Catherine Murphy (Kildare North, Independent)
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I am disappointed the Minister for Finance is not present, as he was in the House earlier. The first two Topical Issue debates were taken by the relevant line Minister.

When I first started raising this issue with the Minister for Finance, Deputy Noonan, he told me IBRC operated at arm’s length from the State. As I probed deeper, he conceded his Department was concerned about the Siteserv deal but that he was satisfied it was in the best interest of the State. When I pushed further, he eventually admitted that far from being satisfied, his Department actually conducted a full review of the deal and that following that review, the Department made a decision to second one of its officials to the board of IBRC to provide greater oversight. Six months later, IBRC was wound up in a very rushed fashion.

Today, I received freedom of information documents from the Department of Finance which show not only that the Minister was not satisfied the deal was the best one for the State but that he believed the deal resulted in a less than optimum return for the bank and, by extension, the State. That conflicts with the original reply, which is a serious issue in its own right.

I have been raising these concerns because when I started examining how the lucrative Irish Water metering contract had been awarded, the trail led me back to the IBRC sale to Siteserv, whose subsidiary, Sierra, went on to win the metering contract, and to the Denis O’Brien-owned Millington. That led me to a web of potential conflicts of interest which I am still trying to understand. I refer to people such as Mr. Richard Woodhouse, the head of specialised asset management in IBRC, who also managed the Siteserv account and the personal borrowings of the Siteserv CEO, Brian Harvey, as well as being a personal friend of Denis O'Brien. That brings me to Davy. There was one Davy adviser advising five Siteserv board members. The same legal firm, Arthur Cox, was advising or working on behalf of both seller and buyer in this deal.

I have tabled parliamentary questions but they have not been replied to, so I am asking questions here. I have been told by a whistleblower, although I am open to hearing the Minister of State’s version of this, that Millington was not even considered in the first round of bids and that Millington received a letter from the aforementioned Mr. Richard Woodhouse informing it that it needed to change its bid if it was to be considered in the second round. Millington added a €5 million cash sweetener for the shareholders to the bid and Millington was successful. The memo I got through freedom of information today again reiterates the point and the Minister’s concern that the decision to exclude trade buyers was serious. It is even more serious in the context of the metering contract which was later won.

Earlier today the Taoiseach told this House that the relationship framework governing the transaction was the 2009 framework, which did not require IBRC to involve the Department in the transaction. However, the freedom of information documents show that negotiations for the implementation of the new framework were ongoing for some time prior to that. I believe there were approximately 30 versions of it prior to the Siteserv deal. It came into effect two weeks after the conclusion of the deal. The documents further suggest that IBRC's CEO, Mike Aynsley, and the board resisted the implementation of the new framework at every hand’s turn until the Siteserv deal was concluded. I need to have an answer to that.

IBRC had been told by the Department to act as if the framework were in place earlier than when the Siteserv deal was concluded. Why did it not do so? Did Mr. Alan Dukes, as chairman of IBRC, ignore the instruction to act as if the framework were in place? The strange relationships and extremely fractious relationship between the Department and IBRC and the concerns surrounding the Siteserv transaction and other large transactions raise serious questions about the real reasons underpinning the eventual "prom night" in which IBRC was wound down in a very hurried fashion.

Simon Harris (Wicklow, Fine Gael)
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I thank Deputy Catherine Murphy for raising the issue. I am grateful to have an opportunity to place some information on this matter on the record of the House.

On 15 March 2012, the board of IBRC met and approved the sale of Siteserv. Under the relationship framework that was in place between the Minister for Finance and the bank at that time, which had been place since July 2009, the board of IBRC was required to engage with the Minister for Finance on certain key issues, which included "any material acquisitions, disposals, investments, realisations or other transactions, other than in the ordinary course of Anglo Irish Bank's banking business."

It should be noted that this relationship framework did not include any specific monetary thresholds which would trigger mandatory consultation with the Minister for Finance. It should also be noted that at the time the ordinary course of the bank's business was to conduct an orderly run-down of the bank. As such, IBRC's efforts, as a secured lender, to maximise the recovery on its loans to Siteserv was considered to be in the ordinary course of business. For that reason, and under the relationship framework in place at that time, IBRC was not required to consult the Minister for Finance on this matter in advance of making the decision to approve the sale of Siteserv.

Upon receipt of critical representations following the transaction, Department of Finance officials inquired about the transaction with IBRC management as part of their regular engagement. Following initial discussions, they agreed with IBRC's chairman and CEO, on 31 May 2012, that they would review the transaction involving Siteserv in greater detail to better understand the decisions taken and the impact these decisions had on the process and the final recovery for the bank. Through this review, which took place on 11 June 2012, Department of Finance officials were concerned that IBRC had decided to allow Siteserv to control the sales process rather than itself acting in a primary role in this transaction. This decision appears to have given rise to a number of other subsequent actions which could quite reasonably be considered to have caused a reduction in the bank's recovery on the Siteserv exposure. These included the exclusion of potential trade buyers from the sales process, the fact that legal advisors to Siteserv also acted for the purchaser, and the making of a payment to the shareholders of Siteserv. In light of these concerns, the shareholding management unit of the Department of Finance recommended that the chairman of IBRC commission an independent review of the transaction, and this was included in a briefing note to the Minister for Finance prior to his meeting the chairman and CEO of IBRC.

On 25 July 2012, the Minister for Finance met IBRC's chairman and CEO to discuss concerns regarding this transaction which were raised with him by Department of Finance officials following their engagement with IBRC management. The chairman and CEO gave strong assurances that the transaction had been thoroughly assessed by the IBRC board and that the management and board of IBRC were satisfied that the transaction was managed in the best manner possible to achieve the best result for the State, including the decision to allow Siteserv to control the sales process. At this meeting, the chairman and CEO further confirmed and provided assurances, with regard to the specific concerns previously mentioned, that trade buyers had been excluded due to the potential damage to Siteserv's competitive position that might otherwise have arisen; that the legal advice was provided by two different teams within the law firm concerned, and that appropriate Chinese walls were in place between the two teams; and that the payment to shareholders was necessary to ensure a vote in favour of the deal.

To help prevent such concerns regarding the quality of decisions taken by IBRC management from arising in the future, the Minister for Finance requested that a further meeting take place between the former Secretary General of the Department of Finance, John Moran, and the then CEO of IBRC. A meeting took place in August 2012 at which this matter was further discussed. At that point, and at all other points mentioned above, the transaction had been concluded and no further action could have been taken.

Notwithstanding the fact that a revised relationship framework and operational protocol had been put in place on 29 March 2012, it was decided following John Moran's meeting with the then CEO of IBRC in August 2012 that a senior Department of Finance official would be seconded to IBRC to explore opportunities for deleveraging with a view to maximising the recovery for the taxpayer. This had the additional benefit of supporting the management team while also providing greater oversight, given that a number of matters within IBRC at that time raised concerns with Department of Finance officials. The secondment of Neil Ryan to IBRC commenced shortly thereafter, in October 2012, and he took up his role as the bank's new head of market solutions.

Catherine Murphy (Kildare North, Independent)
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The Minister for Finance, Deputy Noonan, went out of his way on the night IBRC was wound down to compliment the board of IBRC. He stated, "I wish to emphasise that the reasons the steps are being taken are entirely distinct from the performance or the direction of the board of management of IBRC." He also stated: "I acknowledge, with much appreciation, the significant efforts the directors and staff have made". This is at odds with some of what I have received under the freedom of information provisions, including an internal memo from the Department which states that it was concerned at the number of very large transactions of over €100 million that were poorly executed under the direction of the then CEO, Mike Aynsley. The memo also states that the performance management in executing these transactions raised the question of the effectiveness of the CEO.

Much of what the Minister of State said I could probably have written myself because of the information I have received through parliamentary questions, which was like pulling hen's teeth, but a whole lot of other questions need to be answered. There were many other very large transactions and we need to know what they were. The people whom the Minister of State and I meet every day, who are struggling and who bailed out the bank, have an entitlement to know they got as much as was possible. It seems that a golden circle is operating and that there are serious conflicts of interest all over the place. I would go so far as to say I believe there needs to be an independent inquiry into this transaction. If it is the case that a company, by virtue of winning that deal, was positioned to go on and win lucrative deals such as a metering contract, as was in the news, to the exclusion of other people who were trade buyers, one must ask why this could have happened. There are very serious questions which undermine democracy, and transparency needs to be the winner in this. I compliment the officials in the Department because from a lot of this I can see that they were really doing their job.

Simon Harris (Wicklow, Fine Gael)
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Every action taken by the Government and the Minister for Finance has been taken with the aim outlined by Deputy Murphy: to minimise the cost of bailing out the bank to the Irish taxpayer and to restore our banking sector to a functioning reality so it can continue to serve the Irish economy. We may disagree on this, but it is the reason for the efforts undertaken by officials in the Department of Finance, whom the Deputy has rightly complimented, and by the Minister for Finance.

I have already outlined how the Minister, once these concerns were brought to his attention - after the transaction had been completed, under a relationship framework put in place by the previous Government which did not require him to be consulted - took a number of steps, including meeting the chairman and the CEO, asking the then Secretary General to meet them and seconding Mr. Neil Ryan to IBRC from the Department of Finance.

As part of Ireland's third review under the EU-IMF programme of financial support, a report on which was published in September 2011, Ireland committed to a number of conditions and actions. One of these was to develop a framework to govern the exercise of the State's ownership rights in the banks resulting from the capital injections, including to put in place relationship frameworks with the banks to protect the commercial basis for the banks' operations while under State ownership. The end of March 2012 was the deadline put in place for the introduction of these relationship frameworks with each of the banks in which the State acquired an interest in the context of the financial crisis, to govern the relationship between the State, as shareholder, and each bank. The relationship frameworks were designed to recognise the separation of each bank from the State, to ensure their businesses would be run on a commercial, cost-effective and independent basis to ensure the value of the banks as an asset to the State, and to limit the State's intervention to the extent necessary to protect the public interest. New frameworks were put in place, and the revised relationship framework introduced with IBRC was considerably more intrusive than those with the other banks, and rightly so, as this was necessary given the increased level of oversight required in view of the unique position of IBRC as a run-down vehicle financially supported by the State through the promissory notes, and the Department of Finance's experience to date with IBRC at that time.

The Deputy knows and has heard it from the Government that the ultimate decision to liquidate IBRC was taken in the context of the overall cost to the State of its orderly wind-down, which was being supported by the promissory notes at a heavy cost to the State. What concerns existed about certain management decisions are documented by the Department of Finance, and I have acknowledged them. Ultimately, the aim of minimising the cost of the orderly wind-down of IBRC was of primary concern to the Government. While it is not possible for any of us to express definitive views in the House on commercial decisions taken by boards of banks, it is possible to clearly set out the facts. I have set out the facts very clearly-----

Catherine Murphy (Kildare North, Independent)
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An interpretation of them.

Simon Harris (Wicklow, Fine Gael)
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-----on behalf of the Minister of Finance on the frameworks he put in place, and this tallies very much with the information Deputy Murphy has received. The Minister is working very hard to reduce the cost to the Irish taxpayer of the bank bailout imposed by the previous Government.