Goldman Sachs got over €7m from State for consultancy

Global financial group Goldman Sachs was paid €7.7 million, excluding Vat, by the State between 2010 and 2013 for consultancy services relating to the banking sector.

The money was paid on behalf of the State to Goldman Sachs by the National Treasury Management Agency (NTMA) and relates to three specific exercises.

In 2010/11, Goldman Sachs advised the Government in relation to Anglo Irish Bank at a cost of €362,000.

From 2011 to 2013 it provided advice on liability management exercises (LME) and capital raising transactions in relation to AIB, Bank of Ireland, EBS Building Society (now part of AIB), and Irish Life & Permanent.

In July 2011, then secretary general of the department of finance John Moran told the Public Accounts Committee that it had “relied on the advice of Goldman Sachs, which has been different from the advice of other advisers in the system, and secured multiples of the fee for the advantage of the taxpayer by following that advice”.

It is understood that Goldman Sachs’s advice in relation to the LME transactions generated a benefit to the State of substantially more than €500 million.

It also advised on the €1.3 billion sale of Irish Life to Canadian group Great-West Lifeco in 2013. The total cost of these advisory projects was €7.355 million.

This has emerged from answers provided by the Minister for Finance Michael Noonan to Fianna Fail’s finance spokesman Michael McGrath.

It comes in the week that Goldman Sachs was appointed by Mr Noonan to advise on capital restructuring actions in AIB. Goldman Sachs has agreed to undertake this work on a pro bono basis having secured the assignment through a competitive tendering process.

This is not the first time that Goldman Sachs has worked for the State without charging a fee. It also advised the department of finance on the transaction by Bank of Ireland in late 2013 in relation to the €3.5 billion in preference shares held by the State.

Mr Noonan also told Mr McGrath that the duration of the contract awarded to Goldman Sachs is not fixed but is expected to run to the summer of this year.

The minister said Goldman Sachs’ offer to do the work on a pro bono basis was a “good outcome” for the State.

“We understand is not unusual internationally, given firms desire to be associated with such high visibility government work,” he said. “In fact, a number of the tenderers offered their services on a pro bono basis.”

Some six of the 11 groups that tendered for the work are believed to have offered their services for free.

The award of the AIB contract follows the establishment by the department of finance last year of three separate panels of financial advisers. These were put in place to facilitate the provision of advice in relation to the State’s banking investments.

Mr Noonan said Goldman Sachs was “adjudged to have achieved the highest aggregated score” in the tender process and so was “awarded the contract”.

The minister reiterated that “no decision” has been taken in relation to the State exiting any of its investments in AIB. It owns 99.8 per cent of the bank’s ordinary shares, has €3.5 billion in preference shares and €1.6 billion in contingent capital notes.

“What we intend to do during the first half of 2015 is make the bank’s balance sheet fit for purpose and put together a roadmap that will see the bank start to return cash to the State. Upon completion of this work, we will take stock of our options with respect to the future ownership of the bank,” he said.