IN A less civilised country, Michael Fingleton might be “doing time”, but in lawful Ireland — where rights seem paramount compared to responsibilities — the former boss of the now defunct Irish Nationwide Building Society gets to watch time instead on a €11,000 time-piece presented to him as a going away present in 2009 by his fellow directors.
The watch — details of which were revealed this week as the state admitted it has failed to get it back — is only a very small part of it. Fingleton continues to live off the proceeds of an enormous €27 million pension pot provided by his old employer and, despite repeated requests, he has never returned a €1m bonus for his “efforts” in the last year of his disastrous stewardship of the society, and paid in 2009, even though the financial institution he gambled with has gone bust and has had to be closed. In a court statement earlier this year, he estimated his 2010 income at around €400,000 (although he appears to be struggling to meet some debts: his pension fund may have been badly invested in bank shares and property and be worth just a fraction of what they were, and he has other property investments that have led to legal dispute).
Let’s remind ourselves of what Fingleton has cost all of us — and let’s do it often. The September 2008 government decided to include INBS under the bank guarantee of that month when it should have been allowed to fail: most of its depositors had small amounts invested, usually of about €20,000 in size, in an attempt to qualify for free shares should the society be sold. They would have been covered comfortably by the existing state guarantee on deposits of up to €100,000, had the society been allowed to fail. Instead, the state has had to provide €5.4 billion in cash to cover the losses Fingleton incurred because of his stupid lending. It may be a fraction of what Anglo and AIB has cost us but it is remarkable and back-breaking nonetheless.
Fingleton could argue that this was not his decision or fault. However, when there was considerable fear in the weeks running up to the bank guarantee that INBS was on the verge of failing, Fingleton reassured the then Department of Finance secretary David Doyle in writing that the society did not have a ‘seriously impaired’ loan book. Fingleton estimated bad debts for 2008 would amount to just €100m.
But look at what went on during that four years running up to that date. Fingleton engaged in helter-skelter expansion into commercial-property lending, particularly to large-scale developers. From having development and commercial loans of €3.6bn outstanding at the end of 2004, he more than doubled this to €8.5bn by the end of 2008. This meant that for every €1 the building society lent to personal mortgage customers it lent €4 to property developers.
Confirmation of just how bad this lending was came with the eventual transfer of loans to NAMA before INBS was closed in April 2011. NAMA purchased commercial loans with an original recorded value of €8.7bn. But it estimated that only €1.4bn, or 16%, was likely to be repaid.
The regulators should not escape blame for failing to rein in Fingleton. The board of directors should be castigated for indulging him. Let there be no doubt but that Fingleton was responsible. Little happened at INBS without his knowing about it; that was the justification for paying him excessive amounts during his time in charge. But Fingleton was paid enormously to perform. Between 2005 and 2008 he received total remuneration of over €8.5m.
He can argue that he delivered vast profits, but they were illusory. After all, the profits earned during those so-called good days of reckless lending were clearly illusory, involving the use of (legitimate) accounting devices that allowed for the assumption of guaranteed income and profits from loans that never materialised and, in fact, turned into heavy losses. He can say that others believed the profits, and that accountants verified them, but many pointed out the risks of the strategy he was following and ran the risk of legal complaint when they did so. If Fingleton was not recklessly greedy then he was stupid.
Yet Fingleton has not returned the €1m “bonus”. The Fianna Fáil Government claimed it did all it could to recover this dosh but, not surprisingly, many people are deeply suspicious of Fianna Fáil’s desire to really go after its old mate, a man who was a regular in the Galway Races party fund-raising tent and to whom the likes of Ahern’s ex-partner Celia Larkin and former Finance Minister Charlie McCreevy turned to personally for financial assistance when they needed it. There have been reports that Fingleton offered to return the money in return for a Government promise that there wouldn’t be an investigation into his behaviour. It does not seem believable that any government would have agreed to that.
What is worrying is that the details of an investigation conducted into INBS’s performance has not been published formally. It was carried out by accountants Ernst & Young and solicitors McCann FitzGerald in late 2009 and early 2010, when they conducted a full review of the business and presented it to the new INBS board. The board, in turn, gave it to the Financial Regulator and the Department of Finance, but it remains unpublished. The details that have emerged revealed an extraordinary level of mismanagement and power concentrated in Fingleton. He 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. This allowed Fingleton to circumvent the credit committee when it suited him — and therefore he broke no INBS rules by doing so. The investigators found evidence of loans paid out before approval and of the amounts lent being different to those that had been approved. Yet it does not appear that anything has been done about it.
MYSTERIOUSLY Fingleton seems to have been lucky enough to have caught a break. Fingleton suffered brief moments of unpleasantness, such as being questioned against his will as he walked through Dublin Airport by RTÉ business reporter David Murphy and having the results broadcast on the television news that evening. Occasionally, officials of the state, as in the case of the now Anglo Irish Bank directors, now responsible for INBS’s closure, highlighting the watch this week, look to embarrass him. He continues to live in some style behind the high-gated walls of his Shankill, Dublin, home.
However, there is one thing that can be said to Fingleton’s benefit. The revelation that “Fingers”, as he was known, got a watch on his departure from his office is more damning of his board colleagues than it is of Fingleton. They’re the people who the state should be chasing for payment for the money this piece of jewellery cost. What sort of people are they, knowing back in 2009 when Fingleton was preparing his departure that the society was alive only because of the existence of the bank guarantee, and aware that the losses were mounting on their stupid loans and would most probably have to be paid for by the state, to sanction such gratuitous expenditure? The bill should be divided and sent to them for immediate payment.
* The Last Word with Matt Cooper is broadcast on 100-102 Today FM, Monday to Friday, 4.30pm to 7pm.
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