David Norris (Independent)

I wish to raise a matter of great significance. What I refer to is a systematic violation of the human and constitutional rights of an Irish citizen in which, regrettably, through cowardice, protection of their own sectional interests or sheer incompetence various agencies of this State, including the Garda fraud squad and the Minister's Department, can be clearly shown to have colluded. I have a considerable volume of documentary evidence. I have taken a good deal of time to examine this material and will present to the House an outline picture of the facts as they are contained therein. This will of necessity be sketchy due to the limited time at my disposal but all the supporting documentation is in my possession and I will be happy to make it available to the Minister.

At the centre of these events is my correspondent whom I shall describe according to the convention of these debates as "M". With a terrier-like investigative mind M has been very successful in business. Between 1980 and 1990 he developed and expanded the Small Firms Association very effectively. Among his objectives was the establishment of proper, honourable and decent standards in government, semi-State business and banks. His work between 1990 and 1992, which demonstrated that the major Irish banks had systematically over charged their customers, was highly unpopular, as one can imagine, in those commercial circles. We now know that M was correct in his analysis and what he exposed was but the tip of the iceberg.

In 1992 he helped to establish ISME. During the start-up period M agreed to operate without an agreed salary. As is often the case in enterprises such as this, during the initial period there was a certain amount of ad hoc activity and improvisation, although nothing illegal or fraudulent. However these circumstances were to provide fertile ground when personality differences emerged between my correspondent, M, and a member of the board of directors, whom I shall denominate as "H". Over the ensuing years H launched seven charges of fraud against M, the first and most trivial being that he had fraudulently charged a business suit to expenses. This was investigated and dismissed. The second was much more serious, an allegation of fraud involving €20,000.

The auditor to the company was a firm called Doody Crowley. It had been instructed by the company to provide for a €20,000 bonus in the 1996 accounts. On 30 June 1998 M was requested to resign and offered a €100,000 inducement to go. He refused. The national council of ISME established a committee to examine the charges against M. On 8 October 1998 it reported that there was no fraud by M. In November 1998 the board of directors resigned except for three members including one I shall denominate as DC, whose evidence I have before me. It states that he chaired the ISME meeting in April 1997 during which the board was informed of and approved the payment of the 1996 bonus of €20,000 to M.

When the auditor, Doody Crowley, refused to falsify the accounts by removing the agreement to the €20,000 bonus, it was fired and a new auditor was appointed, which was not informed that the books had already been audited. DC believed that he was removed from the board of ISME on 4 March 1999 because he was opposed to the removal of M on false charges and it was known that he would have opposed the alteration of the accounts.

These actions are all of a very nasty nature and worthy of a criminal investigation. M was framed and in the framing process the accounts were fraudulently altered. However, this is but the trailer to the big event. This State has been the happy recipient of significant amounts of European Union funding. In the late 1990s ISME was involved in just such a fund. It was fairly commonplace for an organisation such as ISME to put in invoices to European funding agencies in advance, receive the money and pay out as work was completed. This was regarded as poor practice and open to fraud. In 1997 the European Commission introduced a "sound efficient management" programme which insisted upon best practice audit procedures to prevent the kind of crude budgeting that was standard practice up until then in Ireland. In other words, incurring expenditures could not be projected forward and had to be actually incurred.

In October 1997, member states agreed to automatic penalties if they were found to have breached those terms. On 14 November 1997, member states agreed the new Regulation 2064/97 to require them to confirm that as of 30 June 1998 they were observing this procedure. This required them to confirm that eligible invoices were checked against bank statements to ensure that invoices were paid before EU funds were allocated. This regulation contained the possibility that it would apply retrospectively to 1994.

There were obvious difficulties in this mission and the Department of Finance gave Arthur Andersen a brief to review the situation. It replied with a devastating criticism of Irish procedures asserting that, first, compliance with EU regulation was vaguely assumed, second, EU expenditures had been signed blind, third, Department of Finance officials had failed to meet EU audit officials on preplanned audit visits, fourth, overlapping, that is, double charging, was possibly widespread as there was no way of knowing that overlapping had not happened and, fifth, compliance with EU regulations was ineffective and haphazard.

In response to these criticisms, the Department of Finance acted by instructing all spending Departments to confirm compliance with the aforementioned EU regulation in order to avoid financial penalties. This confirmation was nonsense, especially when applied retrospectively. None of the spending Departments had confirmed compliance, as was obligatory, by January 1999 and as a result the Department of Finance failed to confirm to the European Commission that it was observing the regulations on 30 June 1998 as required.

In May 2000, in an effort to fudge statements, the Department of Finance wrote to all Departments finessing the word "observed" so that, in effect, the regulation merely had to be circulated to comply. In 2000, the European Commission undertook a systems audit of the Department of Enterprise, Trade and Employment and in April 2001 reported that that Department had systematically maladministered EU funds. The total funds involved in Ireland amounted to €9 billion.

Acting on this, Mr. Grey, deputy head DG Budget in the European Commission, insisted Ireland must confirm compliance with the regulation retrospective to 1994 or face the automatic penalty set in place under the SEM programme. If compliance was not forthcoming the likely penalty was in excess of €400 million. The result was panic. Departments retained consultants to assist in fudging audit trails back to 1994. In fact, retrospective legislation is repugnant to the Irish Constitution but on 18 June 2002 a Government decision was secured ratifying the retrospection and in any case Brussels indicated that these kinds of directives superseded the Irish Constitution.

Ireland was not alone. In January 2001, the British Minister, Alan Johnson, complained about the impugned Regulation 2064/97 and put on the record of the House of Commons that the retrospective aspects of this directive had been rescinded on 10 October 2000. However, this did not prevent the EU from insisting that Ireland confirm retrospective compliance or face the penalty. All this is essential background to the third and most damaging accusation that M was involved in fraud involving European Union funds and their draw down. ISME did in fact draw down three invoices but M was not involved in the draw down or expenditure of the funds. This did not prevent his rival on the board making allegations of criminal fraud to the fraud squad.

Having been implicated, M went on many occasions to the offices of the fraud squad in Harcourt Square to attempt to clear his name. He mortgaged his house in order to help him restore his reputation as he was left with virtually no income at the time. He suffered a stress-related stroke which put him out of action for some time. Members of the fraud squad harangued him, made misleading statements to him and denied being in possession of knowledge which it subsequently turned out they did have. All this is documented in detail and is available to the Minister. Questions were asked in the other House by Deputies Quinn, Hogan, Cuffe and Deenihan. These questions were met with stalling replies.

In 2004, the then Tánaiste and Minister for Enterprise, Trade and Employment, Deputy Mary Harney, in reply to a question from Deputy Quinn, stated that her Department "was not aware of the basis on which the organisation that made the allegations formed the view that a possible fraud had taken place". This is despite the fact that ISME had complained to the fraud squad and written to the Department complaining about the unpaid invoices and offering repayment.

On 29 January 1999 and on 26 April 1999 the Department in a statement to gardaí dealt specifically with the matter of the unpaid invoices. Not only that, but it was in possession of an interdepartmental memo which was circulated as a result of an inquiry and which stated clearly that not only was there no fraud but there was no irregularity. The only reason this memo was suppressed and not made available to M as a result of his inquiries must have been to avoid the embarrassment and the possible imposition of a multimillion euro fine by the EU. I have a copy of that memo in my hand.

Concern for the welfare of the economy and taxpayers' money may be admirable but it must be done within the law. The constitutional requirement that the State should guarantee and vindicate the good name of the citizen has been very seriously violated in this matter. I require an explanation, as well as a full and public apology and compensation on behalf of the applicant.