Appleby’s successor will need to be more proactive with investigations

The length of time being taken on the Anglo Irish Bank investigation is deeply worrying. It is to be hoped that everything is being prepared properly to ensure that any prosecutions are warranted and, given the cost involved in the three-year investigation, then successful.

IT was probably good news that the boss at the Office of the Director of Corporate Enforcement (ODCE) agreed to stay in his job for another six months rather than opting for the retirement he had decided to take at the end of February. Probably, but not definitely, because while the State does not need a transition of power in the office to create any adverse legal issues that could hinder prosecutions arising from ongoing investigations, the jury remains out as to how good Paul Appleby has been at doing his job.

The length of time being taken on the Anglo Irish Bank investigation is deeply worrying. It is to be hoped that everything is being prepared properly to ensure that any prosecutions are warranted and, given the cost involved in the three-year investigation, then successful. All of these financial shenanigans are believed to be very complicated. Even if they look to be wrong, on an ethical, moral or practical basis, it is entirely possible that no laws have been broken, if only because no laws were put in place to stop things that had never been envisaged.

It is fully understood, also, that many of those under investigation may not have been very co-operative, but that should have come as no surprise. Few people seek to incriminate themselves while under investigation. The excuse that people have not been available for interview does not impress.

Only last week Appleby and his team at the ODCE were back at the High Court seeking another extension — the 10th — of the time they wanted to legally keep files that had been seized as part of the Anglo investigation.

When Appleby appeared in front of an increasingly frustrated Justice Peter Kelly last year seeking another extension, it emerged that his office had about 50 people working in it, including members of the gardaí, lawyers, accountants and a small number of civil servants. This hardly seems like an adequate number, especially as only about one third of them were said to be working on the investigation.

Appleby insisted that “substantial” progress had been made in a “complex” case. He said that more than 200 people had willingly provided witness statements to Garda officers, but that “obtaining statements from reluctant witnesses can be a difficult and time-consuming task”. He claimed that even with cooperation, similar investigations by the UK Serious Fraud Office had taken between four and six years.

“In my view, the Anglo operation is well ahead of this benchmark and I’m satisfied that it’s progressing with all possible speed,” he said.

There are mitigating circumstances.

In the US, Bernie Madoff was almost the exception rather than the rule when it came to speedy administration of justice. The key difference is that he confessed swiftly. Less than a dozen people had gone to jail in the US as a result of the most recent financial scandals, compared to hundreds after the American Savings and Loans scandals of 20 years earlier. An international culture of not punishing those responsible for what might be called ‘crimes against capitalism’ has emerged and Ireland is not alone in that. The presence of many highly paid lawyers tends to add to the morass.

The ODCE was set up in 2001, amid some fanfare but few resources. The budget for 2009 was just €5.47m and the office employed only 46 people despite the massive and increased workload.

This meant that it had to outsource some of its work, for example securing High Court approval for the appointment of respected barrister Bill Shipsey as an inspector to investigate the offshore share dealings in shares of the publicly quoted fruit importer Fyffes by a company called DCC which was run at the time by Jim Flavin.

The very complicated Fyffes/DCC case, which arose because of a civil action for damages against DCC by Fyffes, had been ruled upon by the Supreme Court in 2005 and had found that Flavin, as chief executive of DCC and also as a director of Fyffes, had acted illegally by selling DCC’s shares in Fyffes while in possession of confidential information that was highly pertinent to the inflated Fyffes share price at the time of the sale.

However, and to widespread surprise, a Jan 2010 report by Shipsey exonerated DCC from the consequences of an established breach of the law on the basis that Flavin didn’t know what he was doing, didn’t mean to act illegally and had taken legal advice that gave him the go-ahead. Shipsey found that Flavin’s actions were “inadvertent breaches of the law”. He decided that Flavin did not know the relevant law but acted in good faith on the basis of what he had been told by highly paid advisers. He had made “an error of appreciation and judgement” and Shipsey found that Flavin’s belief that he was not in possession of price sensitive information was “rational, if legally wrong”.

It was a highly significant decision and raised questions as to whether or not a precedent had been set where others accused of breaching corporate law could plead ignorance as a defence.

Appleby’s response was as notable. In explaining why he would not be taking any further action in relation to the biggest insider dealing scandal ever disclosed in this country — and for which DCC had to pay nearly €40m in damages to Fyffes — Appleby said that “there’s no way that any court would sanction a director for having followed the company’s legal advice”. What if Anglo’s directors, if prosecuted, say they were only following legal orders?

Appleby was slow enough in going after Anglo. A letter to the Dáil finance committee in Feb 2009 (four months after the bank guarantee was put in place) said it was his opinion that “circumstances suggesting prejudice, misconduct and/or illegality are present with respect to the company’s affairs”. Many had come to that conclusion months earlier.

Much was made of the high-profile raid that month on the premises of Anglo Irish Bank by members of the ODCE and the Financial Regulator.

However, while the raid looked good for the television cameras, it soon emerged that Anglo had been told the investigators would be coming.

Serious questions have to be asked as to why Anglo alone seems to have been the main focus of Appleby’s investigations.

What has he done, for example, about what went on at Irish Nationwide?

An investigation was conducted into INBS’s performance by accountants Ernst & Young and solicitors McCann FitzGerald in late 2009 and early 2010, and presented to the society’s new Government-appointed board. It, in turn, gave it to the Financial Regulator and the Department of Finance, but it remains unpublished, scandalously. The details that have emerged revealed an extraordinary level of mismanagement and power concentrated in chief executive Michael Fingleton. It alleged that he had had persuaded a compliant board to give him powers to personally set, vary or alter interest rates charged on loans; to decide the fees for these loans; and to make arrangements on loans with individual clients of the society. The investigators found evidence of loans paid out before approval and of the amounts lent being different to those that had been approved.

Has Appleby demanded a copy of the report and started an investigation? It is to be hoped that his eventual replacement is a little bit more proactive.

* The Last Word with Matt Cooper is broadcast on 100-102 Today FM, Monday to Friday, 4.30pm to 7pm.

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