‘White knight’ strikes back

HE WAS heralded as its “white knight” for giving crucial support to a flagging development agenda.

The white knight moniker emerged in 2001 because a fledgling sports campus plan was in disastrous shape.

Its promoters quickly needed to rescue their botched attempt to find a private partner to operate the National Aquatic Centre.

The backing John Moriarty was able to provide got it over the line.

However, a year after he arrived on the scene, Campus Stadium Ireland (CSID) turned on him.

He believes this was because his company, Dublin Waterworld (DWW), refused to accept a €10m Vat bill that it said was founded on poor reading of a new tax law.

Mr Moriarty understood that if DWW’s position set a precedent it would add an unforeseen €100m cost to the wider and fanciful plan to construct a new national stadium at Abbotstown.

Mr Moriarty, then in his early 30s, said he had little option but to fight back. So he did.

“There was no choice. I am a company director involved in construction and developing windfarms. And if I allowed myself to become a restricted director my career in business was finished.”

In the last 10 years CSID, in its different guises, has spent more than €1.33m on its legal bills to take Mr Moriarty’s company to court on a series of issues.

In that time the Fenit-based civil engineer, who graduated from UCC in 1991, has beaten the State twice in the Supreme Court and settled another case before it progressed.

The eventual result of the last, and most significant, Supreme Court ruling was that the ill-conceived claim that DWW owed the Revenue Commissioners €10m in Vat was dropped.

Mr Moriarty is now considering a legal case for compensation, but this will have to be weighed up carefully.

“Taking a damages or any case is a risky undertaking. A legal review of all matters is underway when this is complete a decision will be made. My position remains that whatever the final outcome, the taxpayer should not pay for it.”

Already, at his instigation, the Dáil’s spending watchdog investigated the way in which the Department of Sport and CSID dealt with the cases against him.

The Dáil Public Accounts Committee published its findings last month. It was categoric in its criticism of the litigious strategy the State employed.

The case against DWW “should never have been pursued… on behalf of the State” and an “incalculable amount of time and resources” were wasted on it.

The Committee found numerous opportunities to settle it were squandered.

Worse, the PAC said the State knowingly withheld critical information that undermined its case but chased Mr Moriarty and his company regardless.

The PAC said the Department of Sport and CSID had ignored the correct advice of key agents like the Comptroller and Auditor General and the Attorney General.

However, those reservations about the legal action only came to light because of Mr Moriarty’s determined pursuit of freedom of information requests.

And even the crucial letter from the Attorney General’s office, advising the department not to pursue the case, was only released to him by accident.

Up to this day the state authorities have publicly provided cover for each other. This stance has been criticised by the PAC.

Mr Moriarty said DWW, which was dealing with a leaking pool and a poorly constructed roof, was losing money from early on in the lease.

And it would have gladly walked away before CSID got a High Court order ejecting it from the contract in 2006.

This was on the basis that CSID said a DWW backer, Pat Mulcair, was given beneficial ownership of the lease without its knowledge.

Mr Moriarty still disputes this and said a representative of Mr Mulcair was present as the contracts were being signed and his involvement was not a secret.

The Kerry-engineer said it would have made commercial sense to walk away from the aquatic centre without going to the court but it could not turn away from what CSID had claimed.

“You had CSID saying we hadn’t maintained the building, the High Court inspector found against CSID on that.

“He found we had maintained the building, the building had been closed down for five months because of a defective roof, but CSID was also saying we owed them €10m in Vat.

“We would have been happy to go but we couldn’t walk away from the claim that we hadn’t maintained the building because CSID would have come after us for that. And we couldn’t walk away from the Vat claim.”

The first major fiasco surrounding the National Aquatic Centre began after CSID had honed in on a preferred bidder to build and run the centre.

However, in doing so it overlooked concerns about the financial status of a British company that was supposed to fund the arrangement.

Pretty quickly it emerged the British firm was little more than a shell operation with no assets.

The whole plan was on the cusp of collapsing until the business was effectively taken over. This is where Mr Moriarty became the saviour.

The British company had listed the operators of the Aquadome in Tralee, Kieran Ruttledge and Liam Bohan, as the representatives who would be responsible of running the centre.

They had acted in good faith. And when their partners vanished they brought in Mr Moriarty.

But CSID needed some financial security.

First, Anglo Irish Bank provided a guarantee against the assets of John Moriarty & Co ltd.

The contract was ultimately backed by a €250,000 personal guarantee signed by Mr Moriarty.

A early report into the mess, by the Office of the Attorney General, detailed the initial role Mr Moriarty played.

“John Moriarty appears to have emerged as a bona fide ‘white knight’ in early 2001, willing to take a majority shareholding in the operator company to provide financial backing in the form of guarantees,” he said.

With Mr Moriarty’s support DWW was given the lease to operate and maintain the aquatic centre.

However, in the last national budget before the lease was signed, a critical change had been made to the law deciding how and when Vat could be reclaimed.

It meant a project that would not make back its construction costs was not eligible for a Vat rebate.

Because of this, the €63m spent on the construction would be liable for Vat and this would add €10m to the cost of the project.

Of equal importance was the fact that the lease had to be worth more than the cost of the project for the operator (DWW) to be liable for Vat.

A Valuation Office report said the value of the lease, because of restrictions on it, was only worth half what it needed to be if DWW was to be asked to pick up the tab.

This report, which the Supreme Court described as devastating, was buried.

Mr Moriarty said if DWW had tried to make a claim for Vat from the Revenue Commissioners it would have constituted fraud.

However, CSID did not engage with the 2002 law.

“A decision was made in late 2002 that regardless of what the legislation says CSID was going to charge us Vat,” said Mr Moriarty.

Even if it had succeeded, Mr Moriarty said the notion the State would have been able to get €10m from his company was ridiculous.

Instead the only result would have been to register a judgment against him and restrict his ability to manage a company.

“They knew I would never have this money so they decided that I was going to be taught a severe lesson that you don’t mess with the civil servants,” he said.

Mr Moriarty said the actions of CSID appeared to have been at odds with common sense at numerous junctures, particularly when CSID decided to fight its case to the Supreme Court.

“CSID went to the High Court and the three shareholders of CSID are the Taoiseach, the Department of Finance, and the Department of Sport.

“The Taoiseach’s office did not pass comment on this high up or low down and there is no evidence that they ever gave any encouragement to CSID to take the litigation.

“The Department of Finance didn’t give them any comfort either.

“The Department of Sport told them to proceed. The Revenue Commissioners told them that it was a self-assessment tax and go away and do that…

“The Attorney General had told them to take no further action... and the Comptroller and Auditor General had told them there was no benefit to the exchequer from doing this.

“So it is seems to have been quite a personalised issue.”

The personal animosity was matched by the sense of Mr Moriarty that he had to win or he would be ruined.

“[If CSID succeeded] I could no longer be accompany director, I would have had no credibility and you would have had all the reputational issues with having owed €10m in Vat.

“And Vat is a complex topic and I think many people would have had the impression that I owed the Revenue Commissioners that I had somehow elicited €10m from the Revenue Commissioners.”

Since winning in the Supreme Court, Mr Moriarty has continued his dogged bid to keep the issue on the agenda.

He has penned numerous letters to the PAC to offer his perspective on each of the many explanations submitted by thedepartment, the National Sports Campus Development Authority (formerly CSID), and the Revenue Commissioners.

Mr Moriarty said he was fortunate to have the wherewithal to fight but he will not be satisfied until the public and professional advisers who guided the strategy against him are singled out.

“Revenge isn’t the issue. And I don’t want people to be losing their jobs. Accountability is the what it is about.

“I am a taxpayer and I don’t like paying taxes so that these people can go around the place abusing people.”

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