Siteserv is Busted

April 25, 2015

Mr Dukes on the Business programme RTE Saturday 25.04.15 was expressing anger that Dept of Finance officials had amplesideways
opportunity on a monthly basis to express any concerns they had re the Sitserv sell off by IBRC.

It has emerged recently that Dept of Finance officials had grave concerns re the fire sale sell off of Siteserv to Dennis O Brien. Eight companies had expressed interest in the sale. This was whittled down by IBRC to three.

Better late than never!

According to Dukes, there was a history of conflict between Finance and IBRC based on distinction between day-to-day running of a programme of deleveraging sell off of IBRC assets to yield maximum return to the state and ‘overall policy’ informing such sales.

This blog has highlighted on many occasions re the banking inquiry: it has largely become compromised due to its remit of confinement to the latter concentration on policy alone, rather than  minute investigation of key transactions, each witness before the inquiry sings their own song of rueful abstract meaninglessness.

Dept of Finance officials had many concerns related to the specific details recording the sale of Siteserv.

Dukes was unhappy that DoF officials wanted to engage at the level of control related to ongoing day-to-day management of this transaction.

Siteserv was sold to Denis O’Brien-owned Millington by the Irish Bank Resolution Corporation (IBRC, formerly Anglo Irish Bank) in 2012 for €45 million.

Siteserv provides a wide range of services to public and private companies, such as scaffolding for construction projects and the installation of satellite TV boxes.

Businessman Denis O’Brien took possession of the company that won the contract to install meters for Irish Water.

One of the points a full independent inquiry could investigate, is whether Siteserv knew in advance of the likelihood or not of the awarding of such contracts.

IBRC had given Siteserv a loan of €150 million, meaning the bank wrote off €105 million and the State got back less than €45 million. At the same time, shareholders were paid €5 million.

According to Walter Hobbs (  ):

“Walter Hobbs says the initial bid from Denis O’Brien was the highest, while others had multiple terms and conditions”

Ignoring the claims by Mr Hobbs let’s not suspend our disbelief and follow his view that the €45ml on the table by Millington, an O’Brien subsidiary, was the best offer and that failing to accept it risked the taxpayer getting nothing back.

Any estate agent worth his salt would delight in eight companies interested in a house for sale. Incredibly, Hobbs who was managing the sale:

“He said he believed the higher bid that came in from the French company Altrad was designed to disrupt the bidding process, because of competitive concerns that the company had.

Mr Hobbs said initially the bid from Denis O’Brien was the highest and was accompanied by a three-page letter, while other offers had multiple terms and conditions attached to them.”

Let’s set the scene for this Jacobean farce.

By now you may have questioned my analogy to a sale of a house by an estate agent. You know those in negative equity in dispute with banks do not get similar write downs and kickbacks when the sale of their house goes through.

Instead they are likely to suffer eviction and have their assets seized. Not so these shareholders.

These companies were sold in a loosely regulatory business friendly and taxpayer hostile world.

Extraordinary powers were exercised by Hobbs and his team making judgement calls when no interference should have been allowed to steam roll potential bidders off the scene .

Rules of engagement mean different strokes for such folks:

Hobbs had a remit of returning to the taxpayer as much of the €150 ml loan losses incurred by IBRC in its lending to Siteserv.

In this farce  eight interested parties appeared on stage and immediately  5 sent packing.

Dubiously Hobbs notes:
“Mr Hobbs said a number of other bidders were excluded because of the nature of the Siteserv business.”

Firewalls can be put in place if a company requests specific information and withdraws because it has not acquired that information.

It should have been a company decision to withdraw, not Mr Hobbs’ decision.

The absurd idea that Mr Hobbs should decide to exclude interested parties based on his biased preferences, is anathema to best practice and should be considered grounds for investigation.

The irony is the above is standard business practice. Its as anathema as gazumping meaning there is one rule book for Joe citizen, another for cosy insiders.

It gets more absurd: “He said he believed the higher bid that came in from the French company Altrad was designed to disrupt the bidding process, because of competitive concerns that the company had.”

There is enough prima facia evidence to contradict Hobbs and  believe the opposite: that Hobbs feared Altrad was disruptive of Hobbs bid to accept a lower offer from Millington.

Let’s set the scene for what should have happened:

1. All bidders should have been invited to bid at auction with a reasonable time ceiling of eg weeks/months to conclude a deal.

2. All bidders should have been made aware of each other’s bids.

3. All bidders should have been allowed to raise their stake to compete for the sale.

4. A contract of sale should have been awarded to the highest bidder subject to the lodgement of payment.

5. All bidders should have similar information with agreed protocols on information/data sent to bidders.

6. All documents and video evidence related to the above should have been logged and minuted and made available to Dept Finance in exercise of due diligence on behalf of taxpayers.

Are there other matters that should concern a proper independent investigation of Siteserv sell off by IBRC?

Davy Stockbrokers and Arthur Cox solicitors acted for both sides.

Dare you imagine there could be a conflict of interest here? Forget about Chinese Walls for a moment.

Let’s just consider the fact that IBRC and Millington, O’Brien’s company, were aware that their firms acted for both sides.

There could be a tendency there to maximise profit for the legal side and the broker side, to keep the deal inhouse so to speak?

Where incompetence ends and malpractice begins is a matter for investigators. Other questions need to be raised and further investigated independently in a process not hobbled and compromised by conflicts of interest.

There are lessons to be learned. Alarming business practices are accepted as normal. They feather the beds of an elite insider group who want to play the game inhouse.

These business practices, none the least in the manner the way affairs relating to the disposal of taxpayer assets, need reappraisal and change.

Perhaps taxpayers through DoF need to hire special units with expertise in white-collar crime with powers to oversee and investigate day-to-day business of a dubious kind.

Were these sales rushed, was the bottom line getting a sale in a given period over maximising profit in itself a gift to incompetence over expertise. Or was malpractice involved?

Should different protocols regarding sale of such assets be followed in the future?

Should there be a cooling off period of 5-10yrs before ex politicians are allowed to pursue further careers in banking?

Was undue haste the prime motivator behind such sell-offs with Dukes extolling the virtues of successful completion of all sales by 2016-2018.

Such matters need to be investigated in an open and impartial manner by special investigators hired by Dept of Finance to exercise expertise and due prudence on behalf of taxpayers.

The wild west of loose business practices and cosy cartel banking needs to be brought to heel by DoF on behalf of all taxpayers.

This was a rigged game with flawed and broken rules perpetuated by a cosy cartel of insiders feathering their own nests.

No change there.

till again


One Response to “Siteserv is Busted”

  1. mike coll said

    this country needs a revolution. The ordinary citizens of this country are being robbed of everything they have everyday of the week and we are told that it’s the law??? Something is seriously wrong with the whole system and worse; people believe it is the law.

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