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PAC ignores Docklands conflicts of interests

PAC doing a Mahon/Dunlop – in Docklands

The Public Accounts Committee ignores dozens of other schemes and the position of Treasury Holding, in its focus on the Glass Bottle debacle

By Michael Smith

 

 

As the Public Accounts Committee allegedly gets stuck in to Docklands, I am struck how – in the same way as the Mahon Tribunal was too lazily dependent on evidence from Frank Dunlop, the PAC, like the Comptroller and Auditor General whose report it is considering,  is unduly focused on the Glass Bottle Site where it seems the conflicts of interest were much better handled than elsewhere…though the commercial decisions were not.  But there was far more afoot in Docklands.

 

In April 2007 I submitted a  complaint  to the Standards in Public Office Commission (SIPO) based largely on information secured through a Freedom of Information Request from the Dublin Docklands Development Authority [“DDDA”] by the defunct Centre for Public Inquiry and from newspaper articles.  The complaint primarily  concerned conflicts of interests of then Members of the Board (Directors) of the DDDA. These Directors were Lar Bradshaw, Chairman of the DDDA and Sean FitzPatrick.   Bradshaw had been chairman of the DDDA since 1997 and was re-appointed in 2002. FitzPatrick had served as a Director since 1999 and had been Senior Independent Director, with a role in helping with ethical issues, since 2001.  FitzPatrick didn’t like it.  In June 2007 he made a speech to a business lunch hosted by a research company called Experian.  He told his compliant audience: “among the most insidious aspects of our current regulatory environment is the apparent presumption of guilt on the part of entrepreneurs and business people generally.  The whole structure seems to be geared towards something akin to an annual proof of innocence statement.  This is corporate McCarthyism and we shouldn’t tolerate it… We should ask ourselves if it is fair or equitable to allow almost any allegations, however wild and unsubstantiated, against any other citizen with seeming impunity”.  So Matt Cooper invited FitzPatrick on his radio show to find out what on earth he could have been on about.  In Who Really Runs Ireland Cooper writes “He  wouldn’t  give examples despite my repeated requests.  He wouldn’t name any victims of this ‘corporate McCarthyism’… Having raised the hare he wouldn’t chase it, as angry text messages from listeners stressed”.  Cooper continues: “At the time I didn’t realise what had upset FitzPatrick so much… I learned subsequently that only a month before his speech and interview he had been the  subject of a complaint to SIPO.  Legitimate questions had been raised by a member of the public about conflicts of interest.  He had to explain himself to SIPO or, as he would have put it, to prove to them that he was innocent”.

 

FitzPatrick and Bradshaw served on the DDDA at a time when a great number of schemes in Docklands was being financed by their bank.  But they also both took part in discussions on numerous occasions on planning schemes and their certification  under section 25 of the Docklands  Act 1997, for schemes which the  bank of which they were both major shareholders and Directors (Mr FitzPatrick being chairman), was financing.  That bank was Anglo-Irish Bank. The future of Docklands seemed to be largely in the hands of under fifteen development companies.  It was clear that Anglo-Irish Bank was lending money to a considerable number, perhaps a majority, of them. In itself that was extraordinary and a cause of concern. Mr FitzPatrick and Mr Bradshaw seemed to engender an atmosphere that was conducive to facilitating the interests of the development sector, including those of some clients of theirs.  They clearly had conflicts of interest which hung like clouds over the whole operation of the DDDA Board. That much was clear well before Anglo became a coda for dishonesty, incompetence and intrigue. The question was if these conflicts of interest were illegal or are otherwise actionable.  I asked the Commission to consider the, necessarily incomplete, evidence presented and to investigate.   Another DDDA board member, Donall Curtin, is married to Ms Anne O’Donoghue who was  Associate Director, Anglo Irish Bank Private Banking.
Planning Schemes
The Grand Canal Dock Planning Scheme 2000, and the North Lotts Planning Scheme 2002 gave the DDDA its statutory planning powers and were similar to an outline planning permission for extensive areas on the north and south side respectively. Any development proposal submitted under Section 25 of the DDDA Act which complied with the Planning Scheme was exempted development for the purposes of the Principal Planning Act.  I requested that the Commission investigate any decisions to amend or review the planning schemes and the reasons for these amendments or reviews particularly regarding the North Lotts Planning Scheme.  I requested the Standards Commission to investigate whether the appropriate declarations had been made and whether Mr Bradshaw and Mr FitzPatrick absented themselves from meetings where required. Review of the planning schemes could obviously significantly benefit Anglo Irish Bank and the developers of schemes it is funding.

Scheme DD167
Minutes concerning one of the most controversial schemes in this category, DD167 (967 apartments, office, retail), were eventually put on its file.  They show prolonged and intense debate about social housing and height.  While one Director (Donal Curtin) declared an interest, Mr FitzPatrick does not appear to have, though there were four fraught meetings in 2002-3 of which he attended two. In particular at meetings of 13 Nov and 5 Dec 2002 Mr FitzPatrick was present  for discussions on these matters which did not lead to a conclusion but which pushed in the socially-segregative direction that Treasury Holdings through its Director, Mr Richard Barrett, were suggesting.  Mr FitzPatrick did not absent himself. It is possible that he made declarations in some other manner but this is not clear from the minutes. At a meeting on 9 Jan 2003  (from which Mr FitzPatrick was absent) the developers appeared to get their way: a paper to the board from Peter Coyne (DDDA CEO) indicated that Treasury Holdings proposed to concentrate the social housing in one corner of the site with a small complement scattered throughout the site, even though the DDDA Planning Scheme policy 3.5.3 says, “the Authority will seek to ensure integration in social housing between persons of different social background” [Policy 3.5.3] and Mr Terry Durney, Director of Planning and Technical Services, recognised the scheme would breach this and he effectively recommended refusal. Even before a decision was taken, Treasury Holdings’ estate agent, Hooke and McDonald, marketed the scheme off the plans on the basis that this would be the case. This implies some confidence on the part of Treasury Holdings in their ability to sway the decisions of the Board. Section 25 Planning Licence DD167 was issued with effect from 9 Jan 2003, in breach of the Planning Scheme.

A somewhat unsettling sequel to these events was a reply from the Minister for the Environment, Mr Dick Roche TD, to the late Mr Tony Gregory T.D.  on 4 Nov 2004, in which the Minister signalled that there has been no breach of the DDDA’s Code of Conduct in these affairs: “The code of conduct is published.  In so far as I have any information, there is nothing to say it has been breached”.  Minister Roche said, “On appointment, members are expected to furnish details which has been done. When an item for discussion creates a conflict, that may be discussed”.  This suggests the Minister investigated to the extent of finding out that details had been furnished. I asked the Commission to find out how the Minister could then justify saying he believed there had been no breach in the face of the facts outlined above. In particular since Mr Gregory was  specific about the people and schemes outlined above  and Mr Roche, or presumably his officials, investigated the matter, it seemed to constitute a  misleading of the Dail or at least a strangely reckless under-investigation for Mr Roche to state that his “information” was that it had not been breached when it was evident that  Section 4.3.1 of the Code of Conduct referred to by Mr Roche had indeed been breached.  This section says “where [a] conflict or perceived conflict is material (taking into account the circumstances of the Board Member) or it could provide an incentive to a member to act against the best interest of the Authority or there is a risk of negative public perception then the member, in every case, must: (i) in advance of any consideration of the matter, disclose to the meeting the matter and the nature of the interest. (ii) take no part or discussion (sic) in any consideration of the matter.  (iii) neither influence nor seek to influence the decision to be made in relation to the matter.  (iv) withdraw from the meeting of the Board, so long as the matter is being discussed and decided upon”. Clearly there was a risk of such negative public perception and the minutes do not disclose recourse to the required behaviour.
Decision of 2 June 2005
While the above decision pre-dates many of the Ethics requirements, including the application of the DDDA Code of Conduct, a DDDA Board decision of 2 June 2005 on social housing at Spencer Dock did not.  I asked the Commission to investigate whether by this stage Mr FitzPatrick and Mr Bradshaw had made the requisite declarations and stepped outside the room during discussions. Minutes of the meeting suggest they were present. While it was possible that they made declarations in some other manner  this is not clear from the minutes. In any event there was provision by this time in Section 4.3 of the DDDA Code of Conduct that the declarations should be recorded in the minutes.

Treasury Holdings’ Influence

Treasury Holdings’ influence on the DDDA was wide-ranging. In addition to their association with board members whose banks handled their banking, it was the case, for example, that a member of the DDDA Board Ms Joan O’Connor, had acted on a number of occasions (including for the Westin Hotel through her company, Interactive Project Managers) for Treasury Holdings. Yet Ms O’Connor met on behalf of the DDDA’s Planning Sub-Committee with the developers of Spencer Dock on proposed changes to residential development according to Minutes of 13 Nov 2002. And Grainne Hollywood, Director of Property for the DDDA until August 2005 had worked for Treasury Holdings beforehand including in the negotiations leading to the Spencer Dock planning application to the DDDA. This made for the appearance of a pro-Treasury Holdings bias on the part of the DDDA. I asked SIPO to ask officials of the DDDA if they appreciated, and were concerned by, this.

Other specific schemes

The complaint referred also to the Riverside II scheme at Sir John Rogerson’s Quay for Haytonvale Ltd.  The complaint also relates to  a scheme by Candourity Ltd (Treasury Holdings) at Barrow Street. Both these latter schemes benefited from loans from Anglo-Irish Bank. And the complaint related to  a scheme by the Grand Canal Quay Partnership (comprising Woodstamp – Paddy Kelly, and Cursham – a subsidiary of Alanis;  both of which received loans from Anglo-Irish Bank for their projects).

Land Acquisition
Irish Glass Bottle Site
This complaint related to the former Irish Glass Bottle Site in Ringsend, Dublin 4, where the DDDA entered  a joint venture – ‘Becbay’ with a group including Bernard McNamara and Derek Quinlan who were putting up 136m Euro in cash only.  The rest of the reported 1.46bn Euro development cost was funded through complex mezzanine finance by Anglo-Irish Bank, making the DDDA an investor in a scheme over which it would have the planning-certification power. I asked the Commission to investigate if Mr Bradshaw and Mr FitzPatrick made all the necessary declarations of interest and stepped out of the room as required on all material occasions relating to the agreement to enter a joint venture and the price agreed.  It seems in this instance the members did behave properly.  Indeed the treatment of a hurt Lar Bradshaw before the PAC committee was deferential.

The DDDA did not obtain its own independent valuation of the site when it was deciding on the bid Becbay Limited would make for the site. The DDDA obtained Ministerial approval to increase its borrowing capacity to allow its involvement  in the purchase but it had informed the  Department of the  Environment that the value of the site was around €220 million while in fact an outlay of over €400  million was being discussed. Furthermore, the DDDA believed   that its financial commitment to the joint venture would be limited to €35 million but its exposure had in fact increased to €81.9 million by end 2010 though it crystallised at €52.1  million following a settlement with NAMA. It was also the case that Mr Bradshaw (and indeed Mr FitzPatrick) was a member of the Tysan Investment consortium that included Mr Paul Coulson of Ardagh Glass (the company that acquired the Irish Glass Bottle site for a nominal sum using a loophole in legislation that had been adverted to by the Law Reform Commission). Moreover, Bradshaw was a client of Quinlan Private, a component of Becbay.  Bradshaw did not declare these two conflicts – but was not asked about them by a deferential PAC when he spoke to it.

Riverside II

I also asked the commission to take a look at the behaviour of the Board in 2003 in the attempted purchase of Riverside II at Grand Canal Harbour by Skerry Ltd (a Treasury Holdings’ subsidiary) and in particular a decision by the Board  to allow a change of the land-use mix after Skerry Ltd was selected as preferred bidder but before the site was actually conveyed to them. Ultimately, the site was sold to another bidder after Shelbourne Development put in a bid higher than Treasury’s and because Treasury did not pay the deposit on the site. Shelbourne’s boss, Garrett Kelleher has told me that an official in the  DDDA was markedly discouraging of his attempt to make a last-moment higher bid, even though it was to the advantage of the public purse. I asked the Commission to investigate why this site was originally made the object of a lower preferred bid when at least two other bidders were interested at higher prices.  Separately I asked it to investigate if Mr FitzPatrick absented himself from relevant meetings.

Finally, I ask that the Standards Commission look at ALL planning applications, planning schemes and land disposals which Anglo-Irish Banks were involved in funding. In particular I believe they may funded schemes for Zoe/Daninger/Dunloe Ewart, Liam  Carroll, Treasury Holdings, Spencer Dock Development Corporation, Alanis, Paddy Kelly/Redquartz/Kellard/Woodstamp, John Flynn, Bernard McNamara   and their various partners, subsidiaries and joint ventures.

In all cases Mr Bradshaw and Mr FitzPatrick – while they held shares and Directorships in Anglo-Irish Bank and at the same time served on the DDDA Board – stood to make gains as shareholders of Anglo-Irish Bank which was part-funding the purchases and developments.  They were also in a position to negotiate loans that benefited the bank of which they are directors. So they were twice compromised. In the case of the Glass Bottle site the loan was 1.4bn Euro – yielding presumably tens of millions in Euros of profits to Anglo-Irish Bank.  In the case of Spencer Dock it was stated in October 2004 that Anglo Irish Bank was lending over 300m Euro  to the Spencer Dock Development Company – led by Treasury Holdings. The  decisions of shareholders in Anglo-Irish Bank on the nature of planning schemes in these circumstances yielded conflicts of interests. Decisions on height, density, open space, levies and social housing in particular tend to affect the magnitude of the profitability of schemes and ultimately the profitability of shareholdings. For example, Docklands includes far too many two-bed apartments (c70%) which cater to the short-term letting market and do little to facilitate the long-term social rejuvenation of the area – and ultimately the national quality of life.
I asked that Bradshaw and FitzPatrick be asked to indicate, and account for, their behaviour at all meetings they attended where Anglo-Irish Bank had an interest in the  funding of projects that were discussed when either Bradshaw or FitzPatrick were directors and/or shareholders of that bank. I noted that Mr FitzPatrick was famous for deprecating the Irish media for believing that “business is dodgy”. Since the conflict of interest issues that I had cited had had a significant airing in the media, it was only fair, I said, that “he should have a chance to prove that Docklands is a concise manifestation of this heinous misconstruction”.  But even six years on his lawyers are depriving him of this overdue opportunity.

 

As to my complaint, SIPO’s interpretation of complex regulations was that the relationship between a member of a board like the DDDA and a company or person which banks with a bank, like Anglo, of which a DDDA board member was also a board member wasn’t susceptible to a complaint to it. Cooper summarises: “SIPO decided not to launch a full investigation  on the basis that there was no evidence that either FitzPatrick or Bradshaw had held control of the bank”  – as opposed to being directors and shareholders of it. The complaints went uninvestigated.  Now PAC is investigating the Glass Bottle Site debacle.  But  not the many others…