man said to me once, a chairman's job is to appoint the right chief executive and then the chairman can sit back and enjoy the ride. I can understand that the chairman perceived that Mr. Kavanagh was the best man for the job and wanted him to be reappointed. However, there are questions over the way this was handled and on the whole issue of corporate governance. The chairman held up his hand and said there were things that were not done correctly and I accept that. However, I cannot understand why a board, 12 months after 2011, would not ask whether progress had been made on these two outstanding issues or whether they had been dealt with.

A point was made by Deputy D'Arcy about the indefinite contract. Was it always at the back of the board's mind that this was a fait accompliand there was virtually nothing it could do about it in any case? If that was the case, it should have been stated clearly. Dr. Osborne has said it was never raised as an issue that the contract was of an indefinite duration but surely the board must have had it at the back of its mind. How many times in the intervening years, between 2011 and 2016, was the issue of succession raised at the board? How many times was it brought up?

Pádraig Mac Lochlainn (Sinn Fein)
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I thank the witnesses for coming before the committee. In Mr. Keeling's opening statement, he refers to his own business and I congratulate him on many years of job creation and so on. However, he is not running his own business in Horse Racing Ireland. I appreciate that in his business life, he would have sought to hire the best people, keep them on and achieve the best outcome. This is a very different matter. A very significant amount of public money is involved. As he is aware, there has been a huge focus in recent years on salaries and appointments and that things are run properly. The presentation today is not plausible, frankly, in terms of people of Mr. Keeling's experience not understanding fully the implications of what they were doing. There is a need to elaborate further.

As for the existing members of the board, Mr. Keeling said that they are appointed properly and that everything is in order. I seek more information on how long the board members have been in situand how many terms they have served. I seek clarification on all of the board members. The witnesses are bound to have that information and if possible, they could supply it to the committee after today's meeting.

The next question is in respect of Mr. Brian Kavanagh. Why is he apparently being paid €50,000 above what is set down in the code of practice? My understanding is his total salary is more than that of the Taoiseach. Did Mr. Keeling also propose a bonus for Mr. Kavanagh, on top of that salary of €191,000, which also broke guidelines?

Can I get an answer on that?

I understand HRI is a large shareholder in Dundalk Racecourse. Right now, there are legal matters that could expose HRI to financial outlay. One of the concerns people always have is that the State sometimes utilises taxpayers' money in a way that they would not due to the risk. They would not engage in a legal dispute. Can I have some clarification around that? Is HRI satisfied that it has independent advice that it is right to proceed? Maybe it is but is there proper due diligence and does it have appropriate advice around cases that are taken and in respect of which public moneys are exposed?

Deputy Penrose has referred to the value-for-money review. How many of the recommendations of the Indecon report, which is four years old, have been implemented by the board?

Mr. Joe Keeling:

I will talk about the salary first. The salary level of the CEO is a matter for the Department. The current Government guidelines allow for exceptions to be made. Exceptions are made in situations where the person whose appointment is sought brings exceptionally scarce expertise to the role, which is relevant in this case. Exceptions are subject to the approval of the Minister for Public Expenditure and Reform and that was achieved in this case. We did not make a decision on it. We can reply to the committee on the question on Dundalk afterwards as we do not have that information here.

Clare Daly (Dublin Fingal, Independent)
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I do not understand that. The chairman says the board did not make the decision. On what was the decision it did not make?

Mr. Joe Keeling:

On the salary.

Clare Daly (Dublin Fingal, Independent)
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Who made the decision?

Mr. Joe Keeling:

The Department.

Dr. Meta Osborne:

For clarification, the contract the CEO was on when he was appointed was under the previous guidelines. The new guidelines do not apply in his case because he was already in situ.

Mr. Joe Keeling:

There is no bonus. The bonus was done away with many years ago and there is no provision for a bonus in future. He is on the exact same salary he was on before.

Michael D'Arcy (Wexford, Fine Gael)
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Can I clarify that point?

Chairman:

Let Mr. Keeling finish. Is the point that because Mr. Kavanagh was in position prior to the introduction of the new guidelines, the contract he was under would apply going forward?

Mr. Joe Keeling:

Yes.

Chairman:

In the event that he may or may not have been under a contract of indefinite duration, that would continue indefinitely.

Mr. Joe Keeling:

Yes.

Chairman:

That is the point Mr. Keeling is making.

Mr. Joe Keeling:

Yes.

Tim Lombard (Fine Gael)
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Can I get clarity there? In the correspondence of 25 July, which is coming back from the Minister's office, point 4.1 says the contract in relation to bonuses will be removed and then at point 4.9 it says that payment of a director's fee to the chief executive will be removed. At point 5.3, it says that the reference to a car payment will be removed. The Minister removed those items from the contract that was being proposed from 2011.

Dr. Meta Osborne:

It was the 2011 contract.

Pádraig Mac Lochlainn (Sinn Fein)
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I asked the question on this. I asked if the board "proposed". I did not ask if it happened. In the board's submission, was it proposing that the existing contract which permits bonuses be allowed?

Mr. Joe Keeling:

No, definitely not. We wanted it as it exists now with no bonus. There was no question of us looking for more money. That is nonsense. We submitted a proposal that he would continue on the same terms and conditions as he had been on and from which bonuses were removed.

Chairman:

Does Mr. Keeling want to continue to answer the other questions?

Mr. John Moloney:

I will answer the questions addressed to me. I was asked about prize money. Deputy Cahill comes from a very special county in horse racing terms. We saw over the weekend, as was mentioned, the amount of prize money that came back to County Tipperary which was won by a wonderful racehorse in France in what is probably the richest race in the world. One should be proud to have that trainer, jockey and owner living in one's constituency. Regarding the national hunt and flat racing, we are always trying to find a balance. On the programmes and fixtures committee, we are always trying to make that divide as near as possible. With regard to flat racing, the prize money for the international races, as we had during the champions weekend here not so long ago, is very successful. It was won by a French horse. There are swings and roundabouts and it can go out of the country as well as being won here. We have a wonderful national hunt breed in this country and all those who subscribe to that should be complimented whether in our point-to-point field or national hunt racing on Mondays and on any other day. There is racing in Punchestown today and we would all rather be there. It is being looked after as well as possible within the industry.

Dr. Meta Osborne:

I will answer Deputy Clare Daly's question on corporate governance. I joined the board in December 2013. We had a half day session on corporate governance in the spring of 2014. That took place for a variety of reasons, not least of which was the fact that we were waiting for the HRI Act to come into being. The board has been in transition for the last two and a half years. I referred in my opening statement to formal, mandatory corporate governance training now that we finally have clarity on the composition of the board and a better idea of when people's terms will expire and their successors will be appointed. We can now set in train a proper programme. We recognise absolutely the need for that. The last couple of years have seen the board in a kind of limbo which has made it difficult to progress this sort of thing. We are absolutely committed to it being part of our training for board members in future.

Chairman:

One of the committee members asked what discussion, if any, took place within the board about the succession.

Mr. Joe Keeling:

There was plenty of informal discussion. This would have gone on for years. What is disappointing for me is that it took so long to get a decision. It would have been more helpful for everyone if a decision had been given a year earlier. It did not help matters at all that it took so long to get a decision from the Department.

Mr. John Moloney:

Deputy Cahill asked me about on-course bookmakers. As recently as two weeks ago, the chairman and chief executive of HRI, myself, as chairman of the Association of Irish Racecourses, and that body's chief executive met at HRI with representatives of the bookmakers to discuss the very matter Deputy Cahill has raised. We are very concerned about the plight of on-course bookmakers and have started negotiations to try to help them because they are a very special part of Irish racing.

Pádraig Mac Lochlainn (Sinn Fein)
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I asked how many of the recommendations in the Indecon report had been implemented.

Mr. Joe Keeling:

We will come back to the Senator on that and provide a written report.

Martin Kenny (Sligo-Leitrim, Sinn Fein)
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The issue of on-course bookmakers flies in the face of the issue that Senator Mac Lochlainn raised. There is a legal case around that. Is the board aware of any other pending legal cases?

Mr. Joe Keeling:

I said that we would send a report back to the committee providing the whole detail in relation to any issues about Dundalk.

Martin Kenny (Sligo-Leitrim, Sinn Fein)
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Is the board aware of any other pending legal cases?

Mr. Joe Keeling:

No. The board has done a tremendous amount to try to settle the case.

Martin Kenny (Sligo-Leitrim, Sinn Fein)
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So, there are no other legal cases pending between bookmakers and the board of HRI.

Mr. Joe Keeling:

No. It is all to do with Dundalk. I am very sympathetic to bookmakers on the track and have been trying for a number of years to bring the board to tackle that. We are tackling it for next year. This is a serious issue. They should have much better terms.

Martin Kenny (Sligo-Leitrim, Sinn Fein)
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If issues were pending, would the board be aware of them?

Mr. Joe Keeling:

Yes.

Martin Kenny (Sligo-Leitrim, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

Okay.

Charlie McConalogue (Donegal, Fianna Fail)
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I asked a number of questions at the outset but I still do not believe we have received clear answers to many of the questions that have been put to the board today.

Mr. Keeling outlined in his presentation that he felt things could have been done differently. He apologised for the way things were done, yet in his follow-up remarks, he indicated that if he had to go back and do it again, he would not do anything differently. Mr. Keeling also indicated that he felt it was a waste of time going to the board to discuss it with its members because-----

Mr. Joe Keeling:

The Deputy is taking up the wrong view.

Charlie McConalogue (Donegal, Fianna Fail)
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I would be happy to get that clarification because the case deserves clarification.

Mr. Joe Keeling:

There was a great deal of informal discussion with board members. I would meet the members of the board at race meetings. I would meet the members of the board more often outside board meetings. The board met every six weeks to two months but I would meet the board members every Saturday and Sunday. When we met at the races we discussed things that went on at the board meeting. There was a great deal of informal discussion when we met. We will change that in the future.

It took so long to appoint a new board. I do not think there is a member of the board who has not tried to do the best he or she could. They always acted in the best interest of Horse Racing Ireland. I am really happy with the membership of the board. The members show great commitment. Members on the board have different views but that is good. It is a very healthy board that has divergent views. There is respect for one other's views. I come from a family business and there are plenty of different views.

Charlie McConalogue (Donegal, Fianna Fail)
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It is important that the board meets formally. Where there is a difference of view, it is even more important that it gets aired at board level. Mr. Keeling obviously inherited difficulties when he took on the role of chairperson but he indicated that he took the view that in his judgment, the incumbent CEO was the best person for the job. He also said that because of that, he felt there was no point in going to the board to discuss it with its members. Mr. Keeling may have been having informal discussions but he did say he felt there was no point in going to the board to discuss it with the members and that it would be a waste of time and money to re-interview for the job, because he was convinced that Mr. Kavanagh was going to be the best person for the job. Will Mr. Keeling elaborate more on that? There obviously were things that were very wrong with the way the board dealt with this process. That is why we are here today. In order to have confidence in the governance of HRI, it needs to be absolutely clear that the board fully understands and accepts the problems that were there and how they were dealt with and that the committee can be fully assured the board has learnt from that and that the issues will be addressed in the future. From the responses to the questions today, that is certainly not coming across. It is not apparent that there is a full acceptance that things should have been done differently and the correct procedures followed.

Will Mr. Keeling respond to the questions I put at the outset? In respect of the initial letter to the Department, at the end of the letter Mr. Keeling's request for Mr. Kavanagh to be appointed was presented as being at the request and wishes of the board. Will he please specify why he put that across and why he believed that, because it was not the factual position of the official position of the board?

Mr. Joe Keeling:

From my experience of being on the board, I felt it was the wishes of the board. It subsequently was true that it was the board's view, not the view of all the members of the board but I felt all the time that I had the view of the majority of the board.

Charlie McConalogue (Donegal, Fianna Fail)
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Informally?

Mr. Joe Keeling:

Informally.

Chairman:

In respect of the letter to the Department, did Mr. Keeling write it personally or did he write it on behalf of the board?

Mr. Joe Keeling:

I say in the course of the letter that I was writing on behalf of the board, as that is what I felt, but in all other letters I wrote subsequent to it, I said everything is subject to board approval. There is only one letter, which went out at the very start, that said I had board approval. Every other letter said it was subject to board approval. Not all letters we write are perfect. I am sorry for the mistakes we made but overall, I think this board does a fantastic job.

Charlie McConalogue (Donegal, Fianna Fail)
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Mr. Keeling, was the Department aware this had not been discussed by the board or was it of the view that this was the board's wish?

Mr. Joe Keeling:

The Department was clear these were the wishes of the board. I do not know whether it thought it was a formal or informal decision.

Charlie McConalogue (Donegal, Fianna Fail)
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Was it aware whether it had been discussed by the board or not?

Mr. Joe Keeling:

I refer the Deputy to my letter looking to bring it to the board on 18 April in which I wanted the decision, so that I could bring it to the April meeting as I was concerned that time was running out. I was pushing for a decision from the Department in order that I could bring it to the board.

Charlie McConalogue (Donegal, Fianna Fail)
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Let us go back to 2011 and the discussion of the then board. Perhaps Mr. Moloney can clarify this as well. Mr. Moloney indicated there were contractual issues in 2011 which were delegated to the chairperson. Will he clarify the exact nature of them? Mr. Keeling also indicated in his address that in 2011, the HRI board asked the then chairman, Mr. Denis Brosnan, to deal with the Department of Agriculture, Food and the Marine regarding the CEO's contract and his ability to be reappointed. Will both Mr. Keeling and Mr. Moloney clarify that the board mandated Mr. Brosnan to find out from the Department about the CEO's contract and his ability to be reappointed? When Mr. Keeling wrote to the Department was he seeking the reappointment of the CEO or was he asking the Department for legal advice as to whether he would have to be reappointed?

Mr. Joe Keeling:

I never asked the Department whether he would have to be appointed. No.

Charlie McConalogue (Donegal, Fianna Fail)
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Okay. It is clear in other correspondence that the Department was engaging with Mr. Keeling in respect of contractual issues.

Mr. Joe Keeling:

Yes.

Charlie McConalogue (Donegal, Fianna Fail)
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Is Mr. Keeling clear that the Department had concerns that there may have been a contract of indefinite duration?

Mr. Joe Keeling:

Yes.

Charlie McConalogue (Donegal, Fianna Fail)
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Okay.

Mr. Joe Keeling:

I never focused on that aspect, as I said earlier.

Charlie McConalogue (Donegal, Fianna Fail)
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The presentation today states the reason Mr. Kavanagh was appointed and supported by the HRI board was because it was felt he was the person for the job.

Mr. Joe Keeling:

Yes.

Charlie McConalogue (Donegal, Fianna Fail)
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That was the point made in the presentation. However, if it was the case that he was entitled to a contract of indefinite duration, was that not irrelevant?

Mr. Joe Keeling:

No.

Charlie McConalogue (Donegal, Fianna Fail)
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In the sense he was going to have to be reappointed anyway.

Mr. Joe Keeling:

If I did not think he was the right person, I would have - - - - -

Michael D'Arcy (Wexford, Fine Gael)
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Mr. Keeling did not have the authority not to appoint him. Chairman, Mr. Keeling did not have the authority to remove him and put somebody else in his place.

Mr. Joe Keeling:

I was not going to remove him.

Michael D'Arcy (Wexford, Fine Gael)
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Chairman, I am making a point. With a contract of indefinite duration - as Dr. Osborne said, legal opinion was sought in 2011 on whether a potential was there for a contract of indefinite duration, as well as in 2015 or 2016 - the board of HRI did not have the authority to appoint anybody else, except Mr. Kavanagh, if he invoked that right, whether the Chairman wanted him or not.

Mr. Joe Keeling:

I know that, but I was of the opinion that he would not-----

Michael D'Arcy (Wexford, Fine Gael)
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Sorry, Chairman, that is the relevant point.

Mr. Joe Keeling:

The relevant point I made is that I do not think he would ever have invoked that clause. If I did not want him, I would have negotiated with him to leave.

Michael D'Arcy (Wexford, Fine Gael)
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I am sorry, but Mr. Keeling as chairman of the board of HRI did not have the authority to do that.

Charlie McConalogue (Donegal, Fianna Fail)
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Was it not essential that the reappointment should have been discussed at the board? A former party leader of mine, Mr. de Valera, said when he wanted to know what the people of Ireland were thinking, all he had to do was to look into his heart. That was no mandate to disregard a Cabinet or a Dáil. All these contractual issues were present in the toing and froing to the Department with regard to a contract and whether it was possible for Mr. Kavanagh not to be re-awarded a contract. Surely, as chairman of HRI, it was not good enough for Mr. Keeling to make his own judgment and his own call as to whether his was the right man. Given all the issues surrounding it, legal and otherwise, it surely was simply unacceptable that this would not come to the board for a full discussion.

Mr. Joe Keeling:

It did, as soon as I could.

Charlie McConalogue (Donegal, Fianna Fail)
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After it was a done deal.

Mr. Joe Keeling:

How was it a done deal?

Charlie McConalogue (Donegal, Fianna Fail)
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The Chairman had already engaged with the Department and got consent.

Mr. Joe Keeling:

That is not a done deal. I disagree.

Michael D'Arcy (Wexford, Fine Gael)
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In 2011, the legal opinion said the potential was there for a contract of indefinite duration. He was appointed in 2001, he had been working for ten years as CEO of HRI.

He was appointed in 2001, so he had ten years working as CEO of HRI. Does any member of the board know when he moved from being in a contractual position to moving into a CID? Does anyone have that information? Was that information made available to the board at any stage?

Ms Meta Osborne:

I cannot answer. I do not know.

Michael D'Arcy (Wexford, Fine Gael)
Link to this: Individually | In context | Oireachtas source

It is important that-----

Mr. Joe Keeling:

We will get that.

Michael D'Arcy (Wexford, Fine Gael)
Link to this: Individually | In context | Oireachtas source

It is a very important piece of information.

Mr. Joe Keeling:

We will send the information to the committee.

Michael D'Arcy (Wexford, Fine Gael)
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HRI did not have any authority to change the CEO because he had a CID which could be invoked at any stage. That was the legal opinion, namely that there was potential for him to invoke it and that he would win twice. That is the reality of a CID.

Willie Penrose (Longford-Westmeath, Labour)
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That is also my view. The spectre of the CID hung over this process like a dark cloud. Therefore, HRI was effectively neutralised. There was a rush to get the Minister to approve the agreement in order to avoid potential legalities in the future. It is as plain as night follows day and the nose on one's face.

I am somewhat surprised by the comments made by Mr. Moloney. Of course the board was negligent in 2011. In September 2011 two issues were discussed with the board. The chairman was then sent off. When Mr. Keeling arrived in mid-March 2013, some 18 months later, the issues had not been resolved. What did the board do? Did it not discuss the matter every month and agree to get to the root of the two outstanding issues? The board has a mandate. What did it do? Were Mr. Kavanagh, the Department or whoever else spoken to in order to resolve the issue? The board sat on its hands for 18 months and said it was not negligent. Is that good corporate governance?

I am impressed today, not by the level of response but rather the level of non-response. Mr. Keeling wrote a letter to the Department which stated that Mr. Kavanagh's salary was similar to the chief executives of the Turf Club and Eir? That is not right.

Mr. Joe Keeling:

That is not what I said. What we wrote in the letter was-----

Willie Penrose (Longford-Westmeath, Labour)
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Hold on. We will have to go through the letter. I understand it is dated 2 May. It states: "The proposed new salary level will be lower than is currently paid to the CEOs of both the Turf Club and the Association of Irish Race Courses despite much greater level of responsibility and budget levels." Is that not black and white? That is what Mr. Keeling said.

Mr. Joe Keeling:

No, it is not.

Ms Meta Osborne:

To which page is Deputy Penrose referring?

Willie Penrose (Longford-Westmeath, Labour)
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It is page two, paragraph 5, subsection D(1).

Mr. Joe Keeling:

That was the case when a new salary was proposed. The existing salary would have been more. Whatever the letter said, its intention was that if the salary was reduced under the new rules he would be below the existing level. That is the point that was made. If Deputy Penrose wants a written response to that, we can-----

Willie Penrose (Longford-Westmeath, Labour)
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No, I have listened to what was said.

Mr. John Moloney:

If you go back to the letter of 7 April, it states that the new level of salary for a CEO would range between €137,000 and €164,000.

Willie Penrose (Longford-Westmeath, Labour)
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His salary is far higher than that.

Mr. John Moloney:

I am only saying what the new guidelines state. We know Mr. Kavanagh's salary is higher.

Willie Penrose (Longford-Westmeath, Labour)
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His salary today is far higher than the CEO of the Turf Club-----

Ms Meta Osborne:

That is correct because his appointment preceded the guidelines which introduced the new salary scale.

Willie Penrose (Longford-Westmeath, Labour)
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We are back to the CID. The witnesses said there are major issues in terms of appointments. Would they like the Minister to appoint more independent people to the board?

Mr. John Moloney:

Through the Chair, that is the position.

Mr. Joe Keeling:

We are waiting for the Minister to appoint two appointees.

Mr. John Moloney:

Under the legislation, the Minister has two nominees-----

Willie Penrose (Longford-Westmeath, Labour)
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I know all about the legislation. It is baloney.

Mr. John Moloney:

The Minister has the authority to appoint two nominees to the board, which we are awaiting. At the last meeting the nominations were discussed and we will have them within the next month. They are two independent people who applied for the position under Government guidelines. I am not sure what one would call the procedure, but there were a large number of applications. The Minister now has to decide who he wants to sit on the board.

Mr. Joe Keeling:

Some 38 people have applied. The Minister was given eight names, I understand.

Ms Meta Osborne:

I am conscious that we are all focusing on the CID. As I said earlier, I am not an employment lawyer. I came onto the remuneration committee in April. I saw sight of the legal advice which stated that there was potential for a risk in that regard. That was not the only thing we considered. If that was the only thing we considered, no matter who the incumbent was we would have said we were stuck and would have to take the person concerned.

We also considered the record of Mr. Kavanagh to date. As I said, the board has been in a state of transition. We need a steady hand, which Mr. Kavanagh is. It was not the case that we felt we were being strong-armed into reappointing him. We gave the matter full consideration.

I have a minute - I am not sure whether Deputies and Senators have access to it - of a recommendation from the remuneration committee which I will read. It states: "The remuneration committee support the extension of the contract of employment for a further five years based on the business case presented to and accepted by the Department, the efficient and effective management of the organisation by Mr. Kavanagh and taking into account the legal advice which indicates that Mr. Kavanagh has a contract of indefinite duration." That document went to the board. It was fully aware of the position.

Chairman:

On what date did that happen?

Ms Meta Osborne:

A note came from the 21 July board meeting.

Michael D'Arcy (Wexford, Fine Gael)
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It was irrelevant for the board. It could not replace Mr. Kavanagh if he invoked his right to a CID.

Chairman:

Deputy Daly is next. I will return to Deputy D'Arcy.

Clare Daly (Dublin Fingal, Independent)
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I find this whole thing utterly demoralising. I do not think we are getting clarity. This meeting has probably resulted in more concern rather than answers.

Two contradictory things have been said. On the one hand, we have heard that the reason for the reappointment was that Mr. Kavanagh is the world's best in terms of horseracing and the world would not survive without him, but on the other there is an acknowledgment that there was a legal problem.

The real issue for me is neither of those things. Rather, it is corporate governance and the legal position outlined in the code of practice which states that the responsibility for the appointment, remuneration and succession planning for the chief executive is something reserved for the board. I have heard nothing that contradicts the evidence that the board was not given ownership of that process. The process was undertaken not by the board but by others outside it. In his dealings with the Department and the remuneration committee, there are minutes that show decisions were taken to exclude information from the board.

In terms of governance of an important body in receipt of State funds, if we do not learn lessons from this we will have serious problems with regard to how the board is constituted. I accept that many issues go back to 2011, but I am not getting the vibe that lessons have been learned.

Tim Lombard (Fine Gael)
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I would like to refer to correspondence on 25 July. I ask for clarity on it. It is addressed to the chairperson from Brendan Gleeson, assistant secretary of the Department of Agriculture, Food and the Marine. It involves proposed amendments to the contract, as far as I can read from the minutes.

The first line in the contract indicates that the duration of the contract must be a maximum of five years. Do I take it that the previous contract was of indefinite duration? In other words, this is what the Minister wants to have included. Did Horse Racing Ireland include a five-year maximum term or did it have to wait for the Minister to include it? Who initiated the move to have a five-year maximum term? Was it Horse Racing Ireland?

Mr. Joe Keeling:

No.

Tim Lombard (Fine Gael)
Link to this: Individually | In context | Oireachtas source

Was it the Minister?

Mr. Joe Keeling:

Yes.

Tim Lombard (Fine Gael)
Link to this: Individually | In context | Oireachtas source

I take it, therefore, that, if he wanted to in five years time, Horse Racing Ireland's chief executive officer could have run on again with a contract of indefinite duration.

Mr. Joe Keeling:

I had an agreement with him that he would go after five years-----

Chairman:

Was it a written or a verbal agreement? Did Horse Racing Ireland have a written agreement with him that he would complete his term of office within the next five years?

Tim Lombard (Fine Gael)
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The original contract proposed by Horse Racing Ireland did not exclude a contract of indefinite duration. It took the Minister to insert a five-year term. It is fair to say that, only for the Minister inserting a five-year term, Mr. Kavanagh would have been there under a contract of indefinite duration. Is that not true?

Mr. Joe Keeling:

He could have come forward with a three-year contract.

Tim Lombard (Fine Gael)
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In the contract Horse Racing Ireland had proposed did it propose to remove a contract of indefinite duration?

Mr. Joe Keeling:

I am sorry-----

Mr. John Moloney:

To answer Deputy Jim Daly's question, we have learned lessons from what happened and put practices in place. We have a succession plan in place for what will happen in five years time. With the benefit of hindsight, we have all learned a lot in the past few months. This cannot happen again.

Tim Lombard (Fine Gael)
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My question is fair. It refers back to the correspondence we received. The correspondence goes on to state the Minister pointed out that he wanted certain things to be amended in the contract. What was contained in the original contract sent to the Minister in 2015 or 2016 and why did he have to exclude references to a payment for a car, director's fees-----

Mr. Joe Keeling:

They only looked at the----

Tim Lombard (Fine Gael)
Link to this: Individually | In context | Oireachtas source

Why did it take the Minister to remove them?

Mr. Joe Keeling:

They looked at the previous contract. That is what they looked at.

Tim Lombard (Fine Gael)
Link to this: Individually | In context | Oireachtas source

Therefore, the previous contract, a contract of indefinite duration, was sent to the Minister and it took him to remove the references to a contract of indefinite duration, bonus payments and so on.

Mr. Joe Keeling:

Yes.

Tim Lombard (Fine Gael)
Link to this: Individually | In context | Oireachtas source

The Minister intervened to change it.

Dr. Meta Osborne:

There was nothing in any of the contracts stating it was a contract of indefinite duration. They were time-limited.

Michael D'Arcy (Wexford, Fine Gael)
Link to this: Individually | In context | Oireachtas source

It is implied in legislation.

Dr. Meta Osborne:

No; they were time-limited.

Michael D'Arcy (Wexford, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Was that the legal opinion?

Tim Lombard (Fine Gael)
Link to this: Individually | In context | Oireachtas source

Therefore, Horse Racing Ireland could state it was not a contract of indefinite duration because of the legal opinion it had received.

Dr. Meta Osborne:

There was a significant risk that that could be invoked.

Tim Lombard (Fine Gael)
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Therefore, only for the Minister, Deputy Michael Creed, Mr. Kavanagh could have been there for a considerable period after the contract had ran out.

Mr. Joe Keeling:

We can produce the written agreement with Mr. Kavanagh that he will retire after five years.

Chairman:

If Mr. Keeling could supply it-----

Charlie McConalogue (Donegal, Fianna Fail)
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Is it the delegates' legal advice that the written agreement with Mr. Kavanagh nullifies any right to a contract of indefinite duration?

Mr. Joe Keeling:

We will come back to the Deputy on that point.

Charlie McConalogue (Donegal, Fianna Fail)
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I am surprised that Mr. Keeling cannot clarify that point. Legalities seem to have dominated the process going back as far as 2011. It certainly seems to be the case that there were two pieces of legal advice - one from Horse Racing Ireland's steed and one from the Department - that there was a contract of indefinite duration issue. I find it incongruous, going into a third contract, that there is no clarity on whether a contract of indefinite duration still hangs over the tenure of the chief executive officer.

Mr. Joe Keeling:

We have discussed this issue and the board has accepted that it will be for five years. Perhaps we might get the information in writing and have it approved.

Charlie McConalogue (Donegal, Fianna Fail)
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Whether the board wants the term to end in five years does not affect the legalities. It comes down to what the contract states. Since there have been contractual complications since 2011, surely the board has obtained legal clarity at this stage on whether there is a contract of indefinite duration. Did the Department make it clear pre-2011 that there should not be a third extension? If so, how did it come to pass that the board did not plan for this? It strikes me that this got bogged down in legalities and that the issue of a contract of indefinite duration came up. This is not only an issue for HRI and its CEO, there are parallels with the impact on and implications for other State boards of the Government's guidelines on there being one maximum seven-year term.

Mr. John Powell:

As far as I am concerned, both parties, the board of Horse Racing Ireland and the CEO, have agreed that it will be five years, no more and no less. While I cannot comment on the legalities in the context of having a contract of indefinite duration, I think Mr. Kavanagh has accepted that his tenure will end after five years. He has signed up to this and is a party to it.

Martin Kenny (Sligo-Leitrim, Sinn Fein)
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There are still a couple of issues to be resolved, the first of which is the letter which formally requests approval to extend the contract beyond the current term. It states there are issues facing the organisation and that there is a new draft strategic plan covering a period of five years. Is that the basis on which the contract should be extended? The letter goes on to state Mr. Kavanagh has overseen development of the plan and should be charged with its implementation. Is that the reason he was given a period of five years? We understood initially, when the lobbying began, that it would be for about three years. I am trying to help the delegates. Is that the reason?

Mr. Joe Keeling:

It could be. It is a three-year project at the Curragh that will not be completed until 2019. We have to remember that Mr. Kavanagh has many talents and that he will look after the project. There is huge investment at the Curragh and huge confidence in him. We have raised a sum of €30 million. Would we have been able to raise those funds independently without him? It would have been more difficult to do so. We had had the experience of losing money on a previous development at the Curragh, but Horse Racing Ireland lost no money as a result of the good practices put in place by Mr. Kavanagh. There is a huge amount of development work being carried out and the process is very important. The board has confidence in him. We will be spending a lot of money in the next five or six years.

Martin Kenny (Sligo-Leitrim, Sinn Fein)
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Mr. Keeling states the board has confidence in Mr. Kavanagh. It had little option but to have confidence in him. He was appointed and when it was put to the board, it was over. It had to accept it, or there may have been some on the board, many of them I assume-----

Mr. Joe Keeling:

If I did not have confidence in Mr. Kavanagh, I would say so, but I do have confidence in him. If I did not have confidence in him, the fact that he was there would not stop me from saying it.

Martin Kenny (Sligo-Leitrim, Sinn Fein)
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The issue is not whether Mr. Keeling has confidence in him; it is about legal responsibility. The legal responsibility to appoint a new chief executive officer was the board's, collectively, but it was not made by the board. It was made outside it. It was presented to it as a fait accompli.. That is the problem.

There are also issues about the money. People have spoken about the salary scale. Most people in my part of the world, if they were to spin the wheel on "Winning Streak" and win €197,000, would think they were made up for life. This guy is going to get that amount every year. As far as I can see, people in this part of society are out of touch with reality and where ordinary people live. That is my problem.

Another issue that has been raised is media rights. There is an issue about satellite information services and the media rights contract. Who negotiated that deal? How much is it worth to Horse Racing Ireland?

Mr. John Moloney:

Thiat is outside of what we are talking about. However, if the Deputy would like clarification------

Martin Kenny (Sligo-Leitrim, Sinn Fein)
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Yes, please.

Mr. John Moloney:

I am chairman of the media rights committee within Horse Racing Ireland and Mr. Kavanagh is its chief executive officer. He and I, in consultation with the committee and the chief executive officer of the Association of Irish Racecourses, negotiated the contracts. They are very sufficient, but they are commercially sensitive, given the amounts of money involved. However, they are of huge benefit to Irish racecourses.

The Deputy mentioned the strategic plan.

The key objectives of the strategic plan are to increase the value of the Irish racing and breeding industry from €1 billion to €2 billion, complete the current racecourse capital development programme, including the major development of the Curragh and Leopardstown racecourses, and seek the establishment of further schemes to succeed the current scheme. All racecourse will partake in the capital development fund, which amounts to approximately €100 million, of which racecourses will contribute approximately €60 million. Further objectives include to increase racecourse ownership through the expanded racehorse ownership department; increase employment levels and improve welfare in the industry; develop long-term multi-annual funding solutions to replace the current year-to-year basis on which funding is provided through the increase in betting tax from 1% to 2%, about which I have spoken; improve the racecourse product and support racecourses to grow attendances; support the Turf Club in delivering a world class regulatory structure for racing; and implement the Horse Racing Ireland Act 2016. Those are the objectives of the strategic plan.

Martin Kenny (Sligo-Leitrim, Sinn Fein)
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While I accept that, the issue is that inability of the board to deal with the appointment of a chief executive officer casts doubt on its ability to achieve any of its plans, particularly with regard to spending public money. Since the establishment of Horse Racing Ireland in 1999, more than €1 billion has gone into the horse racing industry. This is a serious amount of money in a small country. I have major problems with the culture that has been evident today.

Mr. John Moloney:

The Deputy stated the board did not appoint Mr. Brian Kavanagh. On 21 July, the board voted by a majority decision to appoint Mr. Kavanagh. The Deputy also referred to €1 billion going into the horse racing industry. In the period between 2001 and 2016, revenue from the betting tax amounted to €627 million, which left a shortfall of €400 million. The horse racing industry provided €627 million to the Government coffers in betting tax, which is a substantial amount.

Martin Kenny (Sligo-Leitrim, Sinn Fein)
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All the other sports on which bets are placed do likewise, yet they do not receive money.

Mr. John Moloney:

These are the facts as they pertain to Horse Racing Ireland.

Chairman:

The discussion is straying slightly from the issue.

Willie Penrose (Longford-Westmeath, Labour)
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Mr. Brian Kavanagh was first appointed chief executive officer of Horse Racing Ireland in 2001 and his term should have ended in 2008. Horse Racing Ireland was either extremely unlucky or grossly incompetent in this regard. Mr. Kavanagh's appointment was extended to 2009 and again subsequently to 2011. As a barrister, it is clear to me that the game was over in 2011. The best county manager in the country might have an eight-year contract extended by three years. The game was over in 2008 and at that point Horse Racing Ireland should have advertised or negotiated with the same person but the term of the CEO was extended until 2011. I expect someone wanted the contract to start again in 2011 and continue until 2019. Instead, it commenced in 2009 and continued until 2016. Will the witnesses assure us that Horse Racing Ireland will have everything in place to ensure this shambles does not reoccur?

Mr. Joe Keeling:

I assure the Deputy this will never happen again. We have a process in place for the one and a half year period before the term ends and we will have someone in place six months before the term ends. It does not matter in that case. We will have someone good then.

Clare Daly (Dublin Fingal, Independent)
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This returns me to the point that the people charged with responsibility for this appointment were the members of the board. I have not heard enough today to reassure me that the board members took the primary decision or were kept up to speed about matters. In response to my earlier question on the 2014-15 period, Mr. Keeling stated the issue of Mr. Kavanagh's appointment was discussed repeatedly at the board. We know Horse Racing Ireland was in detailed correspondence with the Department at the time. How many times was the issue discussed by the board? Did it discuss the idea of appointing a chief executive officer by means of an open competition? Did someone ask what would happen if Mr. Kavanagh was not reappointed and were alternatives to his reappointment considered? How many times was the matter discussed? Are these discussions formally reflected in the minutes of the board's meetings? It is the legal responsibility of the board to deal with this matter and a problem arises if it did not deal with it.

Mr. Joe Keeling:

It was not discussed formally. There was an item in July 2015 when our chief financial officer retired and William Flood raised the issue of the fixed term contract of the CEO. That matter was discussed at the board. The minutes of the meeting in question are not perfect because they left out some things that were said.

Clare Daly (Dublin Fingal, Independent)
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Was that the only time the matter was discussed by the board? In earlier responses, Mr. Keeling led me to believe it was discussed frequently at board level.

Mr. Joe Keeling:

It was discussed informally. The question was asked at the board.

Clare Daly (Dublin Fingal, Independent)
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A question was asked at the board about the reappointment but it was not discussed, despite the board taking the trouble to engage in detailed contacts with the Department.

Mr. Joe Keeling:

Yes.

Clare Daly (Dublin Fingal, Independent)
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The clock was ticking. It was the board's responsibility, yet the matter was never formally raised in a board meeting.

Mr. Joe Keeling:

I took the view that I wanted to obtain permission from the two Ministers.

Clare Daly (Dublin Fingal, Independent)
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Does Mr. Keeling accept that was not the right thing to do and that, given that this matter was the responsibility of the board, its members should have been briefed at every turn?

Mr. Joe Keeling:

Yes, it could have been done much better.

Clare Daly (Dublin Fingal, Independent)
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Mr. Keeling accepts that this was done incorrectly or the wrong way around.

Mr. Joe Keeling:

Yes.

Michael D'Arcy (Wexford, Fine Gael)
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While I have some sympathy for the board of Horse Racing Ireland, in 2009, the individual members of the board were at fault when they allowed the contract of the chief executive officer to run beyond his seven-year term. Guidelines and codes of practice are subservient to employment law. Contracts of indefinite duration, CIDs, have gone through the courts, which have taken a very strong line on how contracts are applied. When a contract is extended even one day beyond its term, the holder has a contract of indefinite duration. Regardless of whether we like it, that is what the board was left with.

Mr. Joe Keeling:

Yes.

Michael D'Arcy (Wexford, Fine Gael)
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Mr. Keeling did not handle the matter particularly well.

Mr. Joe Keeling:

I accept that.

Michael D'Arcy (Wexford, Fine Gael)
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If the board has it in writing that Mr. Kavanagh will not invoke his CID in 2021, it would be helpful if Mr. Keeling were to provide a copy of that document to the joint committee.

Chairman:

I ask the clerk to communicate with Mr. Keeling on the further information the committee will seek in respect of Mr. Kavanagh. We have had a full and frank discussion of all the relevant issues. Mr. Keeling may take the opportunity to sum up his position.

Mr. Joe Keeling:

I apologise again for mistakes that were made. I assure members that corporate governance and any future appointments within it will be done 100% correctly. I would like to move forward now. We have a very good team and I am privileged to lead a very good board. It is also privilege to run this great organisation.

Chairman:

I thank Mr. Keeling and other members of the board of Horse Racing Ireland for appearing before the joint committee and briefing members on the current position.