Ireland: a unique country where conflicts of interest are a thing of the past?

“And now let’s have a word from the Adder Party candidate, Mr. S. Baldrick, who so far has not commented on his policies in this campaign, but with him is his election agent, Mr. E.  Blackadder. And now it’s time, I think, for a result, and tension is running very high here. Mr. Blackadder assures me that this will be the first honest vote ever in a rotten borough. And I think we all hope for a result which reflects the real needs of the constituency. And behind me…yes, I can just see the Returning Officer moving to the front of the platform. Er, the Acting Returning Officer, Mr. E. Blackadder, of course. And we’re all very grateful, indeed, that he stepped in at the last minute,  when the previous Returning Officer accidently brutally stabbed himself in the stomach while shaving. And now, finally, a word with the man who is at the centre of this bye-  election mystery: the voter himself. And his name is Mr. E. Bla–  Mr. Blackadder, *you* are the only voter in this rotten borough…?” Fictional conflict of interest demonstrating what happens when the election agent is the same as the returning officer is the same as the voter, an excerpt from Blackadder III

The above comical look at British politics in the 19th century is laughable to us today; the era that gave us “rotten boroughs” has faded away into history and we now expect a separation between a election candidate, the election structure and the constituency. But conflicts of interest are part-and-parcel of daily life – does not the teacher adopt a more sympathetic approach to the child of a friend or neighbour that attends their class, does not An Garda turn a blind eye to a minor infraction to another member of the force and does not the nurse give favourable treatment to a member of their own family. Such conflicts are unavoidable and it is accepted they exist in a minor way in everyday local life.

But what about national conflicts of interest?

 

Here’s the governor of the Central Bank of Ireland, Professor Patrick Honohan, a widely regarded man who must be the only boss in Irelandwho earns less than his deputy after Patrick volunteered a pay-cut and his deputy, Matthew Elderfield didn’t. Professor Patrick came to national public prominence in November 2010 when he announced to the nation that a deal with the IMF was imminent, an announcement he says was to prevent damaging speculative withdrawals of cash from our banking system but the Government was not happy, privately claiming his announcement undermined negotiations. And since then, the Governor has faced occasional questioning about his loyalties. He told an RTE radio programme that other than his role in voting on ECB interest rates every month, when his national loyalty is subordinated to supranational loyalty to the entire €10tn GDP, 300m population EuroZone, other than this, his loyalty is to the national cause. Which if correct is great news for Ireland because An Taoiseach Enda Kenny seems to be saying that Professor Honohan is leading Ireland’s negotiations with the ECB over the future of the promissory notes at IBRC. Taoiseach Kenny is reported to have said on Friday last that he has “every faith”in the Governor in his attempts to agree a deal with the ECB which will see the net present value of the cost of the promissory notes reduced. Except what does Professor Honohan do if ECB president Mario Draghi says “your primary duty is to the safeguarding of price stability in the EuroZone and any reduction in the cost of the promissory notes will constitute a permanent national increase in money supply, which in the interests of solidarity with the EuroZone cannot be tolerated”?

 

Blackstone, reputedly the largest asset management company in the world was revealed in February 2012 to be employed on a retention agreement basis to advise IBRC – the 100% state-owned entity formed from the merger of Anglo and Irish Nationwide Building Society. There is speculation that Blackstone is being paid €500,000 per month for its advisory services, focussed on the what to do with Anglo’s significant legacy loanbook – no wonder An Taoseach Enda Kenny and Minister for Finance, Michael Noonan held a private meeting with the Blackstone boss, Steve Schwarzman on 8th November 2011, but it is being denied that the retention agreement was in any way discussed at that meeting. But in itself, there’s nothing of any consequence in the relationship. Except it has now been confirmed by An Taoiseach that Blackstone may be bidding for Anglo’s legacy loanbook! Or to express it another way, a company to whom we pay substantial sums to examine Anglo’s loanbook may bid to buy said loanbook! No seriously!

 

Then there is the recent case of NAMA and Treasury Holdings, there is an Irish company which has recently played a major part in the fortunes of the Dublin-based property development company. It emerged in court affidavits in February 2012 that NAMA had engaged PwC to advise the Agency on two investment proposals which Treasury brought to NAMA hoping that either would help the group to survive. PwC looked over the proposals which were ultimately deemed by NAMA to be unacceptable; presumably PwC was of the same opinion. And following NAMA’s rejection of the plans, receivers were appointed to Treasury’s assets and one of the receivers was…..PwC! No seriously. So a company which had a hand in assessing an investment proposal was also the company which benefited from the rejection of those proposals!

 

Again speaking of Treasury Holdings, for many years the law firm engaged by Treasury was one of Dublin’s finest, McCann Fitzgerald, and indeed in court affidavits last month, it emerged that it was McCann Fitzgerald which had advised Treasury on its so-called “standstill agreement” with NAMA on 11th January 2012 – according to the Treasury managing director John Bruder in part two of his affidavit “on receipt of the initial demands on 11 January 2012, Treasury briefed McCann Fitzgerald and McCann Fitzgerald wrote to NAMA seeking a “standstill agreement” McCann Fitzgerald’s letter offering terms required a reply by 1.30pm on Wednesday 11 January 2012” . Again so far, so good. But on 3rd January, 2012 NAMA appointed four law firms to a panel which provides general legal advice to the Agency and one of those four firms was …. McCann Fitzgerald.

 

And lastly we have the hawkish NAMA chairman, Frank Daly who was appointed to the high profile chairmanship NAMA role in December 2009 and who has since boosted his profile in Irish public life as he has promoted and defended the Agency. NAMA is independent of State control and it is partly on that basis that its debt is kept off the national debt and the Agency is allowed operate under European Commission competition rules. Again so far, so good. But last Wednesday Frank was appointed to another role, the advisory board which reports to the Minister for Finance, Michael Noonan on the subject of ….. NAMA! So on one hand, Frank is the chairman of NAMA an organisation independent of government and on the other hand he is a member of a body which is accountable to the Minister for Finance! Frank has full access to information, including confidential information, in NAMA and should his views conflict with the NAMA board, then he can always go and have a whine to the NAMA advisory board which will get the ear of the Minister.

Everyday local minor conflicts of interest are inevitable in life, but why do we accept on a national basis, situations such as those described above which have the potential to undermine the objectives of state-owned companies. There is no suggestion of any malfeasance by the companies and individuals above, and in general companies claim that they put so-called Chinese Walls in place when there is a potential conflict of interest. How do individuals handle these conflicts of interest? Difficult to say, judging by the Irish Times photograph of Frank Daly below, maybe they change their hair or attire! But is Ireland so small and the rewards on offer so minute that the same organisations and individuals time-and-again crop up in different roles which have the potential for conflicts of interest? To many, these situations are as comical as the out-and-out 19th century political corruption lampooned in Blackadder.