Davy crisis deepens 'to risk reputation of State'

Scandal blew up after the firm was fined €4.1m for its failure to supervise a group of 16 of its employees in their 2014 profiting from personal dealings in the sale of Anglo Irish bank bonds
Davy crisis deepens 'to risk reputation of State'

The Government and the NTMA risk bringing the State into disrepute a decade after the international bailout, if they allow scandal-ridden stockbroker Davy to participate in a sale of Irish sovereign bonds this week, leading corporate governance experts have warned. Picture: Sam Boal/RollingNews.ie

The Government and the National Treasury Management Agency (NTMA) risk bringing the State into disrepute a decade after the international bailout, if they allow scandal-ridden stockbroker Davy to participate in a sale of Irish sovereign bonds this week, leading corporate governance experts have warned.

The scandal involving Davy, Ireland’s largest stockbroker, blew up after the firm was fined €4.1m for its failure to supervise a group of 16 of its own employees — including senior personnel and key management owners — in their 2014 profiting from personal dealings in the sale of Anglo Irish bank bonds.

It has now developed into a full-scale political crisis amid calls for all of Davy’s boom-and-bust time dealings over the past 15 years to be investigated thoroughly.

The Central Bank investigation criticised the lack of “candour” by Davy when it first started asking questions six years ago.

A half-hearted apology by Davy last week only fuelled the row and led on Saturday to the resignation and early departure of a trio of senior personnel, including chief executive Brian McKiernan, and Kyran McLaughlin as a non-executive director and deputy chairman.

But the Government and the NTMA are now under intense scrutiny over whether Davy should be allowed access by the State to the lucrative €1bn-plus sale of Irish sovereign bonds later on Thursday.

Davy's role as one of a handful of so-called primary dealers nominated by the Government to participate in auctions of Irish sovereign bonds — a way for governments to raise money in addition to taxation — means that despite the scandal, it is still effectively acting as a representative of the State around the world.

Niamh Brennan, the University College Dublin professor who focuses on corporate governance issues, said the NTMA will not want to become “contaminated” by the scandal and will need to put the broker into quarantine. 

She said the trio of resignations on Saturday was “one first step” but that the Davy board has many questions to answer.

“Why the board didn’t act sooner and the damage done by Davy by not acting sooner as they brazened it out, and the board was allowing it to happen, does raise questions,” she told the Irish Examiner.

She said politicians will be asking who benefited from the 2014 Anglo Irish bank bond sale, beyond the group of 16, and whether there were other staff at Davy “who do not know the difference between right and wrong”.

John McGuinness, the Fianna Fáil chair of the Oireachtas finance committee, said the Davy controversy goes beyond the 2014 transaction and reopens the focus on its involvement in boom-and-bust-deal-making, including in the Dublin Docklands. 

He said that any investigation will go beyond the remit of his committee and other agencies will need to get involved.

Mr McGuinness also said the NTMA will have to cut its relationship with Davy, while the group of 16 will have to explain “what happened and whether it ever happened before”.

Edgar Morgenroth, professor at DCU Business School, said there was “a real question of whether the NTMA should have anything to do with Davy”.

Davy chairman John Corrigan, a former chief executive at the NTMA, is now at the centre of decision making with its dealings with the NTMA. 

Davy on Saturday named its deputy chief executive Bernard Byrne, a former AIB chief executive, as interim CEO.

An NTMA spokesman said last night it “notes the very serious findings by the Central Bank”.

“The NTMA is monitoring the situation and awaits the company’s response to the Central Bank findings,” he said.

Asked whether Davy should unilaterally withdraw from Thursday’s auction, a spokesman for Davy said it could not comment on client matters.

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