Fingleton’s journey on the financial gravy train hasn’t ended just yet

Fingleton’s pay package for 2008 totalled *2.34m. This was higher than his 2007 pay of *2.31m. He took the money although he must have known at that stage that the society’s profits for the year were collapsing and that the risks that much of the loans he had sanctioned will not be repaid.

TWO Fridays ago I was going home on the LUAS — as I do every evening after work — when I noticed Michael Fingleton, chief executive of Irish Nationwide Building Society, get on at the Charlemont Street stop just beside the society’s headquarters.

Not having seen him board the train any time previously I wondered if perhaps a bit of long overdue belt-tightening was going on for Ireland’s best paid banker.

I doubt that Fingleton travels by LUAS among the hoi polloi too often because if he did, he’d know it’s not the best place to have a private conversation — voices carry, and most phone users speak too loudly, so most people in a carriage can hear all of one end of a conversation.

Fingleton guffawed to a person at the other end that he was only on the train because his car was in the garage for a service. It has a unique colour apparently, which makes it hard to get a proper paint-match for scratches. I was glad to be able to disembark quickly not to have to listen any more to him.

Whatever about the LUAS, it appears that Fingleton has no intention of getting off the gravy train. Amid the debris caused by the implosion of the Irish banking sector — and the tales of recklessness and greed — there are still some stories that have the capacity to shock. One came last weekend when it was revealed that Fingleton had taken a e1 million bonus from his society last October, just weeks after it was rescued from oblivion by the state’s guarantee scheme, along with the rest of the Irish financial sector.

Apparently, it was due under the terms of a contract entered into earlier that year. It meant that Fingleton’s overall pay package for 2008 totalled e2.34m, which included benefits and fees of e453,240. This was higher than his 2007 pay of e2.31m.

He took the money although he must have known at that stage that the society’s profits for the year were collapsing and that the risks that much of the loans he had sanctioned will not be repaid.

The results for Irish Nationwide for 2008 are awaited but it is certain that it will not report anything like the pre-tax profits of e239m in 2006 and e390m in 2007, two years marking the height of the illusory property boom.

What is most interesting about the building society is the type of lending to which Fingleton committed the institution. In a drive to improve profitability — so it could be sold to a third party — the building society got away from the simple business of taking deposits and lending to people who wanted to buy houses and apartments to live in, or to rent to somebody else.

Instead, it became a lender to property speculators who bought land to build offices on or massive housing estates. This increased the risk to the society dramatically. Worse, it made a large amount of its loans to a very small number of borrowers, lent close to the full price of the property in many cases and, most worryingly, even became a shareholder in itself in some of the ventures.

It still isn’t known just how much of its e12.4 billion of loans has been advanced for hotels, shopping centres and office blocks, some of which have not even been built, but it has been speculated that about 80% of these loans are linked to the imploding Irish and British commercial property and development sectors.

Irish Nationwide may be the Irish institution most exposed to this downturn. The level of bad debts or loan write-offs on the way must be frightening and the recently resigned chairman Dr Michael Walsh said the organisation cannot survive without the support of the Government.

Yet Fingleton took this bonus to make himself the highest paid banker in the country last year and our government is doing little more than express its annoyance and say it will press to get the money back.

It is even worse than that. INBS was reprimanded and fined by the Financial Regulator last October — the first time it had ever done so — for touting for deposits in Britain on the back of the State guarantee, despite the express wish of Finance Minister Brian Lenihan that no financial institution benefiting from the guarantee would act in this way. The party guilty just happened to be Fingleton’s son.

AND then came the scandal of how Irish Nationwide was the counter-party to Sean FitzPatrick’s hiding of loans from the auditors of Anglo Irish Bank during his period as chief executive and then chairman.

FitzPatrick used to pay off his loans to Anglo at the end of September each year and take them out with INBS instead.

At the start of October — as the annual report detailed the accounts at September 30 — FitzPatrick would pay off the Irish Nationwide loans and take new ones from Anglo. His bank provided security to the building society for the loans. It is utterly inconceivable, given the size of the loans and the name of the borrower, that Fingleton was not fully involved in the scheme.

Proof of that comes from the recent decision of the Financial Regulator to force INBS to look to make three key appointments to its management team. It has been told to hire a chief operating officer, a chief financial officer and a chief risk officer.

That implies that the society didn’t have people in those key positions up until now, which is extraordinary and also damning of the limp standards applied by the toothless regulator. But then the regulator allowed a couple of years ago for the appointment of David Brophy to the board of Irish Nationwide as a non-executive director.

Brophy is the managing director of Sean Mulryan’s Ballymore Homes, believed to be one of INBS’s biggest customers.

Was the director of one of the country’s biggest speculative builders ever going to caution the board about its reckless dependence on the property bubble? The former chairman Michael Walsh made it clear that he thought there was a need for a change of management in his resignation letter of last month, copied to the Mr Lenihan and the Financial Regulator.

He said that “the board and ultimately the minister should have the opportunity to provide new oversight and leadership”, something it seems he was unable to do himself, despite the presence of two state appointments to the board in December.

This despite the fact that Fingleton is no longer on the board — because of his age — and had to become chief executive rather than managing director last year because of that. His one-year contract has expired and still he remains in control which is utterly astonishing.

Who would want to fill any of the three positions deemed essential by the regulator with Fingleton still in situ? But why then has the Government not moved Fingleton out? It is true that it does not own it, but the guarantee is keeping it afloat.

International ratings agencies have described its bonds as worth little more than junk, even with the government support. Could it be that the state has to keep him there in the hope of finding out what was going on because nobody else knows?

Even that is true it is not a good enough reason for the State’s effective endorsement of Fingleton. It is an insult to everyone who is expected to suffer financially during next month’s budget that somebody like Fingleton not only took so much money but remains in position to take even more.

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