The Directors of the Society made it absolutely and abundantly clear to the three-person board of CIROC that this payment was in no way linked to performance and clearly demonstrated that it was a contractual payment due to me on foot of my agreement to enter into a one year contract after my due retirement.
It therefore came as a great surprise to me and the Board of the Society that the draft report of CIROC furnished to the Minister for Finance referred to this payment as a ‘Performance Bonus’. As a direct result of this misrepresentation, the Minister wrote to the Board of the Society on 12 March 2009 expressing his ‘serious concerns’ about the circumstances of this payment and seeking an immediate response. The Minister’s letter was delivered to the Society after 7pm on the evening of 12th March 2009 and sought a reply by 11am the following morning 13th March 2009, before the launch of the CIROC Report that same day.
The Secretary of the Society, who was still working in the office that evening, brought the matter to the immediate attention of the acting Chairman who summoned an emergency board meeting. By 11pm on 12th March 2009, the Board delivered a clear and full response to the Minister stating, in unequivocal terms once more, that the payment in question was a contractual payment established and agreed long before the Credit Institutions (Financial Support) Scheme 2008 and did not fall under the powers of the Minister under this same scheme.
As a result of this letter, CIROC was forced to change the reference in the final published report from ‘performance-related bonus’ to ‘pre-contractual bonus’ which appeared in their official report. This was clear and conclusive evidence that both the Minister for Finance and his Department had fully accepted the Society’s position as set out in the letter of 12th March 2009. I am not aware that the Minister ever responded to this letter or officially questioned the content on any subsequent occasion.
It was now clear that my ‘bonus’ was contractual and that the Society was fully and legally obliged to honour it, and furthermore that I was legally entitled to receive it. It was therefore fully established that the powers of the Minister under the Credit Institutions (Financial Support) Scheme 2008 had no legal implications whatsoever in relation to this matter. For completeness, the Board of the Society, at a later date, sought and obtained legal opinion from Michael McDowell SC. The opinion fully and comprehensively agreed with the Board’s position. Mr McDowell’s opinion was openly circulated to the media, however only one newspaper made reference to it. It clearly did not suit the agenda at the time.
Two days later, in a high profile report, the Irish Times on 14th March 2009 stated ‘it emerged last night that the Department of Finance intends to put pressure on Mr. Fingleton to repay the bonus’. It went on: ‘the Department of Finance sources said Mr Lenihan was not impressed with the bonus payment to Mr Fingleton in November 2008 after the Bank Guarantee Scheme was introduced and that the matter would be pursued’.
It was clear to me that the spin, denial and politicisation of the issue had begun. The resources and apparatus of the State were organised to create the perception, contrary to the legal position already accepted by both the Minister and his Department, that the repayment to me was ‘tainted’ and in breach of the conditions of the 2008 Scheme. The Irish media rowed in with a vengeance along with the Government and opposition parties who bought into the false perception now being created that the payment to me was in breach of the Guarantee Scheme and should be repaid. The Society’s rebuttals were ignored and got lost in the frenzy.
The collective bullying and harassment was in full swing and persisted for weeks.
It became clear to me that the matter would have to be brought to a conclusion either by legal means or some other way. I chose the latter in the interest of the Society since under the terms of the Guarantee Scheme the State had effective administrative control of the Society, and the Society would have to work with them on a regular basis. At this point contact was made on a confidential basis through an independent intermediary. The Government contact stated that the question of whether or not I was legally entitled to the payment did not arise; it was the fact that there was a public perception that I was not entitled to the payment. The Government was on a ‘political hook’ and the only way the matter could be resolved was by returning the one million euro payment.
After two days of contact and discussion it was agreed by the government contact that if I voluntarily agreed to pay the one million euro, and thus releasing them from the political hook (a creation of their own making), there would be full and complete closure to this matter. It was stated that there would be no further interest in this matter or in my pension entitlements by the State.
Indeed I was assured that there would be ‘positive official comment’ made on the matter. At all times the Minister for Finance was fully aware of these discussions and the subsequent agreement.
This agreement with the government, notwithstanding the reasons given in my public statement of 27th March, 2009, was the reason I offered to pay back the Society the one million euro (less tax already deducted). For the record there is a further independent witness to this agreement other than the intermediary, who confirmed to me recently that my understanding as detailed above is correct.
Despite this agreement the Minister for Finance continued his personal attack by pursuing an inquiry into the payment of my ‘bonus’ and my pension entitlements by publicly giving instructions to the two Government-appointed Directors to carry out a full and detailed investigation of both issues and setting a deadline for it to be completed.
Clearly, as far as the Minister was concerned there was no closure or anything else. It had been established beyond doubt that there was and is no legal obligation on my part to repay any of the remuneration I received in 2008 and both the Minister and his Department were fully aware of this fact. The only possible reason to initiate such an inquiry was to establish some justification for their campaign, which was as dishonest as it was flawed.
By this action, the Minister has repudiated the agreement I had with the government and my act of good faith.
I was bullied and harassed into volunteering to repay money which I was under no legal obligation to do and to which I was contractually entitled. As a direct result of the minister’s actions, I have no obligation legal or otherwise to account to any party with regard to the funds in question.
The remaining issues now outstanding as far as I am concerned relate to the results of the investigation ordered by the Minister. I am aware that the enquiry is complete and the ensuing report has been forwarded to the Minister some considerable time ago. I was to be given a copy of this immediately after it had been submitted. I now wish for official closure on this subject.
In addition to a copy of the report, I request confirmation from the two Government-appointed Directors that they found nothing irregular nor improper in their investigations and that in both instances I was fully entitled, both legally and contractually, to the payments in question. I also would like to request a copy of the response, if any, from the Minister and/or his Department to the report.
I believe that it would be in the best interests of the Board to seek a full and complete acknowledgement from the Minister that the repayments made to Michael Fingleton were proper, legal and contractually binding on the Society and that it was fully obliged to discharge them. This is a necessity in order to bring complete closure to this matter as far as the Society is concerned.
As far as I am aware, the Minister or his Department have never responded to or acknowledged in any way the numerous occasions the Society, the Board and its Directors have informed the Minister and his officials of the legal status of these payments.
Danny, as Chairman, you clearly set out the position of the Society in relation to this payment and my pension arrangements in the Chairman’s statement to the AGM in May this year. It is strange, though not surprising that this statement got little or no media coverage. I presume you were requested to submit this statemen
t in advance for clearance from the Minister under the terms of the Guarantee Scheme. Again this gave the Department of Finance further confirmation of the Society’s position and indeed an opportunity to challenge it. In not challenging or amending the contents it can therefore be deemed that they accepted the position as articulated by you as Chairman.
In relation to my pension entitlements, I feel this is as good an opportunity as any to clarify the history of the creation of the fund and its cost to the Society.
In the late Eighties and early Nineties, I became concerned about the performance of my pension fund under independent management. I agreed with the Society that I would manage the fund myself and invest all pension contributions as they arose. The fund in the intervening years performed exceptionally well and delivered a sum to cover the Society’s obligations to me but also delivered a lump sum of €1.17 million euro to the Society. The cost to the Society in contributions was less than €3 million. This figure was confirmed by the auditors and appeared in the 2007 accounts of the Society by way of a note.
Furthermore, managing the fund in-house meant there was an estimated saving in fees of circa €2 million. Overall it was an exceptionally outstanding result for the Society.
To put the cost into perspective, if a secretary general of a major government department were to retire now, the cost of his pension would be in the region of €7m as compared to the cost of less than €3m for my pension from the society.
In your Chairman’s statement to the AGM, you also set out clearly the Society’s position in relation to Mr FitzPatrick’s loans. There was nothing improper, illegal or irregular about those transactions. They were commercial loans on commercial terms. For the record I wish to state that I never spoke to Mr FitzPatrick about those loans or he to me. I never had, nor do not have now any interests or business connections with Mr FitzPatrick or any of his associates. I do not have or never had any business interest or connections with any director, executive or staff member of Anglo Irish Bank. I never had or do not have now any borrowings from or deposits with Anglo Irish Bank. Nor have I ever owned or do not own any shares in Anglo Irish Bank.
It must be remembered that Mr FitzPatrick and his fellow Directors made an outrageous hostile attempt in mid-September 2008 to destabilise the Society and to mislead the public and the markets when Anglo Irish Bank announced unilaterally that they were taking over the Irish Nationwide. The media were also duped and bought enthusiastically into this fiction, despite strong denials by the Society.
I wish to state for the record that I have no issues with the Society nor do I expect to have any in the future. Any issues I may have are firmly focused elsewhere. To clarify, this is the response to your letter dated 4th August 2009. Therefore, the Society has contacted me twice and I have responded twice (if somewhat belatedly this time).
I trust that this clarifies for you and the Society my position and I look forward to full closure of this matter.
Yours sincerely
Michael Fingleton
Given the cost to the taxpayer of Fingleton’s decision-making, he might have expected a sternly worded response. Instead, on 6 October 2009 Kitchen replied to Fingleton as follows:
Dear Michael,
Thanks for your letter of 25 September. First let me say that in relation to the legal position regarding the bonus the society is clear that the offer you made to repay it was entirely at your own discretion. Equally as you have noted from address at the AGM the board’s view on the pension arrangements and the FitzPatrick loans coincides with your own. Consequently on the above issues there is nothing contentious between yourself and the society.
I was asked by the Department to ask you again to repay the bonus and I have explained to them that whilst prepared to do so, the society has no leverage to ensure you do so. I also agree that the number of times referred to in the press was two, and that the lack of response referred to the last occasion I wrote to you.
Like you I want to put the issue behind the society and consequently I will assume that you do not intend to repay the bonus and accordingly I will stop seeking such repayment.
I believe you understand the circumstances prevailing and hopefully from both our perspectives this will put an end to the matter.
Yours sincerely,
Daniel J. Kitchen
Chairman
Kitchen admits in his letter that he has no intention of pursuing Fingleton. He wants to put the entire annoying affair behind him and gives Fingleton no reason to pull back on his position.
On the same day as Kitchen’s letter, Irish Nationwide appointed as a non-executive director Roger McGreal, a hardened banker who had previously been an associate director of corporate lending at Investment Bank of Ireland and executive director of Woodchester Investments. McGreal’s speciality was risk, and his expertise would prove invaluable in a society that for decades had ignored the area. He would later confide in friends how shocked he was at the society’s reckless approach to lending, which would have eventually toppled it even if there had not been a global economic crisis. ‘How on earth was this ever allowed go on? What does that say about Ireland?’ he would later say privately.
After decades with a tiny board, for the first time the society was beginning to make proper use of its large boardroom table, though it was still in poor shape, given the scale of its problems. Around him Kitchen had the government-appointed directors, O’Ferrall and Kearns, as well as McGreal. Seán Carey, the former deputy city manager, was also still there. Representing the old regime was Stan Purcell.
‘The new board meetings were very constructive,’ a society insider recalled. ‘The public-interest directors were very good. It was always a struggle but deposits were good as they were spread across the branch network. Collectively [the board] all worked well together.’
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There were signs that the society was facing other troubles than NAMA. On 25 September, John Mara, son of the former government press secretary P. J. Mara, sold his house in Sandymount, Dublin, for more than €1.9 million. The sale was part of an attempt by Mara and his wife to clear their debt of €6 million to Irish Nationwide. In evidence submitted to Dublin Circuit Court that July it was revealed that this debt was 125 times their combined annual income.
Mara’s gradual engulfment in debt to the society revealed how badly things were turning out for the rich and influential who had once been courted by Fingleton. Mara had begun building a property empire by borrowing €2 million to buy a house in Heytesbury Lane, Ballsbridge. In 2006 he and his wife borrowed €2.98 million to buy the Sandymount house, on an interest roll-up basis for two years while they spent €1 million renovating it. The same year they met Fingleton and borrowed another €1½ million to buy a property in Croatia. This property too was on the block.
Irish Nationwide’s use of equity releases and its stacking of one loan on top of another was a repeated pattern in its residential loan book, which would later push small investors into depression, bankruptcy or emigration.
Even the best-connected were being pulled down by Irish Nationwide. For Fingleton, however, life continued as usual. On 10 October he was one of hundreds of mourners at the funeral of Father Aengus Finucane, former chief executive of Concern. Fingleton chatted to an Irish Independent reporter, Stephen O’Farrell, at the fringe of the ceremony at the Church of the Holy Spirit in Kimmage, Dublin. He praised his old friend, who, he said, he had stayed in touch with up until he died at the age of seventy-seven. ‘He was a gentleman, a great humanitarian and a great priest,’ he said. He also made a more unusual comment to the paper, that he could still ‘drop a couple of bombshells.’ He reversed tack immediately when pressed by the journalist: what he had said was ‘nonsense’ and ‘only a joke,’ he said.
Whatever it was, it was a strange comment to make to the media at this time. It was almost as if it was a shot across the bows to somebody.
Meanwhile Brian Lenihan was pressing ahead with a plan to gain con
trol of Irish Nationwide. He proposed amendments to the NAMA legislation that would give him a ‘special share’ in the society. This would give the right to appoint directors to the board and propose or veto motions. The legislation, which was winding its way through the Oireachtas, would mean that the minister could wind up the society, or do anything else he wanted, at five days’ notice to its members.
Lenihan was laying the groundwork for the state to take over the society outright. The society’s members, so many of whom had backed Fingleton to the hilt down the years, were being removed from its future.
Joan Burton claimed at the time that the state would need to put at least €1 billion into the society. This was not confirmed by Lenihan, but she was ahead of her time with this prediction, which would later turn out to be a serious underestimate.
There were heated daily debates in the Dáil on NAMA and the bank bail-out. On 13 October a Fine Gael TD, Paul Kehoe, made a comment about Fingleton during discussion of the NAMA Bill. Kehoe, who had legal immunity because his comments were made in the Dáil, compared the treatment of one of his constituents in Co. Wexford who faced losing his home with that of senior bankers. His comments stung Fingleton, who was furious that such comments had been made, which must only have reaffirmed his resolve not to be, as he saw it, ‘bullied by the state.’ On 21 October 2009 he wrote again to Kitchen.
Dear Danny,
I wish to acknowledge receipt of your letter of 6 October in reply to my letter of 25 September last.
Because the government reneged on their agreement with me through the actions of the Minister for Finance, the voluntary repayment of the €1m so called bonus is no longer discretionary. It is now a matter of principle for me.
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