The former chairman of the disability agency, Hamilton Goulding, defended the decision, saying that while it was “not just uncomfortable, but horrible” for the directors, they could not live outside contract law.
As the HSE continues its search for information, sources said key documentation central to the issue, including agreements on pay, cannot be located.
While they expect Mr Kiely cannot be compelled to give back any of the pension, it is possible the directors could be held personally liable for the deal if it does not stand up to scrutiny on company law and rules of best practice.
Mr Goulding said he could not comment on reports that Mr Kiely is not inclined to give back the money, but said: “My belief is that it would be a very good gesture for him to do so and that it’s really a matter for him rather than me.”
He told This Week on RTÉ radio: “I can’t pre-empt his decision, but if I were in his shoes I think, at some stage and at some level, it would be a good thing for him to do.”
Mr Goulding — whose mother established CRC — said overall costs of senior management had been brought down and “the last piece of the jigsaw was to get Paul Kiely’s salary out of the way and off the books”.
It was discussed twice at the board that his salary was “excessive”, but “there seemed to be no way to get out of the fact that we were contractually and legally obliged by his employment contract”.
Mr Goulding said he had “reasonably cordial” private discussions with Mr Kiely on the issue, in which the latter agreed he would leave if it was in the best interest of the CRC. Mr Goulding claimed this move in fact saved the CRC money.
“The board then has to think, how do we reach a settlement that is fair to him. The idea of giving someone €700,000 was not just uncomfortable, it was horrible. But we can’t jump outside the framework in which we live, the structures and the law.
“It was very uncomfortable that this has to happen. But the legal framework that we are in — in our opinion, and in the opinion of experts who were on the board, who are people of great experience and expertise — led us to the situation that our best decision for the clinic was: Yes, we don’t like it, [but if] we pay this money, get the man out, we make a big saving.”
It is understood the HSE has found no evidence to suggest any outside legal advice was sought.
“Did we pull a number out of the sky for Paul Kiely? No, we didn’t,” said Mr Goulding. “We said, what is a reasonable model to choose for this amount of money?”
He said it was decided to base the payout on the voluntary early retirement scheme the HSE had previously run.
Meanwhile, HSE sources have disputed Mr Goulding’s claim on RTÉ that the HSE was happy to pay Mr Kiely’s salary until 2009. Those close to the process said the salary was taken from a general HSE grant to the CRC until this date. When the €230,000 salary was uncovered, the HSE insisted cuts had to be made.