BACKGROUND:MINISTER FOR Finance Brian Lenihan fired a rocket of a statement lambasting Bank of Ireland for repeatedly providing him with inaccurate, incomplete and misleading information on bonuses.
He was right to be furious. He used the bank’s information in a written answer to a parliamentary question last December, so technically the Minister misled the Dáil.
The number of discrepancies discovered in an investigation into the matter was “unacceptable”, said Lenihan yesterday.
He added that the investigation raised “serious issues” about the bank’s disclosures and the quality of its record keeping.
Lenihan told the Dáil in December that the bank – which has received €3.5 billion from the Government and is 36 per cent State-owned – paid no performance-related bonuses for 2009.
In fact, the bank paid more than €66 million in bonuses from September 2008 to December 2010, the department’s inquiry found.
This is a scandalous sum of money when one considers the State had to pump billions into the bank to keep it solvent and may have to commit further cash following this month’s stress tests.
The department began the investigation after a newspaper report, published after the parliamentary reply, said that a €500,000 bonus was paid to an executive in the bank’s fund management business (since sold) without the Minister’s knowledge.
The investigation found that senior executives were paid contracted bonuses of €4.3 million in 2009 and 2010, and a further €600,000 would be paid in 2011 and €200,000 in 2012.
The bank may also pay up to 250 staff as much as €11 million this year for bonus payments deferred from previous years or to retain employees at the bank.
A further €10 million will be paid on commissions this year.
The bank had repeatedly said that no discretionary performance-related bonuses were paid and thought this was the information the department sought last year for the reply to the Dáil question.
The bank believed that contractual performance-related bonuses were allowed under the terms of the State’s €3.5 billion investment and did not disclose these. This seems odd given that AIB came in for such public flak when it was disclosed in reply to the Dáil question that €40 million in contractual bonus payments were to be made to staff.
Bank of Ireland maintained that payments to staff that were unequivocally performance-related bonuses were described in ways that were “open to interpretation”, the investigation found.
Arthur Cox, legal advisers to the Government, told the bank it had used “a restrictive and uncommon interpretation of what constituted a performance bonus”. Regardless, the report found that the bank had made discretionary bonus payments of €979,000 to staff between September 2008 and December 2010. A “catalogue of errors” were committed, the report said. The bank accepted it gave incorrect information to the department but said it had no intention to mislead.
Figures confirmed by chief executive Richie Boucher were subsequently found by the bank’s internal audit review to be wrong.
The bank said last night it provides information to the department “that is correct to the best of its knowledge”. The bank’s internal systems fell down here.
The report recommended that from now on any information provided to the department to answer Dáil questions should be signed off by Boucher or at a senior level. It said that the bank should be treated as AIB has been – the non-payment of bonuses should be a condition of further State funding. The €2 million to be paid by the bank in recompense for misleading was said by one Government source last night to have drawn a line under the matter.
