Europe’s Fight Against Organised Crime

THE Institute of International and European Affairs hosted a seminar under the above title today that included The Attorney General and The Director of Public Prosecution as attendees.  Speakers included the Head of the Criminal Assets Bureau, Patrick G. Byrne, the Director of Europol, Welsh born Ron Wainright and the Deputy Head of Britain’s Serious Fraud Office, Gary Leong.  Former Minister for Justice, Equality and Law Reform chaired the seminar.  An objective of the fight against organised crime is to strip to holders of ill-gotten gains of those assets.

 

Europol

Ron Wainright, a Welsh-born history and literature buff, became Director of The Hague-based Europol last April.  Europol is the EU Law Enforcement Agency that deals with police intelligence.  Its function is to support the police forces of Member States.  Wainright described how the scale of organised crime is growing exponentially with open borders, ease of travel, and advances in the capacity of the internet combining to enable gangsters and criminals to blend a range of innovative and long established approaches to their mercurial enterprises.  These circumstances have enabled criminals to operate in smaller cellular structures and to diversify their activities as a camouflage.  Various forms of violence and corruption are used to dominate their own ethic communities.  New type of e-tools, methods of computer hacking, and data mining have facilitated large-scale identity theft and online fraud and online money laundering.

The majority of the organised crime groups operate between those domiciled within the EU and others domiciled outside the EU.   Many supplying groups, or non-EU-based groups, typically want to better safeguard their business interests in the EU and maybe also get more involved in the final phases of the supply chain, such as distribution and money laundering. They may even wish to expand their business into other criminal markets located in the EU. Originally non indigenous organised crime gangs may also regard the borderless.

The EU is considered by crooks to be a good location to invest some of their criminal proceeds and to get involved in legal businesses that are apparently profitable,  especially if the risk of involvement is dispersed and some parts of the overall interests of the criminal organisation are maintained outside the EU in the origin.

Europol considers that the organised crime  environment in the EU is evolving and dynamic.

Some groups in intermediary situations are increasingly featuring members from a mixed ethnic background so that several ethnicities and nationalities, including that of the countries of activity, are represented. Their leaders, in a guise  to safeguard their overall strategic interests, often reside both in the countries of activity and origin.

They are also prepared to use influence and corruption in the EU both in the public and private contexts and they display  an increasing awareness of the functions of the EU and readiness to control any aspect possibly affecting the criminal business.

 

Drugs

 

The large scale importation of cocaine into the EU is dominated by Colombian organised crime cartels. They profit from the historic and linguistic links with Spain but also Portugal, as well as from the long coastline of the Iberian Peninsula and well established Colombian communities there. Colombians and Spanish nationals are used to co-operate within this drug market and recently also cooperation with Nigerian groups is frequently reported.

Drug transportation to Europe can be via the Caribbean or recently via West Africa. West Africa is increasingly gaining in importance as a trans-shipment zone. Recently, Colombian gangs  have developed relationships with their Moroccan counterparts in order to make use of the traditional cannabis smuggling routes, thereby enabling the onward transport of cocaine to the EU.

Most of the heroin circulating in the EU is originating from Afghanistan.  Heroin trafficking towards and within the EU
continues to be dominated by Turkish criminal groups. Turkey has ties with Afghanistan and with countries such as The Netherlands,
Belgium, France, Germany and the UK.

The majority of heroin is still transported via different branches of the Balkan routes, but a considerable amount is trafficked via the Northern Black Sea route which is gaining in importance. Dutch and to a lesser extent Belgian organised crime groups still dominate the major production of synthetic drugs in the EU, profiting from their
knowledge and experience and with trafficking facilitated by major ports such as Antwerp and Rotterdam which also act as important
trans-shipment points, for instance for cocaine trafficking. However, large scale MDMA (ecstasy) production continues to spread, in particular in Indonesia, Canada and Australia. In some
cases the use or support of criminal expertise from the EU has been observed. Within the EU, an increase of large scale production
sites outside the Dutch-Belgian region can also be noticed.

Europol consider that the accession of Bulgaria and Romania will influence the EU market in synthetic drugs. Bulgarian organised crime  groups are producing amphetamine tablets currently trafficked to the Middle East. In this context, there are indications that laboratories are moving towards destination countries in the Middle East. The large transport possibilities (Black Sea harbours and important Pan-European corridors) can further facilitate the production and trafficking of synthetic drugs and possibly also the trafficking of precursors, from principal source countries such as China and Russia, towards Western Europe – according to Europol.

All these developments might indicate that regions of the world will become self-sufficient in synthetic drug production and distribution.
With this in mind, the global dominance of Dutch and Belgian organised crime groups in relation may diminish over time. The cannabis market is the largest illicit drug market so far. Cannabis originating from Morocco enters the European continent via Spain and is often transported to The Netherlands for further distribution. Spanish and Moroccan nationalities are predominant within this activity and cooperation with other nationalities allow successful results. The Netherlands is an important producer of cannabis herb when focussing on the European market. Indoor cultivation
of cannabis is also increasing in the Czech Republic by making use of technological skills and equipment originating in The Netherlands.  The actual growing of cannabis is sometimes outsourced either to other people who have financial problems and set up a nursery in their own home or to labourers from Eastern Europe who are forced to employ their skills to grow Nederweed.

Fraud

Fraud can range from from VAT, investment and social security fraud into fraud on EU funds and public tenders.  Intellectual property rights (IPR) issues and cigarettes, alcohol and gasoline smuggling are regarded as fraud due to their direct and indirect financial and tax implications (theft or evasion of revenue).

Fraud features more sophisticated and complicated schemes crossing the globe and involving various bogus and real companies, such as trade fraud, but also more straightforward scams orchestrated simply to lure gullible individuals into parting with their monies, such as some forms of advance-fee fraud. Fraud can be typified and discussed according to its main objective: fraud with direct financial benefits, and fraud with further interests to influence
the society and economy (penetration into society, acquiring a legal appearance, strengthening the control over territory through the control of local administrations, establishment of new criminal business, laundering criminal proceeds, etc.). It can be argued
that in the end all fraud purports to financially benefit its perpetrator but this is not the sole purpose of fraud; criminals  can use it in a more functional way to attach itself into various legal structures and either exploit or penetrate them. In some cases the blatant money-making aspect of fraud actually misleads both law enforcement and society in general into overlooking it as nothing but.

Fraud financially supports many threatening forms of organised crime. It is in many cases the latch that criminal activity can use to penetrate society and economy almost unnoticed. This penetration can have far-reaching implications especially when it is combined with the use of corruption to influence important political and economic decision-making locally, regionally and nationally.  The most threatening aspect of fraud is that it can be used by gangs to gain a strong foothold in various sectors from construction to transport aided by cumulative fraudulent practices and subsequent lower prices offered by OC-related businesses.  Thus, fraud has a far-reaching impact on society as a whole that surpasses its direct financial implications.

This applies specifically to venture and trade fraud, where fraud on EU funds (public tenders and procurement) is an example
of the former, and trade fraud is a main heading for different types of crimes and fraudulent practises that exploit, in various ways, the borders between the buyer, the seller, and the possible intermediaries. These expose certain key vulnerabilities in society
and the economy that can be exploited by OC with grave destabilising consequences. Concerning payment card fraud, Gangs have the capacity to exploit the readily available technological expertise and equipment (skimming devices, hackers, phishing kits, etc.) to engage in credit card fraud.  Payment fraud using credit cards is a global problem but that the relevant tools against it are mainly national, and the growing use of the Internet providing new vulnerabilities to be exploited for stealing and abusing data.  The main threat in relation to payment card fraud is that gangs supported by external experts increasingly gets involved in payment card fraud and, aided by its resources, develops more and more efficient means of stealing high volumes of data.

Counterfeiting

Counterfeiting is an illegal activity encompassing a wide range of criminal fields. It can  be a crime in itself, a specialisation and a facilitating factor for other crimes.

Counterfeiting can be divided in three main categories:

• Currency counterfeiting (banknotes and coins), especially the €;
• Documents counterfeiting (ID, freight, vehicle, excise, etc.);
• Commodity counterfeiting (intellectual property rights infringements).

The countries most affected during the first ten months of 2007 were France, Italy and Spain, followed by Germany, Austria, The Netherlands and Belgium. The smallest number of euro
counterfeits was seized in Denmark, Latvia and
Estonia.

Currency counterfeiting is characterised by a strict distribution of tasks between producers, middle-men and distributors, in some cases controlled or, more often than not, tolerated by Mafia-type Italian Criminal groups from Lithuania, Bulgaria and Poland. Criminals from the itinerant community are among the main distributors in France and Spain. Most of the involved crime gangs have a multi-crime profile, and exploit their international dimension and all available trafficking routes to provide to other criminals and to the public a wide range of illegal products and services.

Currency counterfeiting in the EU remains a threat that, for the time being, is under control, Documents counterfeiting is a major crime facilitator. Counterfeit documents facilitate crimes such as drug trafficking, THB, facilitating illegal immigration, stolen vehicles trafficking, commodity smuggling (including cigarettes and spirits), identity theft and many types of fraud.The transnational nature of modern OC is reflected in the utmost care spent by OC groups
in carefully counterfeiting all documents to be used to cross several borders in apparent legitimacy.

Forged accompanying documents also facilitate the infiltration of illegal products into the legitimate retail sector, releasing distribution
from the clandestine enclosure of black markets, thus increasing the profits of OC groups.

The variety of official or semi-official documents existing throughout the world, combined with the ever-increasing movement
of people and goods across real and virtual borders, hampers efficient controls and facilitates illegal operations. The threat deriving
from document counterfeiting is therefore to be considered as very serious. Commodity counterfeiting is a crime which requires special attention. All Member States are affected by it, and an emerging threat is the infiltration of counterfeit goods into the legitimate retail sector. 

Thorough exploitation of the transport sector and of state-of-the-art technology, globalisation and borders are the main facilitating factors for commodity counterfeiting, making it a crime in perfect line with the modern nature and structure of international crime gangs.  The threat posed by commodity counterfeiting and IPR fraud is multiple and potentially devastating.  The sectors most threatened by it are  health and safety, economy, innovation (scientific and technological) and employment.  A side-effect of commodity counterfeiting is its  impact on innovation and research, the core  product and added value of intellectual property.  Decreasing profits due to unfair competition  by counterfeiters negatively affect innovation and research, slowing progress down.

Moreover, falling profits and shrinking markets  unavoidably lead to a necessary reduction of  working personnel, with consequent loss of
jobs.

Euopol have identified five nexus points for the activities of organised crime ~ Holland for drug distribution in North-Western Europe, the Baltics for activities and the North-East, especially of Russian origin; the Balkans, especially Turkey and Spain / Portugal has become a nexus for a plethora of criminal activity originating in Africa.

Europol is integrating intelligence and shares this on a bilateral basis with national police authorities.  Public confidence is based on the transparency of its role, layers of accountability and strong data protection regimes.

A new legal framework for Europol will be introduced next January when Europol is set to become an official agency of the EU

 

Criminal Assets Bureau

Detective  Chief Superintendant Patrick Byrne worked in the CAB for the first 10 years of its existence and returned to take the helm at the beginning of October.  The CAB was established on a statutory basis on 15 October 1996 following the killing the previous June of Detective Garda Jerry McCabe and Sunday Independent crime reporter, Veronica Guerin.  Today, CAB became a teenager! 

The CAB is not an independent asset confiscation body but it does gather ad present evidence of asset tracing to the courts which decides on cases that are subject to appeal.  Apart from Gardai, the CAB human resource cohort includes representatives of The customs and tax inspectors, Department of Social and Family Affairs inspectors , and professional forensic experts.

In the course of 2008, €6,069,049 was paid over to the Minister for Finance. A further €2,539,709 was confiscated as a result of three Section 4 and nine Section 4A Orders made at the end of 2007 and during 2008.  CAB collected €5,891,498 in relation to income from criminal conduct. Under Social Welfare legislation, CAB made savings of €712,615 for all schemes and a total of €182,198 was recovered from overpayments made. During 2008, CAB trained an additional 57 Gardaí as Divisional Assets Profilers, which brought
the number of Garda Profilers to 82.  During the first ten years of its existence CAB chased down 114 defendents and obtained 77 orders relating to assets worth €20.74 million and £160,000.

The future direction of CAB will include a focus on non-conviction based forfeiture of assets as well as criminal confiscation.

 

Serious Fraud Office

Britain’s Serious Fraud Office pursues frauds typically involving more than £1 million.  Each case is approached on the basis of its pertinent details.  Good intelligence is the cornerstone of its efforts.  This involves making full use of relevant information to inform decision-making at every level in the fight against serious and complex fraud and corruption.

Intelligence often begins life as raw information provided by members of the public, commercial institutions and public bodies.  Once received, it is recorded, analysed, developed and evaluated  before the SFO Intelligence team ultimately uses it for a variety of purposes.

This process may involve comparing the raw information with other material that the SFO already hold or applying different analytical tools and techniques.  They will often use additional information collected from a variety of sources to develop a particular piece of intelligence.

Within the SFO, intelligence may be used to support an on-going investigation or to better inform strategic decisions.  It may also be used as the basis for beginning a criminal investigation.  We also share intelligence from time to time with other law enforcement or regulatory bodies such as the police or the Financial Services Authority.

As part of the intelligence gathering process, the SFO encourages reports from potential victims, members of the public, employees in organisations who may have relevant information on serious or complex fraud or corruption.  We may also receive referrals from other agencies, the police, or other organisations.

In assessing these referrals they first measure the details against any relevant intelligence that already held . Together with any additional, relevant details that are found , they assess the report against their acceptance criteria.  There are several factors which can make the difference in the seriousness or complexity of a fraud.

Generally, the take on around 30-40 new cases each year.  They consider the information they hold very carefully before they decide whether, or not, to take on a case.

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

 

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.

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+

Becbay 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.

SIPTU planning lucky-dip strikes and disruption by whoever wants to muck in

SIPTU are planning strikes, a pre-Budget showdown, so that 34,000 members in the HSE can obtain the first 3.5% increase agreed under Towards 2016.  The David Begg enterprise at ICTU is planning a parallel campaign, to solicit a ‘fairer’ and ‘better’ way to economic recovery.  Fairy tales for the disillusioned, the disappointed and the gullible.

That partnership agreement was nodded through in radically different circumstances than those prevailing and, worse, threatening.  The Social Partnership process has become a meaningless puppet theatre populated by stakeholders with shrinking memberships and no evident national mandate. 

The total number PAYE taxpayers in 2006 was 2,050,897.  The number claiming tax relief on trade union subscriptions in 2006 was 294,300 – 14.3% of the total labour force. The public service  organisation component of the labour force in 2006 was 26.6%.

There are currently 186,026 active companies registered in Ireland. I cannot say how many of these employ people or how many are represented by employer lobby groups but if they had a strong mandate the public would hear about it. The average number of companies formed each year between 2003 and 2008 was 17,164.  The number of companies formed so far in 2009 is 10,294 ~ 60% of the average annual rate, reflecting leaner times.

The impact of the recession, the rise in unemployment and the number on the Live Register has adversely impacted trade unions and lobbyists

The purported purpose of Social Partnership was to create conditions of fiscal stability, improved living standards and a framework from which to respond to the challenges society faces.  It has had its day because it has evolved into a charade where there is no apparent potential capacity for stakeholders to achieve anything of mutual value that enhances the common good. The restoration of competitiveness is challenge #1 and trade unions and lobbyists need explicitly articulate how their various shenanigans advance that objective.  Welfare funding is a by-product of a competitive economy, not an imploding one.

Jack O’Connor advises that the strikes will not be focused on any particular sector and he expects support from trade union members generally.  Given the precarious predicament that those hanging on to their jobs are in, it will be most interesting to see how extensive, passionate and sustainable the ground-swell of support for this action is. How many days pay are people prepared to forego in the run up to Christmas to secure a pay increase for somebody else?  The Saturday march last Spring against the tax levy, I suspect, was the highpoint of mass protest allowing people to respond to their sense of trauma and distress that an abrupt contraction in living standards brings about.

Tax revenues to the end of September was €4.772 million less than the first nine months of 2008 and they €965 million short of the target set when the supplementary Budget was presented on 7 April.  Jack, the cupboards are bare.  I suspect that other trade union members are in no mood to pay additional taxes to fund this ego trip of self-justification.  Furthermore, how many of the potential recipients of this increase would have to be made redundant to fund these increases?

The evening news featured a computer-generated image of the proposed replacement for Liberty Hall.  The bargaining power and public stature of all lobbyists in Ireland is greatly diminished and marginalised.  The public are growing weary of their one-dimensional siren call ‘feed my infinitely self-indulged, cosseted and bloated pigs with more of your taxes’, me, me, me’  If SIPTU don’t get their act together they will be as viable as Aer Lingus by the time this proposed structure is built and the credibility of their leadership will be as comparable.

Having listened to the David & Jack charade over recent days, I can’t help thinking that the trade union movement are responding to this crisis as if it were the property collapse that occurred in Ireland in the 1870’s, directly after the disestablishment of the Anglican Church.  There were many similarities,  not least being the evaporation of credit and no property transactions.  At that time the dreaded landlords controlled estates that cumulatively were equivalent in size to the land mass of five Leinster counties!  There are no such deep pockets of obvious wealth now. 

The FÁS debacle is the granite tomb-stone of social partnership complete with a photograph of Rody Molloy, Christy Cooney, Danny McCoy and Peter McLoone.  That IBEC/trade union playground frittered €1 billion every year on dubious  ‘social partnership’ objectives and whatever else randomly came into their ever-entitled, manipulative, imaginations laced, as became clear, with a strong veneer of peasant-cunning.

The public of this country will no longer be stampeded into more cul-de-sacs either by ‘social partners’ or that other pariah,  the Construction Industry Federation – who would like nothing more than millions of € in subsidies to compensate for the unsalable, unwanted and extortionately priced mud-huts that are scattered across the length and breadth of the country.  CIF need to descend a steep learning curve to understand some basic economic lessons about demand, supply, integrity and value.

The chances of encountering a rogue Irish solicitor are increasing

THE Master of the High Court, Edmund Honahan, has once again drawn attention to the issue of solicitors’ costs when he indicated that they are not entitled to ‘windfall’ costs on the basis of a litigant securing a substantial settlement – because there is not an additional work burden involved. He also highlighted various reports on legal costs that had not been implemented thus causing the Courts to set clear guidelines on the issue of costs. He reminded solicitors’ of an obligation to advise clients being sued over debts who have no defence to the claim against them that each summons contains an ‘easy-pay option’ capping the creditor’s costs at €167, irrespective of the amount of the claim. 

If solicitors’ do not take take these admonishments on board and are clearly seen to do so – why should the public trust the advertisements of the Law Society of Ireland on the theme ‘talk to your solicitor’?  Where is the potential for basic trust in this profession if the issue of cost is shrouded in such ambiguity?

The latest Irish solicitor to have his practicing certificate suspended by the High Court is Padraig Butler, who practiced as Butlers Solicitors, in Kilkenny.  He admitted taking more than €1 million from the estate of a deceased client ~ the estate itself was valued at €4 million.  This is the most recent in what seems like an increasing number of malpractice episodes by Irish solicitors.  Some of these have been especially high profile ~ the Lynn and Byrne cases come to mind in this respect. 

Those cited for misconduct are not confined to any age group, gender, career stage of geographic location.  It seems that the likelihood of a client encountering a rogue solicitor seems evocative of the likelihood of becoming infected with a virus.  The rogue you see in the mirror maybe closer than you realise, whether you are alive, or dead. 

The Solicitors Disciplinary Tribunal has a membership of 20 solicitors and 10 lay members who are appointed by the President of the High Court.  The Tribunal’s statutory powers are mainly confined to receiving and hearing complaints of professional misconduct against members of the solicitors’ profession.

The 2008 Annual Report indicates that there has been an increase in the number of complaints against solicitors’ has been reflected in an increased number of sittings of the Tribunal.  Applications to the Tribunal are made by the Law Society of Ireland.

Yr Ending 31 Dec	Number of Sittings	Number of Complaints
2003	38	70
2004	57	51
2005	55	83
2006	59	104
2007	84	94
2008	110	121

Eighty one per cent of the 2008 sittings found evidence of misconduct.  It was a first complaint for 41 respondents.  But there was one prior finding of misconduct in respect of 14 solicitors; two findings of misconduct in respect of 8 solicitors; three prior findings of misconduct in respect of 9 solicitors; 4 prior findings of misconduct in respect of 3 solicitors and 5 prior findings of misconduct in respect of 5 solicitors.

The Tribunal’s analysis of complaints out of which findings of misconduct arose revealed:

 

Category of Complaint	%
Conveyance	42%
Accounts regulations	31%
Litigation	16%
Probate	8%
Criminal	3%

 

The Chairman of the Tribunal described 2008 as “challenging” due to the nature of the complaints made.  The findings of misconduct and referrals to the High Court have increased at an alarming rate:

 

Year	Findings of Misconduct	Referrals to the High Court
2005	24	5
2006	33	3
2007	35	12
2008	80	35

 

Public Perception

There have been a series of radio advertisements promoting the engagement of a solicitor.  These are to promote the engagement of a solicitor -  perhaps in a context where the potential client had no prior experience of a particular issue, or at individuals who could become a solicitor’s client for the first time.  But how much trust can an inexperienced client of a legal professional place in the chances of not being ripped off by a rogue solicitor?

What expectation can a wronged solicitor’s client have of adequate compensation?

If a client is ripped off what is the position with respect to compensation?

The adverse trend in complaints and findings of misconduct must raise concerns among clients and potential clients about the issue of professional indemnity.   There clearly has to be an increase in claims on the professional indemnity fund.  The fund itself, apart from being depleted by claims on it, could also be undermined by the losses in the financial sector in Ireland.  The consequence would be that there is less protection for clients.

Solicitors’ are obliged to carry professional indemnity insurance but do rogues’ follow rules? 

The cost of indemnity premiums must be increasing but are they affordable by the solicitors and can the clients afford the extra costs?

If the Law Society do not provide some reassurance and clarity the legal profession could end up like a posse of uninsured casual window cleaners who can potentially sue their customers for hefty compensation in the event of an accident on a customer’s premises. That will require more than bland radio advertisements broadcast at daybreak.

The President of the Law Society of Ireland, John Shaw, joined other luminaries in paying tribute to the retiring President of the High Court, Richard Johnson, at the Four Courts on 23 October.  Shaw’s tribute was to compliment Johnson for his handling of cases involving rogue solicitors. 

€795,631 paid in pensions to currently serving TD’s and MEP’s in 2008

THE audited Financial Accounts for the Exchequer for the year ended 31 December 2008 have been published by the Department of Finance.

Our judiciary was paid €27,748,576 ~ 8 justices of the Supreme Court, 37 justices of the High Court, 37 judges of the Circuit Court and 59 district justices.

One of the bugbears of citizens is the payment of pensions to former Ministers and other office holders while they continue to hold elected office.  A total of €4,467,657 was paid in respect of politicians’ pensions last year, including those currently in office and those no longer active in politics. 

The list includes former Attorney General and subsequently AIB Chairman Dermot Gleeson SC (€49,841) and tribunal witnesses Liam T Cosgrave (€18,736) and Ray Burke (€56,260).

Current office holders paid severance payments include Bertie Ahern (€68,337) and Tom Kitt (€23,641).  Kitt is Chairman of the Joint Committee on Arts, Sport, Tourism, Community, Rural and Gaeltacht Affairs.

Four MEP’s, 25 TD’s and one senator are among the following current office holders received pension payments in 2008:

Recipient	Current Office	Party	€
Bertie Ahern	TD	FF	14,923
Bernard Allen	TD and Chair PAC	FG	6,021
Liam Aylward	MEP	FF	13,348
Sean Barrett	TD and Chair	FG	54,033
Richard Bruton	TD	FG	14,534
Paul Connaughton	TD	FG	17,662
Joan Burton	TD	Lab	8,475
Jimmy Deenihan	TD	FG	6,020
Proinsias de Rossa	MEP	Lab	13,833
Bernard Durkan	TD and Chair	FG	6,020
Frank Fahey	TD and Chair	FF	47,874
Pat the Cope Gallagher	MEP	FF	16,372
Eamonn Gilmore	TD	Lab	6,016
Jim Higgins	MEP	FG	5,829
Michael D Higgins	TD	Lab	19,469
Enda Kenny	TD	FG	15,468
Seamus Kirk	TD	FF	19,499
Terry Leyden	Senator	FF	21,309
Jim McDaid	TD	FF	24,681
Liz McManus	TD	Lab	6,020
Gay Mitchell	MEP	FG	6,021
Michael J. Noonan	TD	FG	43,842
Rory O’Hanlon	TD	FF	44,136
Jim O’Keeffe	TD	FG	19,504
Ned O’Keeffe	TD	FF	7,475
Mary O’Rourke	TD and Chair	FF	55,504
Brian O’Shea	TD	Lab	8,469
Ruari Quinn	TD	Lab	50,449
Pat Rabbitte	TD	Lab	6,036
Emmet Stagg	TD	Lab	8,469
Noel Tracey	TD and Chair	FF	40,212
Michael Woods	TD and Chair	FF	109,190
			€795,631

Time for The Public Accounts Committee to make its mark

THE Chairman of FÁS has resigned and the rest of the board is set to resign. When the Public Accounts Committee considered the examination of the Comptroller & Auditor General into FÁS affairs last week, Bernard Allen, the Chairman of the Committee rebuked Niall Saul, the Chairman of the Audit Committee and non-executive Director of FÁS, who was contemporaneously giving a radio interview while the Committee proceedings were under way, - for doing so. He would have preferred to hear Saul’s views directly at the Committee.

I listened to a recording of this interview this evening. Saul was at pains to point out that the Audit Committee conducted its role vigorously but were impeded and frustrated by the leadership of the agency, as was the Public Accounts Committee. The Audit Committee were presented with 22 complaints against the Internal Audit team, none of which were upheld. The Audit Committee may have conducted its affairs with textbook perfection but the hidden hand of vested interests lurked persistently in the twilight until the C&AG shone a penetrating light into the murkiness the debacle in April 2008 and, again, in June 2009.

The FÁS controversy was exposed by the Sunday Independent and that publicity was the catalyst for the urgency of resolution. The preliminary comments made by Rody Molloy, on this day twelve months ago, are interesting to revisit in the light of what is now known. Molloy stated then that “FÁS is not a perfect organisation” and “unfortunately, the internal audit reports released by us under the Freedom of Information Act have been sensationalised by the media and used by some with a destructive agenda towards FÁS”. While Molloy stated that he recognised the efficacy of the audit function he also expressed concern “that anything written will be used by persons outside the organization with a negative agenda” and that “if these reports were released into the public domain they could be damaging to the organization”.

Did he not consider that the media would have no credibility if damaging insinuations had no real substance? These were surely the comments of a person whose own organisation was imploding under him and who had isolated himself to the point of downfall. The C&AG Report has borne this out, not the use of the word ‘entitled’ in place of ‘eligible’.

But these comments also offered a rich insight into the culture of FÁS – an agency whose scope and budget had grown so much that a great many more snouts were feeding at its trough than was ever envisaged. The Prime Time investigation into meals-on-wheels in Castlebar did not inspire optimism that all the effort and expenditure was wise, prudent and appropriate. The importance of an organisations culture should never be underestimated. It is culture that facilitates change; guidelines incur inertia.

The persistent use of the legal fig leaf by other FÁS contributors to The Public Accounts Committee was another symptom of a death rattle and reminded me of the defenders of the ‘B’ Specials police reserve in Northern Ireland decades ago.

Mirror, mirror on the wall,
Who is the fairest of them all?

It was the same newspaper that blew the gasket of the DIRT controversy, submerged since 1991, with a headline on 5 April 1998 ‘AIB Had £600 million in “Bogus” Accounts’. The role played by the Public Accounts Committee in the 1999 – 2000 Parliamentary Inquiry into DIRT was pivotal in charting a new direction with respect to this particular issue.

Impact of DIRT Inquiry

The economic, social and political impact of the DIRT Inquiry was comparable in scale and importance to a grand slam rugby victory.

One constituency embraced radical change because they felt they had no other choice – their survival was at stake. The game changers were The Revenue Commissioners. Not alone did they eventually collect hundreds of millions of euro due in taxes, interest and penalties, but a new generation of competent leadership successfully reformed their own organisation. Reform did not come easily, nor did it come quickly. It came with painstaking effort - but it came and it endured.

The other constituency – the banks did not fundamentally change because those in charge believed that change and reform was beneath them. They knew they were systemically important. They also knew their influence could prevail against all comers in most circumstances. Why else would they have overcharged customers with impunity?
They, of course, paid whatever they were obliged to pay and complied, in certain respects, with other mandatory matters.

But the fundamental self-serving, obscenely remunerated culture prevailed because nothing impacted on them personally to make change happen or threaten their personal status or income until they scuttled the economy last year. Four of them were so nonchalant that they were cited for personal income tax evasion by The Revenue Commissioners on 28 March 2006. Reform, it seems, was only for the ‘little people’. Their legacy is now overwhelming.

Taxes and penalties amounting to hundreds of millions of euro were recovered by the Revenue Commissioners, whose own organisation was radically overhauled and invigorated to make it fit for purpose and recognised as such across the world. The DIRT Inquiry did not, unfortunately, lead to a a similar cultural renaissance in the banking system, where rampant overcharging of customers and shoddy standards became endemic and some of whose senior executives were cited for personal tax evasion by the Revenue Commissioners in March 2006.

Department of Finance Guidelines

Much has been made of the Department of Finance Guidelines with respect to the retirement terms of Rody Molloy. These Guidelines were created in 1998 by John Hurley, the retiring Governor of the Central Bank. They were intended primarily to deal with circumstances in State bodies where chief executives were recruited on fixed-term contracts. Their purpose was to establish clear and consistent maximum limits on the pension and lump sum payments that could be provided to a CEO who was either retiring at the natural conclusion of a contract or was retiring prior to that at the request of his board for relatively benign reason – such as a desire for a change of leadership, or direction at the agency concerned.

The Guidelines provide for the payment of a pension and a lump sum to a retiring chief executive aged 55, having acted in that role for at least 6 years, with 15 years pensionable service in the public sector based on actual reckonable pensionable service. A retiree could possibly be granted one added year of pensionable service for each year in excess of 15 years overall actual service in the public sector, subject to a maximum of 5 years.

A person who voluntarily retires does not qualify for these arrangements. Alternative arrangements are in place for younger retirees.

The Guidelines particularly stress that the board of a State body is free to apply lesser benefits or not to apply early retirement benefits at all. Bearing in mind the Guidelines were created to deal with benign circumstances the example of a board desiring to reappoint a chief executive to another fixed term as an instance where such additional benefits would not be offered, is cited. There is no reference in the Guidelines to retirements in controversial circumstances, which is not surprising.

Public Accounts Committee
a potential game-changer

Where does this leave the Public Accounts Committee in its deliberations with respect to FÁS? The side issue of the company Audi has surfaced but this matter, which is now to make its fifth appearance before The Public Accounts Committee since 2 October 2008, has ramifications that transcend FÁS. Their deliberations will have a profound impact on the entire State sector.

The implications of the recent retirement of Paul Moloney as Chief Executive of Dublin Docklands Development Authority have similar, but unascertainable and potentially serious implications, when the details of the transactions involving Anglo Irish Banks and the Irish Glass Bottle Co site are disclosed. Moloney held this position since 2005 having worked previously with Dublin City Council. His appointment to the Authority was blessed with superlative tributes by then Chairman, Lar Bradshaw, who was to resign from the board of Anglo Irish Bank last December, along with his close friend Sean FitzPatrick.

The entire State sector is observing unfolding developments closely to glean what the consequences of the C&AG examination are. They are also closely watching how Sean FitzPatrick deals with his debts due to Anglo Irish Bank and whether the Minister for Finance is kept appropriately abreast of developments by those acting in the public interest.

If there are no apparent consequences, apart from the thrashed reputations of the institutions connected FÁS and the burden that is borne by those who represented these institutions together with the personal distress that Molloy must inevitably endure, then a damaging vacuum is established. How is it possible to clearly identify the boundaries of what is acceptable and what is not acceptable when standards fall well short of acceptability and serious damage ensues? If the boundaries are unclear, or there are no boundaries, the State sector will convulse itself to avoid ignominy - but will probably do so in a manner that is ineffective and at a cost to its own productivity, agility, sense of integrity and effectiveness.

If there are no consequences, how can the characteristics of stable governance with integrity and commitment flourish in any State agency? Mr Saul confirmed that the procedures and protocols in FÁS. That is the case in most public bodies. Paper doesn’t refuse ink ~ but it is the culture , dynamism, passion and energy of an entity that makes things happen –for better, or worse.

The deliberations of The Public Accounts Committee could therefore result in another ‘grand slam victory’ and have a profoundly positive impact as a consequence of this crisis if the outcome successfully redefines and refocuses FÁS and individuals emerge of the calibre and ambition of those that emerged in The Revenue Commissioners a decade ago. FÁS has been a major by-product of social partnership. Social partnership could also get new life and sense of purpose but the fuel to ignite that will not be found in damp deadwood hidden behind legal fig leafs.

It would, on the other hand, be most disappointing if the enduring outcome of The Public Accounts Committee was merely to record the frustrations, impediments and difficulties in conducting its examination of this matter the only practical outcome is one of Plus sa change, plus c'est la meme chose.

The Davy bluffer’s guide to GDP growth

DAVY, the indigenous Irish stockbroker and wealth management advisor, in a report on the Irish economy, published on 29 September, opines that the economy will grow by 4% in 2011 – “but the recovery will not be felt that strong on the ground”.  Reports of this nature ought to engender trust in the sponsor but there is precious little evidence to support this perspective on growth potential. 

Yesterday Standard & Poor placed AIB and Bank of Ireland on credit watch because they believe the Irish economy is expected to remain weak next year and unsupportive of bank profits.

This Davy Report is founded on:

• Agriculture, industry and traded services expanding and creating an additional 2,600 jobs – a tall order for4 a sector that has been in the doldrums for the past five years and because commodity prices are so low.
  
  The pay component of Irish agriculture is €569 million for the 116,000 ~ €4,905 per person. Employment in the sector dropped by 2,700 between 2007 and 2008.

• Retail sales recovering and creating 28,600 new jobs. But this sector has dropped 18,200 jobs in the last 12 months and is traumatised

• Consumer spending increasing by 1.5% from 2010 –“but may grow by 3.8% as incomes recover and precautionary savings unwind somewhat”. Retail sales volume dropped by 15% in the 12 months to July 2009 and was 9.6% lower in Q1 2009 and 6.2% lower in Q2 2009. Further taxes are likely. Consumer debt is gigantic and credit flow is sclerotic. Where are the resources to come from to nurture growth?

Changes in employment envisaged in this Davy report

Changes in Employment	Q4 2011
Agriculture, forestry and fisheries	2,600
Industry	-10,000
Construction	-16,400
Wholesale and retail	28,600
Transportation and storage	4,700
Accommodation and food services	14,900
Information and communications	2,700
Financial, insurance and real estate	-1,100
Professional, scientific and technical	14,900
Administrative and support	8,100
Other NACE activities	9,100
Public Sector
Public administration and defence	9,100
Education	3,000
Human health and social work	2,200
	14,300
TOTAL	72,400

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Irish Hotels Federation recently proclaimed the industry to be in crisis and that the excess capacity is 12,000 of the sectors 60,729 bedrooms and that a massive restructuring of the sector is urgently needed. The hospitality sector has dropped 10,400 jobs as a consequence.

The Exchequer deficit at the end of August was €18.73 billion (87.6% of Government revenue in the 8 months to August 2009). The Davy Report suggests that the Government provided for 35,000 more unemployment claimants than was necessary and will thus ‘save’ €400 million. Welfare spending at the end of August was €118 million less than the €6,873 million projected

Household debt is approximately €170 billion – an outrageous level by any civilised standard and is attributable to the Irish allowing imbeciles, who craved for bonuses like baboons crave for peanuts, run its banks.

While 83% of this secured by mortgage the collateral in question has collapsed in value resulting in negative equity in 32% of the nation’s housing stock. The Report suggest that “households are now in debt payoff or debt write-off phase” and that because ratio of debt service to after-tax income has seemed to improve, that consumers are all set to gallop into the golden sunset once again. Rising interest rates and more prudent bank regulation will impede this gallop.

The contention that a “rising interest burden in 2011 will become more manageable as disposable incomes begin to grow at a faster pace” (i.e. 2.7%) is difficult to fathom at a time when incomes are dropping like the proverbial stone. Did the IMF not categorically state that “further wage reductions will be required to restore competitiveness and growth prospects and that determined recovery efforts will require execution over several years”? The majority of Irish mortgages are on a variable interest rate.

Much is made by Davy of “an incredible spike in savings”. The National Income and Expenditure Account for 2008 actually indicates that net national savings dropped by 44% to €13 billion which contradicts the reports assertion that “personal savings jumped by €6.5 billion” and “it is not clear that all of the savings was rational. ” Well, well.

IMF Perspective

When the IMF reviewed the Irish economy last June they considered that Irish GDP will contract by 13% through 2010 and that when recovery comes it will be very modest and dependent on a banking system that is not loss making, fit for purpose, that NAMA proves itself and that the Irish banks are no longer controlled by imbeciles or any other dysfunctional, incompetent eunuchs.

ECB Perspective

The ECB is acutely aware of the need to rebalance the Irish economy, moderated public spending, reduce public deficit and return to compliance with the Stability and Growth Pact. Wage restraint would obviously be helpful as would taking account of competitiveness and local market conditions in a responsible and timely manner and other reforms that would enhance competitiveness.

Competitiveness is related to the external performance of the economy and is typically measured in terms of export growth, share of export markets and current account balances. Additional factors that impact on competitiveness include the degree of export specialisation in terms of the range and quality of products exported and the markets these are exported to. If Ireland were to export products with a higher quality or greater degree of sophistication and to find strongly growing markets for these – that would enhance competitiveness. This implies a capacity to generate a sufficient number of very productive firms.

The pattern of wage growth and exports does not reflect enhanced competitiveness:

Year	Wage growth	Export growth
2003	7.4%	1%
2004	9.4%	8%
2005	11.8%	5%
2006	10%	5%
2007	6.1%	9%
2008	2.9%	-1%

 

Another indicator of competitiveness are the trends in Current Account balances, which in the case of Ireland have been:

 

Year	Balance on Current Account, € Million
2003	-2
2004	-867
2005	-5,690
2006	-6,304
2007	-10,124
2008	-9,435