A report into the sale of Siteserv to a company controlled by Denis O'Brien has found Siteserv's decision to offer the businessman exclusivity on the deal in February 2012 was "tainted by impropriety" from the perspective of the Irish Bank Resolution Corporation (IBRC).
The report by the Commission of Investigation into IBRC found the decision to grant Mr O'Brien exclusivity was made "without even considering whether to contact Anchorage, the other leading bidder...before granting exclusivity to Mr O'Brien".
It found the decision favoured Mr O'Brien as exclusivity "conferred on him a significant advantage over the other bidders seeking to acquire the Siteserv Group".
The 1,500-page report said that the chairman of the sale sub-committee in Siteserv, Robert Dix, played a vital role in the decision to grant exclusivity to Mr O'Brien.
It says this decision was "not reasonable" from the point of view of IBRC bank.
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The report found that Robert Dix "gave false, misleading and untruthful evidence in sworn affidavits" to the Commission of Investigation.
His relationship with Denis O'Brien and the fact they both spent a weekend together in San Moritz in Switzerland during the sales process "would, if known at the time, have given rise to the perception on the part of reasonable, objective person that Mr Dix was not impartial in his role of chairman of the sale sub-committee".
However, the report found Mr O'Brien was not at fault in going on the trip with Mr Dix and there is no evidence they discussed the Siteserv sale.
The report found by not considering a higher offer by Anchorage that Siteserv had shut out IBRC from considering the Anchorage offer.
In an overall assessment, the commission concludes that IBRC executives worked "honestly and diligently" throughout the Siteserv transaction to protect the interests of the bank.
The commission said it accepted the evidence and rejected any allegation that Mr O'Brien had been provided with a favourable interest rate from the bank.
It also found no evidence of an improper or unduly close relationship between Mr O'Brien and senior IBRC executives.
Read the report in full here.
Siteserv deal - what was the controversy about?
The commission was established to investigate the 2012 sale of building services group Siteserv to Millington, a company controlled by businessman Denis O'Brien.
Led by Mr Justice Brian Cregan, the inquiry was set up in 2015 to assess whether the transaction was "commercially sound".
The €45m sale came as the State-owned IBRC, formerly known as Anglo Irish Bank, wrote off €119m of the €150m which Siteserv owed.
The commission concluded that the bank made its decision to approve the sale of the Siteserv Group to Mr O'Brien in good faith, but based on "misleading and incomplete information provided to it by the Company".
The report was critical of the role played in the deal by Siteserv co-founder and CEO at the time of the transaction, Brian Harvey.
"The commission has also determined that it can be concluded from the matters set out above that the Siteserv transaction was, from the perspective of the Bank, so tainted by impropriety and – in respect of Mr Harvey’s concealment of his material interest in Mr O’Brien’s bid – wrongdoing, that the transaction was not commercially sound," the report said.
It added that the transaction was not conducted in a manner that was reasonable from the perspective of the bank, that the decisions made and actions taken in the course of the transaction were not reasonable from the perspective of the bank and the outcome of the transaction was not reasonable from the perspective of the bank.
"In the light of all the matters set out above, the commission finds that it can be concluded that the Siteserv transaction was not commercially sound in respect of the manner in which it was conducted, the decisions made and the outcomes achieved," the report said.
'Two parallel processes during Siteserv sale process'
The report also concludes that it is clear from the evidence that there were two parallel processes during the Siteserv sale process – an above the surface process organised by the company and the "below the surface" process where certain events occurred without the knowledge of the bank.
"This 'below the surface’ process meant that steps were taken and decisions made…in the course of the Siteserv sale process in a manner that was manifestly improper and which undermined the integrity of the Siteserv sale process," the commission concluded.
The commission said its view is that IBRC could have received up to a further €8.7 million in repayment of the loans due to it from Siteserv if the transaction had been commercially sound.
It also found that based on the evidence, the terms of reference of IBRC’s risk and compliance committee were fit for purpose, while the bank’s credit policy was also generally fit for purpose.
It also found that the bank’s credit policy was generally complied with in relation to the Siteserv loan and transaction.
The inquiry also concluded that the procedures and controls that were operated by IBRC at the time in relation to the Siteserv transaction were fit for purpose.
"In particular, the Credit Committee was well designed and had an appropriate level of decision-making authority," it said.
"The processes, procedures and controls that were applicable to the Siteserv loan and transaction were adhered to in all material respects except that the Credit Committee failed to pursue its own request for further information on the proposed payment to shareholders of €5 million, and recommended the transaction for approval without any such additional information."
It added that the bank’s failure to address this proposed payment to shareholders contributed to IBRC recovering between €0.7 million and €2.1 million less than it might otherwise have received from the proceeds of the Siteserv sale.
Review of how interest rates set
The Siteserv Commission was also asked to review how interest rates were set at IBRC over the period from January 2009 to early February 2013.
The commission found there were no specific policies or principles when it came to setting rates on loans to customers over this period. It said it did not work like a retail bank where a general rate was set and given to customers.
The loan rates applied were proposed by the lending team in charge of particular customer loans. This was usually an amount added to the bank’s cost of funds, which is what it cost the bank to raise funds at any given time.
The proposed rates were submitted to the bank’s Credit Committee, which had the power to approve or reject the rates.
'Elaborate and entirely opaque charade of trusts'
The Commission found that Siteserv co-founders Niall McFadden and Brian Harvey "orchestrated an elaborate and entirely opaque charade of trusts, trusts upon trusts, offshore companies, fictitious agreements, false letters and false backdating of documents" in order to conceal the income and assets that they acquired as part of the transaction from their creditor IBRC at all times.
They also did not disclose this income or these assets to Revenue, according to the Commission.
The Commission said neither Mr Harvey nor Mrs Harvey paid any tax on the capital gain on the sale of the 500 shares in Siteserv Holdings for €2.3 million.
It said these are matters for the Revenue Commissioners to investigate.
The Commission also recommended that the Revenue Commissioners should investigate various matters relating to Mr McFadden and Mr Harvey and companies including Boundary Equity Holdings Limited, Mine Developments Limited, Cathkin Holdings Limited and Cathkin Investments Limited.
It investigated matters relating to Mr Harvey's and Mr McFadden's shares in Mr O'Brien's new company as well as Mr Harvey's exit package, the backdating of his employment agreement and the circumstances around a €780,000 loan.
It said Mr Harvey's bonus and earn-in shares and Mr McFadden’s Finder’s Fee should also be examined.
It makes various recommendations that the official assignee and the Office of the Director of Corporate Enforcement or its successor should investigate matters raised in the report, adding special liquidators of the IBRC should seek legal advice.
'No basis' for Dáil remarks
In a statement, Denis O'Brien criticised remarks made about him by Social Democrats TD Catherine Murphy in the Dáil in the wake of the transaction.
The statements sparked political controversy which partly led to the investigation led by Judge Brian Cregan.
He said today's report showed there was no basis for her remarks.
But today, Deputy Murphy said she had been vindicated.
She said the report showed there was "catalogue" of issues which showed the sale process "was undermined from the very beginning".
Publishing the report, the Government said it accepts the findings of the commission, which it said "shines a light on unacceptable practices by certain parties during the course of the transaction".
Additional reporting: David Murphy, Will Goodbody, Robert Shortt, Cillian Sherlock, Dimitri O'Donnell
