In the maw of an inflation shock and an energy crunch, the Siteserv report harks back a decade to the dark days of the last financial crisis. At issue is the long-disputed 2012 deal in which Siteserv, a building services firm in turmoil because of the crash, ended up in the control of billionaire businessman Denis O’Brien.
Central to the €45 million transaction was the former Anglo Irish Bank, by then nationalised and renamed Irish Bank Resolution Corporation. IBRC wrote off €118 million of the €150 million Siteserv owed as part of the sale, crystallising a big loss for the State and taxpayers. This arrangement ultimately led to a major political row when Social Democrat co-leader Catherine Murphy TD started questioning O’Brien’s engagements with IBRC. The Dáil furore prompted the appointment of Mr Justice Brian Cregan in 2015 to lead a commission of inquiry into the Siteserv deal and 37 other large transactions in which IBRC wrote off a total of €1.88 billion from outstanding loans.
The aim back then was to conduct a swift inquiry under legislation specifically designed to avoid the huge expenses and protracted delays encountered in a succession of tribunals of inquiry. But it did not work out that way. The highly-detailed 1,500-page Siteserv report was seven long years in the making, the process having begun the year before the UK Brexit referendum. Given political disquiet at the extraordinary length of time taken to conclude the work on Siteserv, the prospect of the judge proceeding for many years to come with examinations of the other deals seems at this point remote.
One of prime points of contention that ignited the controversy all those years ago was Murphy’s assertion that the interest rate on O’Brien’s own IBRC loans was “extremely favourable”. Still, the judge rejected claims the businessman received a “favourable interest rate” from the bank and said there was no evidence of “improper or unduly close” relationships at the time with top IBRC executives. Key bank executives worked “honestly and diligently” to protect its interests, the judge said. IBRC decided “in good faith” to sell to O’Brien but based on “misleading and incomplete information” from Siteserv.
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The report stands as an unflinching indictment of highly questionable conduct within Siteserv as the company teetered on the brink of collapse after its takeover by O’Brien. There are issues for Siteserv co-founders Brian Harvey and Niall McFadden, senior Independent director Robert Dix and also for O’Brien’s adviser, Dermot Hayes.
Matters concealed from the bank included: Harvey’s financial interest in O’Brien’s bid; Dix’s trip to a Swiss “boot camp” with McFadden and O’Brien and relationships with them; O’Brien’s €3 million headline price reduction in March 2012; and a €1.8 million reduction in proceeds to Siteserv from O’Brien’s bid, settled in relation to a working capital adjustment.
Such matters were fundamental to a proper appraisal by IBRC of a sale to O’Brien or a rival bidder but IBRC was never aware of them until the inquiry. The judge also criticised €800,000 in bonus payments to certain Siteserv directors, describing them as “lavish in scale and entirely unacceptable” for a business costing taxpayers almost €118 million in write-offs and losses.
“Taken together, these items demonstrate the possibility that the bank could have recovered up to €8.7 million more than the €44.3 million it agreed to accept in settlement of Siteserv’s indebtedness,” the judge said.
“The Siteserv transaction was, from the perspective of the bank, so tainted by impropriety and – in respect of Mr Harvey’s concealment of his material interest in Mr O’Brien’s bid – wrongdoing, that the transaction was not commercially sound.”
The Government has accepted the judge’s findings, and his report will go to the Revenue and the Corporate Enforcement Authority. But this time-consuming exercise demonstrates that an efficient means of investigating issues of public concern remains elusive.