Govt paid consultants €34m for advice on banking crisis

Govt paid consultants €34m for advice on banking crisis

Consultants were handed €34m to advise the Government and State agencies on the banking bailouts, it was revealed today.

But despite the hugely lucrative contracts, there are no detailed receipts of work provided by top legal and accounting firms as well as some of the biggest names in global finance.

Officials told the State’s public spending watchdog the consultants were not asked to vouch for their costs because of the urgency of the crisis.

A report by Comptroller and Auditor General (C&AG) John Buckley shows the Department of Finance alone paid Arthur Cox Solicitors €9.7m up to July this year for advice on the banking fiasco.

The law firm got another €1.95m in consultancy fees to help out the National Pension Reserve Fund Commission (NPRFC).

Investment bankers Merrill Lynch made €7.3m in one of the fixed fee arrangements with the National Treasury Management Agency (NTMA), which is responsible for managing the national debt.

The NTMA also paid international financial advisers Rothschild €4.5m for help.

Accounting giant PricewaterhouseCoopers made around €6.6m for giving advice to the Central Bank, the Department of Finance and the NPRFC.

Other major consultancy firms to benefit were KPMG (€2m), Jones Lang LaSalle (€840,000), Deloittes (€420,000) and Ernst and Young (€240,000) – all for advising the Central Bank on the banking guarantee scheme.

Sir Andrew Large, a former deputy governor of the Bank of England, was paid €120,000 to be a “trusted adviser” to the NPRFC.

The report into public spending revealed that Sir Andrew, PricewaterhouseCoopers and Arthur Cox were hand-picked to give advice on investing in Bank of Ireland and Allied Irish Banks.

Normally State agencies have to go through a transparent tender process.

Fixed fee arrangements with Merrill Lynch and Rothschilds did not require them to provide details of any work carried out, according to the official report.

Mr Buckley asked for a specific breakdown of the charges but was told by an NTMA accounting officer that “time was of the essence” and the urgency of the crisis meant normal procedures could not be followed.

The report found the highly technical issues thrown up by the near banking meltdown and the urgency of the situation required specialist outside legal, financial and economic advisers.

While €33.76m was poured into consultancy services up to the end of July, this does not include fees paid by banks and lenders themselves on the direction of the Department of Finance or Central Bank.

Mr Buckley said there were also “significant internal costs” in relation to staff who helped draw up the banking bailout plan.

The Department of Finance has so far recovered around €3.3m from lenders covered by the €440bn banking guarantee scheme, the report stated.

Mr Buckley insisted the administrative cost to the State was small compared to the risks involved.

“Access to timely and professional advice is a vital input to decision making in this context,” he said.

“At the same time, it is important to ensure that sound procurement and contracting practices are followed to ensure that the expenses being incurred are no more than is warranted in the circumstances.”

Fine Gael’s finance spokesman Michael Noonan said the costly advice could have paid for more than 100 hospital beds for a year.

“This huge sum spent on financial advice represents appalling value for money. The advice received was either ignored, or was woefully misguided,” he said.

Mr Noonan said there were also serious concerns over the lack of tendering procedures and a potential conflict of interest by consultants who advise State agencies as well as banks.

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