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Archive for September 17th, 2012

There has been speculation “on the street” for over a month about the imminent appointment of receivers to the Clery’’s department store on O’Connell Street and this evening RTE reports that a receiver has indeed been appointed to the company, Guiney and Company Limited, which owns the iconic department store on O’Connell Street.

RTE reports the receivers saying that the store will remain open and it “will be business as usual” but the industry has been that a receivership will allow Clery’s to give notice to the various concessions which operate in the store.

Clery’s has had a long and chequered history, including a period in which it was owned by notorious Dublin businessman William Martin Murphy. It has been in the Guiney family since 1941, survived recessions in the 1950s and 1980s but overplayed its hand in the 2000s when it got into the property development game.

It is believed that the store will now be sold to a Boston investment company called Gordon Brothers. Bank of Ireland is the main banker to Clery’s and it is likely to see a 50% writedown on its loans from the deal. Although we nominally own 15% of Bank of Ireland, we also own €1.5bn of preference shares which if converted to ordinary shares would mean the State owns Bank of Ireland. So it is you and I that lose out from this business collapse, but arguably we incurred the loss when the bottom fell out of the property market. Although Clery’s had property development loans from a NAMA Participating Institution, it is understood that the loans were never acquired by NAMA.

In addition to the receivership at Clery’s, RTE reports that liquidators have been appointed to the  Guineys in Dublin city, Leopardstown and Naas which will result in the loss of 29 jobs.

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“The Irish welfare system does not differentiate significantly between social insurance and social assistance, or between contributory and non-contributory state pensions. Accordingly, PRSI contributions do not bear a strong link to welfare benefits, so that it is acceptable to combine (employee) PRSI with income tax and USC when looking at personal income taxation in Ireland.” IMF “Selected Issues” September 2012

It looks increasingly likely that Pay Related Social Insurance (PRSI) will feature in the Budget 2013 announcements in three months time. Today, the Minister for Social Protection Joan Burton launched a previously-leaked review of the so-called “Social Insurance Fund” for 2010 and her accompanying comments provided a strong enough gust to sustain the PRSI kite-flying.

The 167-page KPMG actuarial review of the Fund in 2010 is available here, it was completed on 7th June, 2012 – the flying of this particular kite has all the hallmarks of being a long-planned venture!

The Fund was set up in 1953 and if you believe the Minister, it is supposed to be a self-balancing fund whose income from PRSI payments by workers is offset by spending on pensions and a number of other benefits including statutory redundancy, maternity benefit, carers benefit, illness benefit and jobseekers benefit but notably it was not intended to cover jobseekers allowance.

It seems likely that Minister Burton will justify either an increase in PRSI or reduction in payments from the fund, or both, on the basis that the fund is in deficit. The annual deficit was €2.6bn in 2010, and according to Minister Burton is provisionally estimated at €1.5bn in 2011.

We know we need find a €3.5bn annual adjustment somehow in 2013, but it is important to remember that Minister Burton’s positioning is no more than window-dressing to justify what is essentially a misdirection – the only true objective is that Ireland must balance its books overall. How we manage components of income and expenditure is for ourselves to determine. Artificially hypothecating income and expenditure – for example when Minister Hogan says that all of a sudden, the Household Charge must equal a certain share of Local Authority spending – is hokum.

Even KPMG itself concedes that within the Fund there is no hypothecation of receipts with expenditure, it’s one giant mixing bowl. But more accurately, our national income is one giant mixing bowl and if, for example, we suddenly decide that the carers allowance should have a higher priority than ministerial pay, we can just cut ministerial pay and re-allocate that money to the carers allowance.

The IMF recently concluded that in Ireland, PRSI is really just part of the big pot of income taxes along with the Universal Social Charge, and it should properly be regarded as part of our tax rate. This view will be offensive to Minister Burton who is constrained by the Programme for Government commitment not to raise income tax rates. No doubt, Minister Burton will be hoping her positioning on PRSI will assist her in justifying adjustments to PRSI or the benefits that it pays.

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After the furore over NAMA’s off-market sales in county Cork and after the off-market purchase of a NAMA debtor’s property by then-NAMA employee Enda Farrell, perhaps we should be pleased that one of NAMA’s properties is in fact being offered for sale on the open market where there might be some reassurance from the transparency of open advertising and tenders. Yet it seems even here there are pitfalls.

A property bought by a consortium led by 68-year old Paddy Kelly (pictured above) in Sarasota, Florida was apparently advertised for sale by a local estate agent – or “realtor” in American. But the realtor did so without the permission of NAMA which now controls the loans originally extended by Anglo. The Herald Tribune newspaper in Florida reports that a realtor called Florida Growth Realty had advertised the property for sale but withdrew the listing when contacted by the Tribune.

The property in Florida (indicated above) is subject to at least one legal action. In September 2011, it was reported that a Florida developer, Mark Famiglio was suing NAMA because he claimed he had an agreement to buy the property. That action appears not to have been resolved yet. It has also now emerged that a company incorporated in the British Virgin Islands called Bussoleno Limited has come on the scene claiming that the Paddy Kelly consortium owes it USD 10m from an unrecorded mortgage on the property, an alleged mortgage which pre-dates the Anglo loan to the consortium.

According to the Tribune, NAMA has retained a realtor called HFF to deal with the property, so it may come on the open market yet.

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Last week was a bad one for NAMA as it was revealed that an internal investigation by the Agency led to the uncovering of what was alleged to be a breach of its security with confidential details of loans being leaked by a former employee. NAMA has sued the employee, Enda Farrell and his wife Alice Kramer, it has also referred the matter to the Gardai and to the Data Protection Commissioner Billy Hawkes who incidentally is not commenting on the matter. NAMA is not commenting further on the matter saying it is sub judice and indeed it has been fast-tracked to the Commercial Court division of the High Court for hearing. It remains unclear what NAMA is doing to minimise the commercial impact of the alleged leak, which has the potential to cost the Agency and its stakeholders a lot of money.

A bad week for NAMA, but then yesterday, Ireland’s most-read (still) Sunday newspaper insinuates that earlier this year when challenged with a list of 60 questions, NAMA responded by reporting the newspaper to the Press Ombudsman. Yes, that’s what Brendan O’Connor insinuates in yesterday’s Sunday Independent, that the Sindo submitted a written list of 60 questions to the Agency in May and lo and behold, what did NAMA do, but complained of a separate matter involving the Sindo to the Press Ombudsman. We don’t have a list of the Sindo’s 60 questions but with such a volume of buckshot it is no surprise that some of the questions touched on the transparency and probity of NAMA’s dealings, something that is now set to take centre-stage as the Enda Farrell court case plays out.

To be clear when the word “insinuate” is used here, it is acknowledged that Brendan O’Connor writes in an introduction to a paragraph “Let me stress that the previous piece being brought to the Ombudsman was not connected in any way to the serving of the 60 questions on NAMA” but then goes on to write “It just all happened at the same time. So get the picture clear in your head before we go on. NAMA is arguing with us about an article. We, as part of our ongoing campaign to find out more, on your behalf, about this State agency, ask it a comprehensive list of questions for another article. NAMA refuses to answer even one of the questions and in and around the same time tells us that it is bringing the previous matter to the Press Ombudsman. The questions were about stuff like probity and NAMA staff’s potential conflicts of interest, among other things”

He goes on to write about “other odd behaviour from NAMA”. So it was “odd” that NAMA would make a complaint to the Press Ombudsman? Or it was “odd” that NAMA would make the complaint at that time? The article leaves open the suggestion that NAMA has abused the press complaint system by making a complaint to suppress or silence a newspaper from going about its business.

As for the NAMA complaint to the Press Ombudsman, NAMA is not commenting save to say its dealings with the Ombudsman are confidential. Not so the Sindo which has reported on the complaint at least twice, once by Ronald Quinlan and yesterday by Brendan O’Connor. What was the nature of the complaint and what article – Brendan O’Connor refers to a single “article” yesterday – was complained about? We don’t know but we do know that NAMA was unusually upset at reporting in the Sindo in February 2012 that it had jeopardised 230 jobs at a Google facility in Dublin. NAMA took the unusual step of issuing a press statement the next day in which it said “This story is completely inaccurate and misleading. NAMA wishes to state that no effort was made by the Sunday Independent to check the allegations being made with NAMA through its Press Office before the story was published and no opportunity was afforded the Agency to reject the allegations being made.”

If this was indeed the “article” then a timeline of publication in February, an informal complaint to the Sunday Independent in February/March and exchanges to resolve the matter in March/April followed by a conclusion in May that NAMA was not going to get satisfaction from the newspaper resulting in a complaint to the Press Ombudsman in May hardly makes the timing “odd” Trying to cack-handedly connect the 60 questions with the suggestion of a retaliation by NAMA to the Sindo’s valiant attempts to bring transparency to the Agency’s operations, and then trying to capitalise on the incident as somehow usurping the scoop at the Sunday Times in which the original Enda Farrell story of his purchase of a NAMA property was uncovered, stinks of the worst goal-hanging excesses of lazy journalism.

UPDATE: 17th September, 2012. It has been pointed out that there is generally a maximum three-month window between an article being published and a complaint being made to the Press Ombudsman John Horgan, which if the original article at issue was indeed the Sindo story in February 2012 would mean the deadline for making a complaint would expire in….. May 2012!

UPDATE: 17th September, 2012. A credible source has said that the article complained of by NAMA to the Press Ombudsman was NOT the Ronald Quinlan article on Google or indeed any other article by journalist Ronald Quinlan.

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