Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

I move amendment No. 3:

To insert the following after "Dáil Éireann on 9 June 2015":"Calls on the Government to amend the terms of reference for the Commission of Investigation into IBRC, as follows:

- The Commission of Inquiry will also examine governance within IBRC.

- The Taoiseach would request an interim report to be provided in October."

I welcome the opportunity to respond to the Minister on this important motion to establish a commission of investigation into certain matters affecting IBRC. I welcome the fact that we are going to have a commission of investigation into certain matters relating to IBRC since its nationalisation. The establishment of this statutory investigation is, above all else, a rare victory for our parliamentary democracy. There would have been no investigation into IBRC were it not for the dogged pursuit of the Siteserv transaction over a prolonged period by Deputy Catherine Murphy. She deserves all of our praise for her tenacity in that regard and for the courage she has again shown in recent weeks. In the face of silence from the Government, in particular the Taoiseach, our party leader, Deputy Martin, has been to the fore in defending the constitutional privilege afforded to Members of this House and the right of the media to report freely on what is said in our national Parliament. These are rights that must not be impugned or compromised for anyone or at any price.

The review of KPMG transactions that was announced in April by the Minister, Deputy Noonan, was never going to meet the test of public confidence. It is simply incomprehensible that the Government failed to see the obvious contradiction in appointing KPMG to review a transaction to which it was party. Perhaps it chose to ignore it.

This commission of investigation must answer many questions. I would like to mention two fundamental questions. First, did any IBRC borrower receive preferential treatment in any shape or form? Were all decisions made for sound commercial reasons, with the best information available at the time? Second, what was the nature of the relationship between IBRC and the Department of Finance? Did the Department properly fulfil its oversight role? I will come back to the amendment I have moved concerning the issue of an interim report and governance issues within IBRC. If the Minister does not accept that amendment, we will support the Government's proposal for this commission of investigation, albeit with some reservations, which we will outline during the course of the debate this evening and tomorrow.

We know from some media reports that approximately 40 IBRC borrowers - businesses and individuals - benefited from total write-downs of between €1 billion and €1.2 billion. According to a report in The Sunday Business Post, the borrowers apart from Siteserv, which is now owned by Denis O'Brien, that benefited from large debt write-downs included Calyx, which is a technology company; TV3; the family of Seán Quinn; a high net-worth syndicate assembled by Derek Quinlan; and Boundary Capital. A number of other borrowers are included in the list. The Minister has indicated that the overall number is between 30 and 40.

The key decisions that were made by IBRC in extending loan terms and changing interest rates require careful examination. The commission of investigation needs to examine whether all such decisions were fair, reasonable, had a commercial logic, went through the appropriate approval process and displayed consistency in the treatment of different borrowers. The reality is that ordinary people, including those who are paying sky-high interest rates on their mortgages, those who are struggling to get bank agreement to restructure their debts and small business owners who are being pursued for every cent they owe, will compare the stories emerging in the media about the deals secured by corporate borrowers from IBRC with how they continue to be treated by financial institutions.

The Government did not want to establish this commission of investigation. No one should be under any illusion in that regard. It is worth recalling that five weeks ago, the Government voted down a Fianna Fáil motion that sought to establish a commission of investigation. On that occasion, the Minister for Finance made a very ill-judged speech which was deeply political and partisan. Ultimately, as the Minister has acknowledged tonight, it was seriously misleading. The Minister's essential defence was that before the new relationship framework was put in place on 29 March 2012, the Department of Finance was kept in the dark about what was going on within IBRC. He suggested that he did not know what was happening in the bank because the 2009 relationship framework essentially failed to provide for a proper flow of information between the bank and the Department.

The Minister's defence has been blown wide open. He has had to correct the record of the Dáil. The Minister previously told the House that the first time the Department of Finance received a board pack and board minutes from IBRC was April 2012. This was not true. We now know from the letter the Minister sent to Deputy Martin last week that the Department was receiving board documents from IBRC management as far back as August 2011. Despite finding a schedule of board packs for the period between August 2011 and September 2012, the Department has been unable to find the actual board documents.

We need to get this straight. In 2011, IBRC was still a €60 billion bank, the Minister for Finance was the sole shareholder and the Minister and the Department were charged with overseeing the work of the board of the bank in winding down the bank on behalf of the State. After doing a trawl of the Department of Finance, the Minister told the House six weeks ago that no board documents were received until April 2012 because of the relationship framework agreement which was in place at that time. The Minister's officials discovered less than two weeks ago that they had been receiving board documents since August 2011. Presumably, they had forgotten about them. Now the Department cannot find the board documents it did not realise it had been receiving in the first place. The Department had to contact the special liquidator to get copies of these board documents. Despite all of this, the draft terms of reference published by the Minister last week did not mention the Department of Finance. Last Wednesday, the day he confirmed board documents had been received by the Department all along, the Minister published draft terms of reference that excluded the Department of Finance. I suggest that was extraordinarily bad judgment on his part.

All of this raises some fundamental questions about the Minister and his Department. Who in the Department of Finance was reviewing the IBRC board documents that had been coming in since at least August 2011? What did that person do with them? How did the Department of Finance manage its relationship with the board of IBRC? Who in the Department was responsible for reading the minutes of IBRC board meetings? What action was taken at senior level within the Department on foot of these reports? Where were these board documents languishing all this time? How have they come to light now? More to the point, where are those documents now?

We need to know the full extent of the contact between the Department of Finance and IBRC during the years in question. The Minister's comments contrast sharply with those of the then chairman of the bank, Mr. Alan Dukes, who said there was ongoing and regular engagement between IBRC and the Department of Finance even prior to the putting in place of the new relationship framework agreement at the end of March 2012. Now that we know there was a regular flow of information from IBRC to the Department of Finance, we need to establish how this information was used and if concerns raised by the Department with IBRC were dealt with adequately. We can speculate but we may never know for sure whether issues relating to corporate governance at IBRC were a factor in the Government's decision to liquidate the bank in February 2013, rather than having the assets of the bank run down over a period of ten years as originally intended.

The wording that has been brought forward this evening with regard to the examination of the role of the Department and the Minister is not adequate. It is proposed that the commission of investigation will examine whether the Minister or the Department were "kept informed where appropriate in respect of the transactions concerned" and whether they "took appropriate steps in respect of the information provided to them". This is very carefully worded and is too narrow. What about the questions that the Minister or his officials should have been asking? What about the lack of follow-up on information that was in the public domain? What about the performance of the Department's wider role in the wind-down of the bank? We do not accept the basic premise underpinning the wording that has been put before us, which is that if the Minister and the officials were not told about a certain matter in IBRC, they had no responsibility whatsoever for that matter.

The fact that Siteserv, for example, was being sold was in the public domain from mid-January 2012. It was being reported in the media. At that stage, the sale of Siteserv had been on the cards for many months. Did the Department not know this? Is it the Minister's position that the Department had no responsibility in this regard, and therefore the commission of investigation should not be examining the Department's role prior to the transaction, because he was not officially informed of the sale until he received the March or April board pack? The Minister told the Dáil last month that "in June 2011, following an independent review of the strategic options for the business and the level of debt in the company, the IBRC credit committee approved Siteserv's commencement of an orderly process to sell itself". Were the credit committee minutes not in the board packs that were being received since by the Department of Finance from IBRC since August 2011 at least? What exactly was in the board packs that the Department had been receiving since August 2011? I presume the board minutes were included. I assume the minutes of key sub-committee meetings would also have been included. We cannot think of any more key sub-committee than the credit committee of the bank. These questions need to be answered. The Minister is continuing to hold the position that the first that he, his Department or his officials heard about the Siteserv transaction was when a member of the public e-mailed the Department of Finance on 23 March 2012.

The provenance of this investigation lies in a Siteserv transaction that involved a loss to the State of €119 million.

The Siteserv transaction is undoubtedly the aspect of the IBRC saga which has most captured the public imagination. This may well be because a subsidiary firm was subsequently awarded the contract for the installation of water meters. In essence, two of the most politically potent events in Irish public life, the banking collapse and the introduction of water charges collided in a single story.

Since we last discussed the issue in this House, a number of new facts have emerged. We now know, courtesy of the misplaced board minutes, that the write-down on the Siteserv loan was in fact €119 million. This is some €10 million more than was previously believed. Were Ministers in possession of this information at the time of the Dáil debate on 6 May?

The Minister has said that the first the Department became aware of the Siteserv transaction was after the board approved the sale on 15 March 2012. This essentially means that the first time Siteserv was recorded in the minutes of an IBRC board meeting was at the meeting when the sale was approved, resulting in a loss of €119 million. That may well be the case. If that was indeed the first occasion Siteserv came to the IBRC board's attention, then presumably it was being dealt with over a number of months by the bank's credit committee. Were the minutes of the bank's credit committee sent to the Department of Finance since August 2011?

The sale process involving Siterserv raises serious questions which the commission must answer. A company that was massively in debt to IBRC and apparently on the brink of insolvency was allowed to drive and determine its own sale process. There were a number of alternative courses of action open to IBRC, including seeking the appointment of a receiver or selling on the loans it was owed by Siteserv, which was the main course of action the National Asset Management Agency, NAMA, took when disposing of debtors by selling the loans. There is a counter argument that any move against Siteserv by IBRC could have triggered a loss of confidence in the company among its clients and caused an even greater loss for the State. It is important that we get clarity on the appropriateness of the course of action taken, notwithstanding that we are now looking at it from three years' remove.

There are other specific issues of concern with regard to Siteserv, including the sudden upsurge in share sales in the month before IBRC began to receive the first bids for Siteserv as part of a confidential sale process. For example, in November 2011, 6.4 million shares were sold in the firm, compared with 121,000 in October 2011, and 4.76 million between January and October the same year. When the company was sold in March 2012, the 3.9 cent share price was 292% higher than that of 13 January 2012, the day before the potential sale of the company was confirmed to the Stock Exchange. Who were these investors and were any of these investors acting on insider information? Why were shareholders in Siteserv paid €5 million for an effectively insolvent company? Shareholders in Siteserv got a €5 million payment when the company was sold. Normally, shareholders get nothing if a firm is effectively insolvent. There has been no adequate explanation as to why this happened. The €5 million sweetener was recommended by Davy Stockbrokers which was Siteserv's adviser. Some of Davy's clients were also investors in Siteserv. Why were other bidders apparently excluded from the sale process? We still need answers to that question.

According to Alan Dukes there were approximately 50 expressions of interest in the sale but it was decided to exclude so-called "trade buyers" to avoid the company's being "upscuttled" by rivals merely seeking inside information.

We have read the 2004 Act and as far as we can see there is nothing to prevent the commission producing an interim report. In fact, the Siteserv aspect could, and in our view should, be taken as discrete topic in itself and dealt with as a matter of priority. I listened to the Minister's comments tonight and he seems to believe it should be left entirely to the discretion of the judge to decide whether to publish an interim report would be published. In our view the Minister should be using the powers granted under section 33 of the 2004 Act to request that a report be provided by the end of October to deal with the Siteserv transaction on its own. We all wish to have the maximum amount of information put in the public domain but this should not be the price of delaying the publication of a report until the early part of next year or possibly later. The Taoiseach should make a commitment now that the investigation will be required to issue an interim report on the Siteserv transaction by the end of October.

Under the flawed KPMG model of inquiry, we would have had a report on Siteserv by the end of August, as the Minister has acknowledged. Notwithstanding the need for a more comprehensive and effective model of inquiry, we believe the judge overseeing the investigation should produce an interim report by the autumn on that aspect. We have seen from the experience of the Fennelly report experience that a timetable can quickly slip by not just weeks but months. The only persons who would benefit from an inordinate delay in this case are those who would prefer the full truth in relation to IBRC not to come into the public domain.

There has been considerable attention given to the issue of preferential interest rates given to certain large IBRC borrowers. Over the weekend, there were contradictory reports from former IBRC sources with some indicating that no rates of below 2% were offered to clients while other reports indicated that rates as low as 0.25% were available in some cases. Deputy Catherine Murphy claimed in this House that Denis O'Brien was paying a rate of 1.25% on some loans. It would be extraordinary if interest rates of this order were being charged by the bank. If this was the case, did such rates originate in loan agreements negotiated under the old Anglo Irish Bank or did they arise under the management of the nationalised bank? Questions that arise include: on what criteria was the practice of substantially discounting the interest rates based? How wide-spread was the practice? What was the cumulative revenue loss to IBRC from interest rate discounts? Was the Department of Finance advised of the revenue loss associated with the interest rate reduction? Interest rate reductions, however, are not the only form of concession that would be of material value to a large IBRC borrower. In order to ensure that the terms of reference are sufficiently robust to capture all relevant issues, we believe specific reference to revenue losses of €4 million due to interest rate concessions should be extended to cover other issues such as the rolling-up of interest, the extension of the loan period and changes to the collateral, including personal guarantees underpinning loans.

I note that in the terms of reference he published, the Minister has amended the definition of transactions or decisions to include changes to the commercial terms of loan agreements. That is an absolutely vital issue and we welcome that amendment because limiting it to distinct transactions resulting in a write-down or capital loss of €10 million is simply not sufficient. Very substantial benefits could be received by borrowers if there were key changes to the commercial terms attaching to loan agreements, including the expiry of a loan beyond the date originally provided for in the loan agreement. That must be explicitly provided for within the scope of this commission. It should also be established why certain loans were not transferred to NAMA by the IBRC when it was established. NAMA's rules were quite different to those of the IBRC in that they would not allow borrowers buy back loans at a discount. That was not prohibited in the IBRC legislation and the nationalisation, as we know, and that might have led to a different outcome.

We believe the Government has moved in the right direction on this issue, albeit in the face of sustained public and parliamentary pressure. It needs to reflect carefully on the comments of Deputies on all sides of this House tonight and during the debate tomorrow. The democratic process suffered a serious setback from the media blackout on reporting of Deputy Catherine Murphy's recent speech in this House. A genuinely engaged Government, listening to Opposition concerns, would go a long way to undoing that damage. We look forward to the debate tonight and tomorrow and we wish the commission of investigation all the very best in the serious challenge it faces in completing its work in a speedy time frame.

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