Michael Smith. CRH plc is the biggest company in Ireland with a worldwide turnover of €18 billion. Its history since the 1930s has been clouded by conspiracies, scandals and corruption, together with repeated allegations of its involvement in criminal price-fixing and market-sharing. All of these activities continue up to today. Recent High Court proceedings have been taken against CRH by Framus Ltd and Goode Concrete.
The controversies have been raging for over 40 years, since Roadstone Ltd took over Irish Cement in 1969, a takeover that flew in the face of the Constitution. Irish Cement had a monopoly in cement production in Ireland and Roadstone Ltd had gained a dominant position in downstream operations such as quarries, concrete and tarmac. There were political fingerprints everywhere. The first Chairman of the new Cement Roadstone Holdings was the retired Taoiseach, Sean Lemass. After Lemass’s death in 1971, there was an abortive attempt to make Charles Haughey Chairman.
In the mid-1990s, John Gormley of the Green Party stated that CRH was the biggest party-political funder and that the Green Party was the only party not to receive funding from CRH. In the Dáil vote on whether Moriarty should investigate the State sale of Glen Ding Wood to CRH, Ray Burke, Liam Lawlor, Ivor Callely, Albert Reynolds, Bertie Ahern, Mary Harney and Sean Haughey unsurprisingly voted against.
In 2004 Vincent Browne wrote about then Tánaiste Mary Harney and the Progressive Democrats: “Among the plethora of recurring self-regarding proclamations Mary Harney makes about herself [‘anyone who knows me…..’] is the boast that she and her party are committed to taking on monopolies and freeing up the market for the benefit of the Irish consumer. And indeed, this government has taken on goliaths such as taxi drivers, bus workers and now airport employees. But when it comes to the big boys – and especially when it comes to the biggest boy of all, the most gigantic monopoly in the history of the state, construction conglomerate Cement Roadstone Holdings [CRH] – it’s a different tune”.
Neither has influence with Fine Gael been in short supply. Former deputy leader of Fine Gael, Peter Barry, is a brother of former CEO and Chairman of CRH, Tony Barry. One-time Fine Gael stalwart and former EU Commissioner for Competition, Peter Sutherland was a CRH director. The Barry family dynasty is still represented in Leinster House through Deirdre Clune. Richard Bruton has long held shares in CRH and worked as an economist with CRH before getting into politics.
The Labour party has had its own love-in with CRH and in the mid-1980s brought in the Cement Certification Scheme which blocked the use of imported cement in government and grant-aided construction jobs. At that time there were extensive grants for agricultural work. When CRH had Ardfert Quarries in Kerry on its knees, the Labour party saw fit to broker a deal which saw CRH secretly acquire control of Ardfert Quarries. Ardfert Quarries and CRH subsidiary, John A. Wood, then carve up the market in North Kerry for stone, lime, concrete and tarmac. There was no regard for European Law when it came to the Labour Party’s support for CRH.
Repeated calls for an investigation into CRH have met obfuscation. Bolshie opposition TDs who clamoured for an investigation miraculously fall into a stony silence when they assume the veil of power.
CRH: Immune from Regulatory Scrutiny:
The Competition Authority, ODCE, Revenue Commissioners, and Financial Regulator have all been called upon to carry out investigations into CRH. In February 2000, Mary Harney gave an undertaking that the Revenue Commissioners, Competition Authority and the soon-to-be-instigated ODCE would carry out a comprehensive investigation into CRH, but this has never happened. Patrick Massey, then head of the Competition Authority, resigned his position that very same month stating: “it is no longer possible for me to continue as director of competition enforcement due to the failure to provide adequate resources to enable me to do the job properly. My experience has convinced me that price-fixing cartels represent a serious widespread problem in this country…the resources available are wholly inadequate for carrying out the sort of complex and highly intensive investigations that are required to obtain evidence”. Mr Massey went on to say, “certain complaints made to me in recent months involve matters that would occupy four or five staff full-time for the best part of a year. I simply do not have such staff resources and given the very real concerns expressed to me by the complainants as to the consequences for them if the matter is not pursued properly, I have concluded that it is simply not possible to pursue the matter”.
The Competition Authority has repeatedly turned a blind eye to the activities of CRH despite a barrage of complaints. In April 2011, senior Authority representatives in discussions with Tom and Peter Goode of Goode Concrete stated that: “there isn’t a hope of the Authority investigating this behaviour because of who you are up against and what’s at stake”.
Going back to 1996, the Competition Authority stood by when Greencore sold all of its limestone quarries to CRH enabling it to further tighten its stranglehold on the aggregates and ground-limestone market.
The Authority also ignored the controversial acquisition of 147 acres at Glen Ding Wood by CRH, which contained around 20 million tonnes of sand and gravel adjacent to Dublin, the biggest market in the country. CRH’s extraordinary level of dominance should have precluded it from bidding for Glen Ding. Instead, the state privately sold the reserve to CRH without alerting other would-be bidders.
When the ESB entered into an exclusive contract with CRH to supply it with PFA (pulverised fuel ash – a waste product of its power generation facility at Moneypoint that can be used as a substitute for cement), the deal had to receive regulatory approval from the Competition Authority. The Authority again saw no competition issues with the deal and ratified it.
The Office of the Director of Corporate Enforcement has fared no better. Despite repeated calls for an investigation into CRH’s structure – in particular the widely-used model of secretly taking control of downstream competitors in order to create an illusion of competition, when in fact CRH was copper-fastening its grip on construction materials markets throughout the country – the ODCE has consistently refused to scrutinise these structures which breach company law and facilitate further competition abuses. The Sunday Independent uncovered four such secretly-controlled quarry operations in 1999.
Under European Law national courts must not “make it excessively difficult or practically impossible” for a private litigant to take a Competition Law case. Framus Ltd has struggled through the Irish Courts for 16 years impeded by a myriad of procedural hurdles, financial paralysis and difficulties gaining access to evidence.. The ‘Framus’ proceedings have discouraged many other victims from taking a private action with the belief held that Competition Law cases are impossible to win in Ireland. In 2004 Dr John Fingleton as head of the Competition Authority stated that “private enforcement has absolutely failed”.
It emerged that an illegal bank was being run from CRH’s headquarters by its then Chairman, Des Traynor, in 1999. Charles Haughey was found to have held an illegal Ansbacher account along with many other prominent businessmen. In total, eight out of fifteen CRH directors held Ansbacher accounts, including four former Chairmen.
Justice Moriarty was subsequently appointed to investigate corrupt payments to politicians, many of which flowed in and out of Ansbacher accounts; however, during the investigation it materialised that Justice Moriarty held approximately £500,000 in CRH shares and this in his opinion precluded him from investigating CRH. In 1969, Roadstone Ltd (CRH) sold 80 acres of land to Mr Haughey, the then Minister for Finance, for £120,000. In 1973, Mr Haughey sold 17.5 acres of that land back to CRH for £140,000. Within four years, Mr Haughey had made a net profit of £20,000 and 62.5 acres at CRH’s expense. A detailed submission to the Moriarty Tribunal on this matter was sidestepped and not addressed by Judge Moriarty.
CRH was accused in 2002 of the illegal dumping of 100,000 tons of toxic waste on land in Blessington, Co. Wicklow over a 10-year period. The company denied all knowledge of illegal dumping and no DPP investigation was initiated.
Bribery in Poland
A Parliamentary Inquiry in Poland was told in 2005 that CRH paid a bribe of almost $1 million to a former minister for privatisation, Wieslaw Kaczmarek, in connection with the privatization of a cement plant at Ozarow, in central Poland, in 1995. CRH currently own and operate the cement plant at Ozarow. It was further revealed, in 2005, that CRH paid approximately €125,000 to a charity founded by the wife of Poland’s President, Jolanta Kwasniewska. CRH was fined €530,000 in Poland in 2007 for obstructing an investigation into alleged anti-competitive practices in the cement and concrete industry and attempting to destroy evidence. CRH was eventually fined €26 million in 2009 for operating a market-sharing and price-fixing cement cartel in Poland.
Abuses in Israel/Palestine
CRH Plc purchased 25 per cent of the Israeli Company Mashav Initiative and Development Ltd in 2001. Mashav own Israel’s sole cement producer, Nesher Cement Enterprises Ltd. Nesher supply 75-90 per cent of all cement sold in Israel. This cement is widely used in activities deemed illegal under international humanitarian and human rights law. These include the construction of the Separation wall, the Israeli settlements and infrastructure of settler- only roads, underpasses, bridges, tunnels and watchtowers in the West Bank. Another subsidiary, Ta’avura, import the Liebherr brand of heavy equipment which an OECD report stated has been used in the demolition of Palestinian homes and farms to facilitate the construction of the Separation wall.
Influence on the Banking Sector
Until recently, CRH had a slew of cross-directorships with the banks. This allowed CRH to restrict funding to many of its competitors (a finding of the European Commission against the cement sector in 1994). The names Tony Barry, Jim Culliton, Peter Sutherland, Pat Molloy, Kieran Mc Gowan, Howard Kilroy, Des Traynor, Don Godson are included.
CRH and the Media
CRH has been a very strong influence on media outlets over the years. RTÉ attempted to produce a Prime Time documentary on CRH on several occasions but attempts have been sabotaged. In April 2011, the cameras, production crew and reporters arrived at the premises of Goode Concrete in Dublin 12 to begin filming but withdrew after receiving a discouraging phone call. There was no explanation given.
The real cost of anti-competitive practices and crony capitalism
Few will disagree that crony capitalism is a cancer on Ireland’s economic well-being. In 1999 UCD sociologist, Dr Kieran Allen, stated that “Irish Capitalism was structured around a series of informal alliances and families who operate in specific sectors of the economy. Most had close political links and operated either as monopolies or oligopolies. An obvious example is Cement Roadstone, but a similar point might be made about the banks”. Alongside funding the political process, the other key tool of crony capitalism is regulatory capture, a term that describes corporations’ domination of regulatory agencies through lobbying and selective information sharing. Regulatory capture has long been endemic in Ireland as corporations regularly breach regulatory laws, confident that they won’t be caught or that, if they are, the financial benefits derived from the breach will exceed the costs of the fines assessed against them.
Regulatory capture in Ireland has contributed as much as any factor to the implosion of former pillars: Anglo Irish Bank, AIB, Bank of Ireland and Irish Nationwide. Indeed the worst excesses of regulatory capture/cronyism almost wiped out the state’s largest political party, Fianna Fáil. Historically, Ireland has protected big business at the expense of the citizen. The blanket bank guarantee which has forced citizens to pay for bank-gambling losses crystallises this widely-held view. Government traditionally cossets many sectors of the economy such as construction materials, pharmaceuticals, oil and gas, drinks, health insurance, electricity, gas and the list goes on.
With little or no regulation of big business by its supposed guardians, the Financial Regulator, Competition Authority and Office of the Director of Corporate Enforcement (ODCE), our costs have been driven relentlessly upwards leading to an erosion of competitiveness and of the economic progress made over the past few decades.
For example, the mission statement of the Irish Competition Authority is “to ensure that competition works well for consumers and the Irish Economy”. Since its inception in 1991, the record of the Irish Competition Authority has been deplorable. In 2002, the highly respected London-based Law Business Research Group described the Irish Competition Authority’s performance as “next to dire”. Little has changed. Former Chairman Dr John Fingleton estimated that anti-competitive behaviour was costing the State circa €4 billion per year. That is the equivalent of one Anglo Irish Bank debacle every decade or a penalty of circa €2,400 each year on every household in Ireland.
The Competition Authority’s role in damaging the economy can be likened to the Financial Regulator’s role in the collapse of our financial system. The hapless performance of our regulators simply incentivises cartelists to continue their criminal behaviour, safe in the knowledge that they will not be caught or that if they are, the consequences will be minor.
John Fingleton stated that, there is a legacy of (competition) problems in Ireland and that “private enforcement (of competition law) has absolutely failed”. As of course has public enforcement. Fingleton further stated that, “It will not be until Judges decide to convict people who are members of the same golf club of which they themselves are members, that we will really see white collar crime being tackled”.
More recently, in June 2011, Fingleton, then head of the UK’s powerful Office of Fair Trading, described the lack of sanctions for breaking competition law in Ireland as “shocking” adding that Ireland still has a “huge” amount of work to do to improve its competition policy. We can’t blame everything on Fianna Fáil. Minister Richard Bruton, who ironically worked for CRH as an economist in his early career, was responsible for the toothless 1996 Competition Act and the highly questionable 2012 Competition Act.
Anti-competitive criminal behaviour has been endorsed for decades by the main political parties, governments and all relevant bodies charged with the proper regulation of business in Ireland.
Many economists pine for a devaluation of our currency which is impossible as we are locked into the Euro. However, we can devalue and become more competitive by declaring war on costs. Effective regulatory enforcement will bring down domestic prices. This not only will benefit domestic consumers but will also enhance Ireland’s reputation abroad and increase the attractiveness of our exports to foreign consumers.
It is for the government to learn the hard lessons of corpocracy.