Telecom share certificates sent out in error

Telecom share certificates, nominally worth about £1.6 million (€2.03 million), were issued to applicants who had not paid for them, a report published yesterday shows.

The certificates were issued to applicants for shares whose cheques bounced or whose accounts did not contain the funds necessary for mandated direct debits.

In a few instances, applicants were sent refund cheques from Telecom because they were given fewer shares than they had applied for, even though the cheques they had given to Telecom had bounced.

Due to the volume of applications needing to be processed (574,082), and the fact that 70 per cent of them were received in the last two days of the offer period, the task of printing the share certificates began before all the cheques and direct debit mandates received were cleared.

Share certificates and cheques issued to applicants who were later found not to have proper funding in place were cancelled and there was no loss to the State. The number of share certificates issued and then cancelled was about 500 or 0.087 per cent of the total number of applications received.

The shareholdings to which the certificates relate have been deleted from the Telecom share register.

The average individual share issue for all applications was 1,036 shares, which would indicate a nominal value of about £1.6 million for the 500 invalid share certificates.

The recipients of seven of the cancelled share certificates managed to sell their invalid shares. The amount involved is £24,600. The persons or institutions who purchased the invalid shares are at a loss to this amount, rather than the State. The shares issued and then cancelled, reverted to the ownership of the State.

The report on the issue, compiled by Mr Brendan Tuohy, assistant secretary at the Department of Public Enterprise, details how, right up to the day share certificates were issued, letters containing certificates were being retrieved from the secure An Post centres where they were being stored.

The letters were retrieved on foot of requests from the Department of Public Enterprise. Mr Tuohy said he was satisfied the withdrawal by An Post of the envelopes "did not constitute an interference with the due delivery of a postal item".

His report also said: "The Office of the Attorney General has advised, on the basis of the accuracy of the facts outlined in this memorandum, that there are reasonable grounds to assert that the Postal and Telecommunications Act 1983 has not been breached by the withdrawal of the relevant items."

Section 84 of the 1983 Act stipulates it is an offence for a person to do anything to prevent the due delivery of a postal packet addressed to another person. The offence can be punished by a fine or imprisonment.

The Department had an arrangement with An Post whereby the letters were held by An Post at its various regional postal centres awaiting an instruction from the Department that they should be posted. The total number of unpaid applications for the whole process was about 4,000 or 0.7 per cent of the total.

On July 13th, the day before the instruction to post the certificates, the Department issued a request to An Post to retrieve 911 identified letters.

On the afternoon of July 14th, an instruction to commence posting was given. By this stage about 400 of the 911 invalid applications had been withdrawn. The other 500 were posted.

These share certificates were subsequently identified, the shares identified as invalid on the Telecom share register, and a letter written to the applicant seeking return of the certificate.

The inquiry by Mr Tuohy began on Thursday and was completed yesterday evening, following a query from RTE to the Department of Public Enterprise.

Sources said the unpaid applications were in almost all cases the result of honest mistakes rather than an attempt to defraud the State.