The Department of Housing, Planning, Community and Local Government knew about and approved the giving of a €6.6 million interest-free loan by a local authority to James Elliott Construction (JEC), it has emerged.
The 10-year non-recourse loan was given to the company by the Dublin City Council subsidiary Ballymun Regeneration Ltd in the context of pyrite damage to about 100 houses that were being built in Ballymun by JEC.
The secretary general of the department, John McCarthy, told a Dáil committee last week that it engaged with Ballymun Regeneration about the best way to manage the situation when the pyrite issue emerged around 2008.
The two options were to continue with the existing contractor (JEC) without any determination having been arrived at in relation to legal liability for the pyrite issue, or to get someone else to do the remediation and completion work required.
Remedial work of €10m
Having assessing the legal, risk and financial aspects to the unique situation, they decided to continue with JEC and issue the unguaranteed loan, Mr McCarthy told Fine Gael deputy Peter Burke at the Public Accounts Committee.
He said the loan was given because, in a situation where legal liability had not yet been decided, they wanted an avenue through which public funds could be recovered in due course, including by way of a successful outcome of legal proceedings.
JEC is suing the supplier of the material, Irish Asphalt Ltd, which is part of the Lagan Group. Mr McCarthy said that even though it was "10 years on", the proceedings have not concluded.
The 10-year loan was given in 2011 in part so the construction company could pursue proceedings through the courts, according to documents seen by The Irish Times and which were quoted in a report published in January.
A contract covering the deal states that JEC “does not, at the date of this agreement, have the financial means to carry out the remedial works nor to undertake the litigation”.
A contract for a €10 million remedial work project was agreed without it being put out to tender. Mr McCarthy said it was decided, at the time, that the State should step in and fund the completion of the work in what were difficult and peculiar circumstances.
He told Noel Rock of Fine Gael that he had no knowledge of any other such loans being issued by local authorities.
