Saturday, October 10, 2009

Are the authorities asleep as far as Dublin Dockland Development Authority is concerned?


2009 10 10_0711_edited-1 WHEN UCD Professor  Niamh Brennan was appointed Chairman of Dublin Docklands Development Authority (DDDA) to effectively replace Donal O’Connor, last March, the taxpayer looked forward to observing an icon of excellence in corporate governance emerge under her leadership.  O’Connor had become Chairman of Anglo Irish Bank on 18 December 2008 having been Chairman of DDDA since June 2007

One of the basic fundamentals of excellence in corporate governance is the timely presentation of an annual report and audited accounts.  The annual report and audited accounts for the year ended 31 December 2008 have yet to emerge from DDDA.  An Oireachtas Committee was advised on 10th February that draft accounts were ready and that audited accounts for 2008 would be available by early March. 

The 2008 audited accounts of Becbay Limited which is the vehicle through which the 26.4 acre Irish Glass Bottle site was acquired, have not been filed.  An annual return due on 31 July 2009 is long overdue and liable to penalties.  DDDA has a 26% stake in this entity. Is Brennan asleep at the helm and is anybody capable of rousing her?

The DDDA, to an outside observer seems to reflect the cosy, intimate  neighbourhood culture of Dublin’s docklands before the era containerisation.  Everybody knows everybody else.  Nobody is remotely embarrassed to borrow a cup of sugar or a couple of hundred million € for speculative purposes.  That quaint intimacy of The Rovers Return and a bubbly pint of bitter radiates among all of those doing their ‘level best’ to alleviate the depressing despondency of the ‘the vulnerable’. Behind the glitter and the graphics the bulk of DDDA resources appear to have been committed to fattening well upholstered arses of affluent developers and discredited bankers, who have proven themselves untrustworthy.


Irish Glass Bottle Site 2009 Valuation

It has been recently reported in the media that the value of the former Irish Glass Bottle site at Poolbeg has written been down by 85% from €412 million to €62 million.  This leaves DDDA with a potential liability of over €90 million in respect of its 26% share of this asset. One arm of the State owes another (nationalised Anglo)  €90 million.  How can a State body with an income (excluding property trading, grants and levies) of €820,000?  DDDA recorded a deficit of expenditure over income of €15.64 million over the four years between 2002 and 2005, so its viability depends on its capacity to sell its development assets.  Where is the banana plantation?

The primary income of DDDA was in dealing in ‘Development Assets’, some of which it sold, while others were retained as ‘Investment Properties’ with the potential of achieving a rental income and their investment potential.  The consequences of large unanticipated liabilities must raise real doubts about the solvency and viability of DDDA.


DDDA 2007 Audited Accounts

DDDA has four major assets ~ at Grand Canal Harbour, the former Readymix site which was purchased in 2006, the CHQ Building, a retail centre at the IFSC and its 26% interest in the Irish Glass Bottle site at Poolbeg held through Becbay Limited.

The net assets of DDDA at 31 December 2007 stood at €177.2 million, a figure that included investment properties, the value of which had been increased by €25.66 million. Development properties held for investment are reflected at open market value.  These valuations, which are supposedly to reflect ‘open market values’ must now be greatly overstated on the basis of the 2007 accounts.

2009 10 10_0749

The Executive Board comprises 8 members, of which one is a civil servant from the Department of the Environment, Heritage and Local Government.  Businesses directly connected with three of the remaining seven members earned revenue of €592,843 from DDDA in 2007.

Consultancy services were provided by O’Donnell Tuomey. Sheila O’Donnell, who with her close family has a controlling interest in O’Donnell Tuomey, was appointed a member of the Executive Board during 2007. Amounts payable to O’Donnell Tuomey for services during 2007 were €132,438.  

Consultancy services were provided by Ove Arup and Partners Ireland (trading as Arup Consulting Engineers). Niamh O’Sullivan, a director of Arup Consulting Engineers, is also a member of the Executive Board. Amounts payable to Arup Consulting Engineers for services in 2007 amounted to €310,750 (2006: €372,555). Not bad pickings really for being in the right place at the right time.

The total expended on consulting fees in 2007 was €913,889 – so 0ver 48% was spent at firms connected to the Executive Board.  I can’t wait to see how much they were paid for services rendered in 2008! The engineering under way a the Irish Glass Bottle site is effluent disposal by seagulls!

Internal audit and consultancy services continued to be provided by PricewaterhouseCoopers during 2007, amounting to €149,655. Donal O’Connor, a former managing partner at PricewaterhouseCoopers, was, of course, Chairman of the Executive Board of DDDA for a substantial part of 2007.

A pension liability of €7.33 million arises in respect of the DDDA unfunded pension scheme for its 46 employees.  Pension payments in 2007 were €81,419 while contributions were €68,311. An actuarial gain was recorded in 2006 (€271,000) and 2007 (€290,000).  An actuarial loss of €447,000 was recorded in 2005. 

The pension interest of the remaining 45 employees will be ‘protected’  by the Pensions Board, whose Chairman is Tiernan O’Mahony, former  Chief Operating Officer of Anglo Irish Bank from whom he parted company in 2004 when The Drummer Boy, complete with the optimism of The Pied Piper,  was made CEO. 

O'Mahony joined Anglo Irish Bank at its inception in 1985.  He became of a member of its board in 1993 and served as Chief Operating Officer and Chairman of the Executive Board from 2002 until his departure in December 2004. He subsequently founded International Securities & Trading Corporation (ISTC) on the premise that "it would be lending to the highest quality borrower that there is".  ISTC, in its early days, could apparently borrow and make a healthy margin on its loans until the cost of borrowing rose and the value of bank capital fell.

Moodys Investment Services, in November 2007, reviewed and downgraded several structured investment vehicles in which ISTC had invested €210 million, 7% of its portfolio.  Its assets continued to fall in value and its capital began to run low before ISTC ceased paying creditors. 

as iopmThe consequences were to cause the business to collapse in early 2008 and enter examinership.  When ISTC collapsed, with a loss of €870 million, it was, I believe, the largest corporate collapse in Irish history, although it didn’t hold that record for long when the malignancy of his former boss at Anglo was disclosed.  It had 18 creditors, including many of the world's largest banks.  125 unsubordinated bond holders in Friends First lost €43 million.  Last month 154 of the 540 jobs in Friends First were lost as a result of the closure of its asset finance division, Firends First Finance.

There is also a sum of €11.03 million listed in creditors which does not accrue to DDDA.  It relates to levies invoiced on behalf of the Railway Procurement Agency and Iarnród Éireann.

Tax Privileges and Planning Procedures

DDDA is exempted from Corporation Tax under S220 and Capital Gains Tax under S610 of the Taxes Consolidation Act 1997.

Planning permission for developments within the DDDA mandate are granted under what is known as a ‘Section 25 certificate’, except in the case of land dedicated to public amenity use, for which planning permission is sought in the conventional manner.  Planning proposals are submitted by DDDA to the Minister for the Environment, Heritage and Local Government for approval.  Section  25 refers to the Dublin Docklands Development Authority Act 1997 and a planning scheme should be consistent with the DDDA Master Plan.


Arrival and Departure
of Paul Moloney and Lar Bradshaw

Mr Moloney resigned, seemingly abruptly, from the DDDA on 30 July 2009, 11 months before his contract expired.

It was reported that he was paid €150,000 to cover the salary he would have received had he remained in the employment of DDDA until the end of June 2010 when his 5-year contract was due to expire. No mention of the company rickshaw or an Audi A6

When Mr Moloney joined DDDA from Dublin City Council in 2005, the then chairman of DDDA, Lar Bradshaw, replete with all the superlatives he could muster said then: “We are delighted to confirm the appointment of Paul Maloney as the new Chief Executive. He has all the attributes we were looking for in terms of urban regeneration experience and, throughout his career, has demonstrated that he is a highly effective leader with vast experience in project implementation”. 

The remuneration for the position of chief executive of DDDA was reaffirmed, (but not increased) at €151,261 in 2007 by the Review Body on Higher Remuneration in the Public Sector, whose Chairman, Tony O’Brien, coincidentally is a former chairman of Anglo Irish Bank and former chair of the Remuneration Committee at Anglo where he would have become acquainted with large numbers.

Mr Bradshaw had completed a decade as Chairman of DDDA when he stepped down in 2007. It was reported last June in the media that he had a stake, along with Derek Quinlan, in a €70 million car park and office scheme constructed in Commons Street by Liffey Partnership during his tenure as Chairman of DDDA and that DDDA approved major changes to that project to facilitate a major office complex to be located above the car park. Quinlan is also  joint venture partner with Bernard McNamara and DDDA  in the Poolbeg site

Bradshaw (aged 49), was, of course, also director of Anglo Irish Bank from October 2004 until he ‘voluntarily’ resigned that position along with his friend and confidant, Seán FitzPatrick on 18 December 2008.  He had been managing director in Ireland of McKinsey from 1995 until his stint at Anglo Irish Bank.  He had been a member of the Anglo audit committee in 2005.  He became a member of the Nomination and Succession Committee in 2006 and of the Risk and Compliance Committee at Anglo, alongside Greencore boss Ned Sullivan and Fintan Drury,  while Chairman of DDDA and overseeing the Irish Glass Bottle Poolbeg deal.  Anglo reported in 2007 that it was “delivering excellent performance across all divisions with organically driven growth in earnings per share of 44%” and it anticipated “underlying earnings per share growth in excess of 15% in 2008”.

After all it had secured a big fat arrangement fee on the €296 million loan to buy the Poolbeg site.  This deal had been approved by DDDA under Bradshaw’s chairmanship and risk evaluated at Anglo by himself Sullivan and Drury.  “As always, Anglo’s risk appetite remains conservative”. (former CEO The Drummer Boy in 2007 ~ at his most perspicacious).

FitzPatrick was also a member of the Executive Board of DDDA in 2006 and Chairman of its Finance Committee. 

Who appointed FitzPatrick and Bradshaw to the Executive Board of DDDA?  I’m sure the Oireachtas Committee on Environment, Heritage and Local Government, will advise and explain before too long. 


Becbay Limited ~
Issued capital €100; Debt €300 million+

2009 10 10_0717Becbay Limited was established on 11 August 2006 and acquired the shares of South Wharf Plc.  DDDA provided irrevocable guarantees to Becbay which owned the 24.9 acre Irish Glass Bottle site at Poolbeg (photographed 10 Oct) . Becbay has an issued capital of €100, of which €26 of which is owned by DDDA, which had been represented on the Becbay board by Paul Moloney. The other directors include Bernard McNamara of Ailesbury Road (neighbour of vendor Paul Coulsen)  and Derek Quinlan of Shrewsbury Road.

The site was acquired for €412 million and the overall   investment in this site is stated to be €428 million financed by a loan of €296 million owing to Anglo Irish Bank, loan stock of €138 million, a directors loan from Bernard McNamara of €101,869, loans from parties related to Becbay of €11.6 million and the issued equity of €100. The deferred arrangement fees due to Anglo Irish Bank in respect of the bank loan is €2,572,917 but this is being amortised over the period of the loan. Interest rate swaps were in place at 31 December 2007 which meant that €91.4 million of the loan bore a floating interest rate while the balance bore a fixed rate. The Anglo Irish Bank loan was a 2-year facility that was to be repaid in last February.

No annual accounts have been filed for 2008 and the latest Annual Return due on 31 July 2009 is seriously overdue at this stage.

Oireachtas Committee ~ 10 Feb 2009

Mr Moloney reported to the Oireachtas Committee on Environment, Heritage and Local Government on 10 February 2009, that DDDA contacted those who were tendering for the Irish Glass Bottle site.  The other partners,  Quinlan (33%) and McNamara (41%) said “they were happy to form a consortium”. DDDA took the minimum stake possible.

The reason DDDA took 26% was to secure voting rights in the Becbay.   The site was not sold as a discrete asset, but as a company, as the former owners had directed. No doubt there were tax savings at stake in this approach. 

The prospective buyers were apparently advised that the market value of the site was between €250 million and €370 million. The actual sale price was €411 million but the DDDA stake is 26% of €375 million at an entry cost to DDDA of €32.6 million. Why would someone pay over €30 million above the maximum estimated value of this site?  What implications would have arisen among the various parties to this exceptionally high price.  Is it all about emulating the transaction in Ballsbridge (Soweto on the Dodder) that made the Doyle and Beatty families even wealthier that their wildest dreams could have envisioned?

Did the Ministers for Environment, Heritage and Local Government and Finance sanction this, or was it all left to Bradshaw and Moloney with the connivance of the Chairman of the Finance Committee, FitzPatrick?  Was this what Bradshaw had in mind when he uttered the superlatives welcoming Moloney’s appointment to DDDA in 2005?

Interest accrued and working capital to last February brought the DDDA outlay to €37.6 million. But in 2007 it also has a liability of €26 million in respect of Bebcay liabilities.  Today,  DDDA, carries the can for 26% of the€300 million debt due to have been discharged last February.

When the proposal for DDDA to become involved in the site was approved by its board in 2006, Bradshaw was a party at the DDDA board meeting that sanctioned approval ~ even though Anglo was a banker of the project and Anglo was the recipient of a substantial arrangement fee. Bradshaw was also a client of Quinlan Private, a business founded by Derek Quinlan, one of the other joint venture partners. He did not recuse himself from these decisions.

Bradshaw also had a business relationship with the vendor of the site, Paul Coulson, through a company called Balcuik, a property rental business with profits in the year to 30 May 2008 of €873,174 (€3,506,751 in 2007), ~ but this interest was not disclosed to the board of DDDA.  The other directors of Balcuik include former Anglo director, Gary McGann, and Denis O’Brien.  Anglo Irish Bank provided company secretarial services to Balcuik.  There is a fixed and floating charge over the assets of Balcuik in favour of Anglo Irish Bank, its principal banker.

The site was to have been revalued last March and this was to have been reflected in the 2008 accounts. The cost of revaluation was to have been borne by Anglo (is that now the taxpayer?).

Despite the promises the site remains dormant and the taxpayer remains in the dark about the nature and implications of this transaction and the viability of Dublin Docklands Development Authority. 

It is time for the Joint Oireachtas Committee on Environment, Heritage and Local Government to grab this hiatus by the scruff.  Deputy Fleming – step forward and call order.

1 comment:

  1. Great post, I've been looking for a summary of the action at the DDDA for a while now but to no real avail. As I see it, and your post tends to confirm, a number of individuals hijacked a state agency and used it for their personal enrichment. It amazes me that this story is being ignored by the fourth estate. These guy's must be laughing all the way to the bank at the media's obsession with amateurs like O'Donoghue when the real action is down at Sir John Rogerson's Quay!