China deals difficult to explain

Friday, June 15, 2012

The shock resignation of Michael O’Hagan from HRI comes after his courting of Chinese investors, writes Investigative Correspondent Conor Ryan

UNTIL Monday Michael O’Hagan had a key role in reconstructing the Irish thoroughbred industry. The market here has been overstocked since the recession. The boomtime reliance on builders and bankers to invest in racehorses has seen domestic demand collapse.

Attracting international money has been seen as critical to the industry’s recovery. It is hoped the professionalism and reputation of our breeding industry will offer enough capital to lever access to expanding markets.

Individual stud farms do their own promotion. But in terms of selling the country, the man with responsibility for the brand was Mr O’Hagan.

The 51-year-old from Fethard, Co Tipperary, was, until his shock resignation, the chief executive of the subsidiary of Horse Racing Ireland, Irish Thoroughbred Marketing (ITM).

Reflecting his success, Mr O’Hagan was promoted to become HRI’s director of international affairs and its director of communications at the end of May. This promotion came despite a cloud hanging over his dealings. The HRI believed this had passed.

Four months earlier, he was the subject of a disciplinary inquiry because of a breach of ethics involving clients ITM brought over to look at Irish racehorses. The concern related to Chinese buyers.

In February an anonymous letter to the HRI warned it Mr O’Hagan’s wife, Josephine O’Hagan from the Tipperary Tack shop in Fethard, was operating as a “China Ireland” bloodstock consultant.

The correspondence said she had been involved in organising deals where Chinese buyers, entertained by her husband’s operation, bought show jumping horses.

The HRI held its inquiry and found it had been a serious breach of ethics and of its code of conduct. It believed the practice stopped. And it went on to promote Mr O’Hagan to an even more strategic international role.

But last week it became aware of at least one other deal. This was completed in March and saw an Irish show-jumper sold to a Chinese client through Ms O’Hagan. A second disciplinary process commenced but Mr O’Hagan opted to resign.

The Chinese market has been a particularly sensitive area. In 2011 ITM paid to accommodate 39 buyers from China. Hotels, entertainment, and meals cost €16,176 and the clients stayed for about four days.

There was €10,400 used on “travel assistance” for these purchasers. Mini-bus hire cost €2,206 and the cost of flights for an interpreter came to €5,371. This did not include over €15,000 spent sending Mr O’Hagan and other staff to China to build links.

These spending details were obtained under the Freedom of Information Act (FoI).

Earlier this year, the Irish Examiner also sought details on dealings with third-party consultants who were used to find horses. This request was sent in before Mr O’Hagan and another member of staff joined a trade delegation led by Simon Coveney, the agriculture minister, to China in April.

This was designed to strengthen contacts for Irish agriculture. The equine industry enjoyed particular attention during the visit. A €38m deal was announced that should see Coolmore help stock a new racing city in Tianjin, south of Beijing.

By this stage, the department had been made aware of the first disciplinary inquiry set up to investigate Mr O’Hagan’s links to private sales to China. It was also told about the adverse findings. However, Mr O’Hagan still travelled on Mr Coveney’s shoulder as the representative for marketing the Irish industry.

On May 22, HRI refused to release the details of ITM’s communications with third-party consultants. It said this was commercially sensitive because Ireland was in competition for business in China.

“It is not appropriate to release such material at this time, where the Chinese market is being developed by ITM with similar other private and foreign governmental organisations carrying out such similar market development,” it said.

However, it did release the broad details on the spending it authorised on capturing the Chinese market.

This showed how important the Chinese market had become. The 2010 costs for the China project were €12,757. No clients were paid for. The overall bill jumped to €49,594 in 2011.

As the FoI request was not released in full, it is not known how many separate sales of sport horses were arranged through Ms O’Hagan.

For Irish breeders, the Chinese market has been difficult. There is no culture for racing horses outside Hong Kong and gambling on racing has been illegal. This meant horse owners had a greater affinity to show jumpers (sport horses) rather than racehorses (thoroughbreds).

Mr O’Hagan defended the deals involving his wife’s consultancy. He said any buyer who bought a show jumping sport horse during an ITM visit had also purchased a thoroughbred — which was the function of ITM.

He explained that during visits, buyers could request a lot of additional support and, if it made their trip easier, this was facilitated.

Mr O’Hagan said his wife had been involved in the equine industry and show-jumping for a number of years.

And he had left his post to pursue business interests. He said the travelling involved in his work took its toll.

However, as the Irish horse industry works to court the Chinese, the suggestion that its principal liaison was involved in a serious conflict of interest during the trips will be difficult to explain away.

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