What we learned from FoI documents on Siteserv sale

The Irish Times is reporting on FoI documents received late on Thursday showing ongoing tensions between the IBRC and the Department of Finance.

The extent of what is revealed is striking, all relating to meetings held during 2012. Here, with extra detail from the documents, are the main areas of contention.

1. The deals: We all know about the Siteserv controversy which started all this off and the documents clearly outline official concerns about this deal, already widely covered in reports. The documents show that there were concerns about other deals and commercial arrangements entered in to by IBRC, with the areas of concern listed in a memo prepared for senior officials ahead of a meeting in July 2012. These include the appointment of US firm Blackstone as an adviser to IBRC, without the normal procurement process being undertaken. Another "business conduct concern" was the failure to sell the bank's wealth management business.

The memo also refers to an approach to the department by Topaz, in which the majority shareholder at that time was Neil O’Leary’s Ion Equity and a minority stake was held by Denis O’Brien, who later took control. It says the department was informally approached by the company about concerns relating to the IBRC’s handling of it. It said that Topaz was told that these concerns should be raised directly with IBRC chairman Alan Dukes. A later note of an August meeting refers to IBRC’s desire to restructure Topaz.

That memo and a number of others also refer to concerns about the sale of loans linked to a high-profile apartment block in Manhattan called Apthorp. An executive in IBRC raised concerns about the valuation process used and the provisioning by IBRC as part of the deal. The departmental papers question the valuation process used which it says was “bespoke”. The valuation method was not that approved by the EC Restructuring Plan, The note says that the “adverse deviation” from the normal valuing approach was $25 million to $50 million.

Senior IBRC executives defended the Apthorp sale, according to minutes of meetings. Briefing notes for the July meeting note Government concern that the board of IBRC were not appraised of the concerns raised by the official before signing off on the deal. The memo was also critical of the subsequent handling of the issue by the IBRC board.

2. The borrowers: Another theme running through the memos and notes of the 2012 meetings was the way Anglo Irish Bank dealt with and interacted with its big borrowers. Among these was the Quinn family, listed under the " business conduct concern" heading in the memo drawn up ahead of the July 2012 meeting for senior department officials. However details of why the concerns were held are redacted.

A number of the pre-meeting memos also raise the issue of text messages exchanged between bank chief executive Mike Aynsley and developer Paddy McKillen, one of the Anglo’s big borrowers, whose loans moved to the IBRC. The texts emerged in court proceedings in London in a case involving Mr McKillen and the Barclay Brothers and covered McKillen’s dealings with the bank. The notes question whether Aynsley should have communicated in this manner. In a meeting on July 25th Minister for Finance Michael Noonan put the issue directly to Aynsley and asked him about his relationship with McKillen, according to minutes of the meeting.

Aynsley replied, according to the minutes, “that the bank has large clients and that the relationship must be close but that they are not inappropriate”. He added that the clients are managed to ensure a maximum return on the loans. According to the minutes, Aynsley “confirmed that the relationships with McKillen and Denis O’Brien are strong, but not inappropriate and that he may have had about four dinners/lunches with both individuals”.

Briefing notes for an August meting between Aynsley and department secretary general John Moran, prepared for Moran by civil servants, said that a more “low-key” approach to dealing with borrowers might be appropriate. Then IBRC chief Alan Dukes noted at the July 25th meeting that IBRC was operating, according to minutes of the meeting , “in a very sensitive environment with a lot of high-profile cosmetics and that this would inevitably lead to a significant public interest.”

3. Pay and appointments. The third recurring theme in the notes and minutes is the issue of the remuneration of executives at Anglo and a number of appointments made. Senior officials clearly believed that IBRC was not doing enough to reduce pay levels, with eight executives paid more than €300,000 and a number on the €500,000 limit. Pressure was put on IBRC to cut pay, but this did not appear to happen.

A major dispute occurred over the appointment of a chief financial officer, with the department saying IBRC had not gone through the proper clearance procedures and the bank saying that the department had not responded in a timely fashion to its communications. According to a note prepared by a finance official, “this is a typical example of the type of behaviour that undermines the trust between the department and the bank”. It was made clear at a later meeting that the concerns related to the procedure used for the appointment and not the individual concerned. A similar dispute arose over a pay increase granted to an IBRC executive which the department felt its views were not taken into account.

Concerns also emerged about the length of time taken to appoint non-executive directors suggested by the department. Subsequently, the department appointed a senior civil servant as an executive director.

Conclusion: The documents give a snapshot of the relationships rather than a full picture. The tone of the correspondence suggests that tensions pre-dated 2012 and the Siteserv sale – it was repeatedly pointed out to IBRC officials that the department found dealing with it more difficult than with the National Asset Management Agency and the commercial banks under its ownership. The final meeting was one on August 13th, which seemed to deal mainly with operational issues at an official level. An earlier meeting took place between Aynsley and Moran on 3rd August. There were no minutes of this meeting but there was a subsequent note written by senior official Michael Torpey. It referred to actions being taken including the appointment of the new non-executive directors, other jobs being filled and a discussion on "imposing a compliance requirement of equal standard with Nama. Less than six months later, IBRC was liquidated.