Sunday, March 8, 2009

Liam O'Reilly the first Irish Financial Regulator is a busy man

The first chief executive of the Ireland's Financial Regulator, Liam O'Reilly, is a busy man these days at the age of 61.

He has been a board member of Irish Life & Permanent Plc (IL & P) since early September 2008. His appointment was inspired by his "long experience in financial services, public administration and economic and monetary policy in Ireland and at EU level", according to Chairman Gillian Bowler in welcoming O'Reilly.

However, O'Reilly arrived at IL & P just in time for the transaction described as the €7.9 billion in 'exceptional support' to Anglo Irish Bank was executed. The source of these funds is being investigated by the Irish authorities including the Financial Regulator, the Director of Corporate Enforcement and the Garda Fraud Squad.

Bowler, admitted on March 4th this transaction was wrong; that her board knew nothing about it, that if they had, they would not have approved it. But they have not fallen on their swords, despite great unease among the staff and society-at-large - yet.

Mr O'Reilly became the first Chairman of the Chartered Accountants Regulatory Board (CARB) in April 2007. This Board supervises the "to regulate its members, in accordance with the provisions of the Institute's bye-laws, independently, openly and in the public interest".

This CARB appointed the former Irish Comptroller & Auditor General, John Purcell, on 19 February to undertake an investigation into the issue of dirctors loans at Anglo Irish Bank.

Loans to the former Chairman of Anglo Irish Bank, Sean FitzPatrick, for an 8-year period resulted in FitzPatrick's resignation from this position on December 19th as well as his resignation from the boards of Aer Lingus and Smurfit Kappa. The loans outstanding amounted to €83 million in 2008 and €122 million in 2007. These are the very loans which the staff of the Financial Regulator discovered when conducting sn examination of the books of Irish Nationwide Building Society in early 2008 but neglected to tell their boss, the last Financial Regulator, Pat Neary, in sufficient time for him to protect his position. Neary resigned from as Financial Regulator on January 9th.

If that was not enough to keep a man busy Liam O'Reilly is also a director of Merrill Lynch International Bank based at the IFSC. It was disclosed on 6th March that the Financial Regulator is investigating a possible rogue trader case involving an employee at the London branch office of this bank since February 18 relating to the 'mis-pricing of trades'. The NY Times reported that a FX trader may have lost more than $120 million and tha several hundred million dollars could have been lost on derivative trading - MLIB earned pre-tax profits of $860 million on reveues of $2.6 billion in 2007 before the financial tide turned for its parent.

Bank of America acquired Merrill Lynch on 15 September 15th 2008 for a €50 billion all-stock transaction that was "intended to create an entity that would become the leading financial institution in the world based on a great global franchise"

However, just a mere 4 months later, on 21st January 2009, the former boss of Merrill Lynch, John Thain, resigned following a fourth quarter loss in 2008 of $15.3 billion, - $553 million more than Bank of America expected it to lose when it acquired Merill.

Thain was a man with extravagant tastes and spent $87,000 and $68,000 on a sideboard when refurbishing his office last year at an overall cost of $1.2 million. Thain had suggested to his fellow directors the previous month that he be paid a $10 million bonus for the period since he became CEO of Merill in December 2007. He had already received a $15 million bonus in cash when he joined Merrill and a salary package anticipated to yield from $50 million to $120 million over several years.

The US Government has provided $45 billion in bailout money to Bank of America. Apart from selling 3 corporate jets, it is also selling a Merrill Lynch helicopter and has confirmed that no bonuses will be paid to Bank of America executives last year and the remuneration of its chief executive has been slashed by 60% to $10 million.

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