Seanad debates

Thursday, 19 June 2008

2:00 pm

Photo of David NorrisDavid Norris (Independent)
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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.

Photo of Jimmy DevinsJimmy Devins (Minister of State, Department of Education and Science; Minister of State, Department of Enterprise, Trade and Employment; Sligo-North Leitrim, Fianna Fail)
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I apologise to the Acting Chairman and the House for the delay.

I want, at the outset of my response to Senator Norris, to make it clear to the House that my Department did not make any allegations against the individual involved and never sought to question his good name. These matters have been the subject of a number of parliamentary questions in the Dail and the position of my Department has been fully explained, most recently in reply to Parliamentary Question No. 690 of 30 January 2008. In that reply, the then Minister reconfirmed that neither he nor the Department had any issue or concern to pursue with the individual, who had been so advised in writing.

In order to help understand the concerns of the individual, I am happy to outline briefly the background to the case to the House. In June 1996, my Department approved grant assistance of 104,000 ECUs or about IR£83,000 under the EU-funded small business operational programme for a project proposed by the organisation concerned. In accordance with the normal procedures for the relevant measure, an initial grant of 50% of the total approved was made at that time, while a further grant of 30% was issued in September 1997, following the submission of a progress report on the project by the organisation.

On 29 January 1999, the organisation wrote to the Department advising it that it appeared to the organisation that it had received an over payment from the Department in respect of expenses amounting to IR£16,500 on foot of which a grant had been paid at the rate of 75%. At a meeting with the Department on 5 March 1999 to discuss this matter, the Department was advised by the organisation that it had decided to alert the Garda fraud squad to suspected irregularities in regard to the claims submitted to the Department for funding for the project arising from the organisation's concerns about invoices in the amount of IR£16,500 received from a supplier of services to it.

The Department was advised that the organisation's auditors had also been informed about the matter and that the Department would be kept informed about developments. At that stage, the Department suspended any further payments in respect of this project pending the conclusion of the investigations into the matter. The Department subsequently co-operated fully with the fraud squad.

On 23 June 2000, the organisation wrote to the Department and confirmed that an extensive investigation by its auditors had found no evidence of fraud and that, following a fraud squad investigation, a file had been referred to the Director of Public Prosecutions, who had decided there were no grounds for action. The organisation indicated that it had accepted the results of these investigations and, accordingly, the invoices which had been the subject of the investigations were paid by the organisation on 23 June 2000.

Since 1999 there have been very extensive contacts, both direct and indirect, between the Department and the individual concerned. These contacts have included the following: 24 freedom of information requests; copious correspondence; a number of meetings between the individual and various officers of the Department; ministerial representations from others on behalf of the individual; and numerous parliamentary questions about his situation. It is estimated that over the course of the past nine years the individual has submitted in excess of 100 e-mails, letters, phone calls and so on in regard to this matter to a wide variety of officers throughout the Department.

In the context of the various freedom of information requests, the Department has endeavoured to assist him both within the constraints of the Act and outside the Act. He has been granted access to all relevant records that are held in the Department concerning the issue. In addition, he has met a number of officials in the Department on different occasions, who have given him an opportunity to view all relevant files that relate to his various freedom of information requests. Despite this, he wrote to the Information Commissioner in 2004 in regard to the Department's handling of his various freedom of information requests. While not part of her binding decision of 7 March 2007, the Information Commissioner in her reply commended the Department for the way in which it had co-operated with her office during the review, including examining pre-commencement records where no right of access had been established and providing access to records outside of freedom of information legislation.

Following an approach on behalf of the individual in 2004, the then Secretary General issued a letter that closely followed a draft submitted by the individual concerned, which he wanted the Department to issue. The Department considered this draft very carefully and the then Secretary General responded on 18 October 2004. This letter was a final attempt to satisfy the individual and made it clear that the Department had no issue with him. I take this opportunity to read into the record of the House the text of this reply by the then Secretary General, without naming the individual or the organisation involved:

The Department acknowledges your sustained written and mobile communication, particularly since August 2003. You contend that the relevant Department files demonstrate that there was never any basis for the allegation which led to the deployment of the Garda fraud squad in 1999.

The Department has now read all the files identified by you and confirms that there was never any evidence available to the Department to support any suggestion of "collusion" in respect of grants paid by the Department or collusion against the Department. In this regard, the Department also recalls that an extensive investigation by [title of organisation deleted] auditors found no evidence of fraud while the Director of Public Prosecutions decided, on the basis of the file submitted by the Fraud Squad, that there were no grounds for action. The Department was happy to accept the findings of these investigations.

The Department also wishes to confirm that it was not involved in substantiating the charge or in the subsequent calling in of the Fraud Squad and is happy to reject any suggestions to the contrary that may have been made in this regard.

The Department has, over a period of some 20 years, dealt with you in a variety of capacities. The contacts were always of the highest probity. The Department never had any evidence to suggest the contrary.

The Department believes that it has addressed the issues raised by you to the fullest extent possible and that the exchanges between us should now be considered closed.

Despite this explanation, the Department's conclusion that the matter should be considered closed and the reconfirmation of the Department's position by the current Secretary General in May 2005, the individual continued to pursue the matter. In the interim, the Department has devoted further resources in responding on the issue, inter alia, in the context of a further freedom of information request and parliamentary questions in the Dáil. The House will appreciate that the Department has made a considerable effort to provide the individual with access to all relevant documents in regard to his position and to address the issues raised by him.

For the avoidance of doubt, I again affirm that I am satisfied neither the Tánaiste nor the Department has any issue or concern to pursue with the individual who has previously been advised to this effect in writing. If it is helpful, I am happy to restate that the Department has over a period of some 20 years dealt with the individual in a variety of capacities. The contacts were always of the highest probity. The Department never had any evidence to suggest the contrary.

Photo of David NorrisDavid Norris (Independent)
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I am horrified by the Minister of State's reply. If he thinks this matter is closed, he has another think coming because it most certainly is not. Much of the material in his reply is simply untrue. He stated:

[T]he Department has endeavoured to assist him both within the constraints of the Act and outside the Act. He has been granted access to all relevant records.

That is not true. It is a lie. In 2005, the former Minister for Finance, Deputy Quinn, asked a series of questions and was given an answer on the matter. Subsequently, an important memo, which I put on the record, was withheld from the person concerned. That memo would have allowed him to clear his name. The Minister of State's Department has colluded in the framing of an Irish citizen, has continued to violate his rights and has produced a lot of waffle to cover up the fact that it got itself into a serious situation. If it had vindicated his human rights, it might have exposed itself to a significant fine. That is what the matter is all about. It is completely untrue to claim that the Department assisted in every way. It withheld documents, prevented him from clearing his name and then washed its hands with this waffly statement. I hope the person concerned, who is sitting in the Visitors Gallery, will be able to use what has been said today to raise a storm about this issue because it is not satisfactory that any Irish citizen should be subject to this kind of behaviour.

Given the extraordinary and explosive nature of this story, I originally found it difficult to believe. I confirmed it with Deputy Quinn who said that a catastrophic violation of an Irish citizen's human rights had taken place. However, the Minister of State's pathetic answer has not advanced the matter whatsoever. I do not mean that personally.