A fraud involving almost £1.5 million which was discovered at the Irish Ispat steel plant in Cork, was never brought before the courts because the company agreed to waive prosecution in return for full compensation.
At the time of the fraud, the Hammond Lane Metal Company of Dublin was the sole supplier of scrap metal in the Republic to Ispat. All other scrap merchants who delivered loads to the Cork plant were paid by Hammond Lane, which in turn invoiced Ispat.
According to sources who spoke to The Irish Times, Ispat withheld £1,464,798.43 from Hammond Lane in 1998. The money was set against estimated losses after irregularities were discovered at the Cork plant.
In August of that year, Hammond Lane issued proceedings against Ispat for recovery of the money but a settlement was reached in which Ispat retained the money withheld, and the case never went ahead.
Ispat sacked one employee, a haulier was barred from the plant, a new security firm was hired and two other employees who were involved in the fraud paid back £10,750 between them. One returned almost £10,000 to the company in cash. A confidentiality agreement was signed by the parties in which it was agreed that neither the settlement, nor the details of the fraud, would be made public.
In December 1999 Ispat and Hammond Lane signed the confidential settlement which referred to a haulier and two sub-contractors who supplied Ispat under the Hammond Lane contract. The document noted in Clause E that Hammond Lane denied the allegations and that the settlement terms agreed by both sides "were without admission of liability".
The same year Hammond Lane was taken over by the Belfast firm, Clearway. Its managing director, Mr Vincent Boyle, has contacted The Irish Times to say that while he was aware of "a dispute" between Hammond Lane and Ispat, it had nothing to do with Clearway and the issue had been resolved before the takeover.
The fraud was discovered after Ispat acquired the Cork plant from Irish Steel in 1996. It was found that significant amounts of soil and other debris were being weighed in at the plant as scrap and that some of the trucks weighing in, according to the documentation, contained loads of more than 40 tonnes when the legally permissible load was just over 20 tonnes.
A surveillance operation led to the discovery of a widespread and sophisticated system of tampering with the recording mechanism used to check loads against delivery.
Sources say the fraud was costing the company an estimated £500,000 a year until matters were brought to a head in 1998. It is also understood that Irish Steel investigated irregularities at the plant in the late 1980s but no action was taken.
"Ispat's primary concern was to recover the money it had lost and to get on with the business of making steel," sources said. "The company could have opted to take criminal proceedings in the courts but that would have been a lengthy process. The company was just as happy to get the money back and go on from there." They added that the fraud was not a factor in the decision to close the Cork plant with the loss of 407 jobs.