Ireland's "legal corruption"

“Business is seen as particularly close to political life in Ireland.”

A new report based on 2 and a half years of academic study has found that Ireland suffers high levels of “legal corruption”. The Transparency International (TI) report found that: “While no laws may be broken, personal relationships, patronage and political donations are believed to influence political decisions and policy to a considerable degree in Ireland.”

Related Links:
The website of Transparency International (Ireland)
The Global Website of Transparency International

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Although the report is light on banking, it does shed some light on the Galway Races Tent culture when it states that “Business is seen as particularly close to political life in Ireland.” The Galway Races is an annual horse racing social gathering at which the leading political party Fianna Fail had a notorious fundraising tent up until last year. TI do draw attention to the ease at which political donations can be secured. There is no requirement to declare donations under €5,078.98 to a party or under €635 to an individual.

The National Integrity System Country Study is one of many carried out internationally by the Non Governmental Organisation Transparency International. The Irish study is one of the few actually paid for by a national Government, in this case via the Department of Justice, Equality and Law Reform. Primary research was initially led by Dr Elaine Byrne and completed under the direction of John Devitt. The report ranks Local Government, Political Parties, and Ireland’s Public Contracting System, as those sectors most vulnerable to fraud, corruption and the abuse of power.

Low on bribes
Although the report documents some of the findings of the various Tribunals of Inquiry established by recent Governments it concludes that levels of “petty corruption” are amongst the lowest in the world and that Ireland’s citizens are amongst the least likely to be asked for a bribe.

However the report cites a Sunday Independent report from 2006 as claiming that bribes have been offered to one in ten CEOs of Irish companies to award contracts.

No chapter on banking
It seems unfortunate to say the least, but there is no chapter in the report dedicated to banking. It does document the evolution of the Financial Regulator’s office following the national scandal in which Ireland’s leading banks were implicated in systemic overcharging of retail and business customers and the evasion of Deposit Interest Retention Tax (DIRT). TI recognise that the Regulator takes a “principle based approach to regulation and supervision placing responsibility on the boards and management of financial institutions to implement appropriate risk management systems and effective anti-money laundering internal controls.”

The report states that the Regulator has never fined a bank for regulatory breaches even though it has the power to do so. No-one was ever prosecuted in the aftermath of the DIRT scandal. Perhaps the only public casualty in the banking sector until recently was Fianna Fail TD Beverly Cooper Flynn who lost a libel action in the High Court during which it emerged that she had encouraged a number of people to evade paying tax. She lost the Fianna Fail whip for a short period and had to pay significant legal fees. She is not mentioned in the TI report.

“The Wild West of European Finance”
The report does however document the Regulator’s role in the scandal that led to the New York Times referring to Ireland as the ‘Wild West of European Finance’ in 2005. A US$500 million reinsurance deal was alleged to have been transacted illegally between a Dublin based re-insurance firm, Cologne Reinsurance and AIG Insurance in the US. The Chief Executive of Cologne Re., John Houldsworth had already been debarred by the Australian Prudential Regulation Authority in 2004 for his part in a similar fraud in 2001 and contributed to the AUS$5.3 billion collapse of one of Australia’s leading insurance firms. In 2006, Houldsworth pleaded guilty to securities fraud in Virginia, having left Ireland to stand trial in the US. The TI report asserts that the Irish Regulator was accused of moving too slowly to investigate the US$500 million deal and of weak supervision of the insurance and reinsurance sectors generally. Ireland did not transpose the EU Reinsurance Directive into law until 2006, thereby providing for regulation of that sector for the first time.

Jim Flavin
The report also documents the Fyffes Plc v DCC Plc and others case from 2007 when the Supreme Court found that a shareholder had access to price-sensitive information when selling its shares worth €106 million in the food importer. The case caused a scandal in Ireland as Jim Flavin was a Director of Fyffes and Chief Executive of DCC. By mid 2008, the High Court appointed an Inspector to examine the share dealing events in question.

The Golden Circle
The cosiness of Ireland’s Golden Circle is brought into focus deep on page 140 of the report. “Business is seen as particularly close to political life in Ireland. The World Bank Institute’s Corporate Ethics Index of 2004 found that only 43% of Irish business leaders believed that the private sector does not have undue influence over the political process – this finding places Ireland behind some developing countries including Botswana, Ghana and Malaysia. Influence can be brought to bear by business organizations, individual businesses and trade unions through political donations, the Social partnership process, professional lobbying on legislation, board membership of public bodies, and more informally through social networks.”

Freedom of Information
The report draws particular attention to the fees payable under the Freedom of Information Act (FoI). “Given the acknowledged role that transparency has in preventing corruption, it is surprising that the Irish Government has curtailed access to official information. The FOI has been weakened by the introduction of fees for access to non personal information and charges of €150 for appeals. The fees, which are amongst the highest in the world, have led to a dramatic fall in the number of requests for information from both the media and general public.”

The benefit of FOI was brought home to Irish people last autumn when Shane Ross published an article in the Sunday Independent about the lavish expenses claimed by former FAS Chief Executive Rody Molloy. FAS is the national training agency with a well remunerated board staffed by representatives of the social partners (unions, employers and Government appointees).

Mary Harney and FAS
Ross’s newspaper spent over €1,000 on a FOI request for details of expenses paid. His report revealed first class air travel for executives and their spouses and led to considerable embarrassment for the Government when it was revealed that Mary Harney, the Minister for Health had claimed over $400 for beauty shop treatments on the trip. Having appointed Mr Molloy as Chief Executive in August 2000 in her then capacity as Minister for Enterprise, Harney announced her appointment of Brian Geoghan as Chairman of FAS on November 21 2000. A year and 9 days later, November 30 2001, she married Mr Geoghan.

As the expenses scandal exposed by Senator Ross engrossed the nation, Rody Molloy resigned his position, with a handsome pay off and a good pension. Without the large budget of the country’s largest print media group for the FOI, and Senator Ross’s clout with his editor, the information would never have come to light.

The Freedom of Information Act is a minefield
Senator Ross details his experiences on his website: http://www.shane-ross.ie/archives/442/first-blood-at-fo...e-442
He describes his experiences thus:

“The Freedom of Information Act is a minefield. You need to ask the right questions. You need to know exactly what you are seeking. It takes time. And it is lethally expensive. FAS took the maximum time allowed to release the papers.
"Initially it said the documents would cost nearly a grand. Good tactic: that would kill the question stone dead. Any citizen without Seanad expenses or a newspaper would baulk at this. We instantly agreed to this outrageous fee for information which should be freely accessible.
"A few weeks later, Fas admitted that the work involved in digging up its records was less than expected. So it reduced the fee to €400. The deterrent had failed.
"Next, mysteriously, my cheque was lost in the post, somewhere on the 500-yard journey from Leinster House to Fas. Another delay. Another cheque.”

Can we deduce that only someone with the financial resources of a Senator or the backing of a well endowed national print media group can access information freely in Ireland?

But perhaps we should be grateful that FAS are actually covered by Freedom of Information at all. The TI study draws attention to the fact that An Garda Siochana (Irish Police Forcce) are excluded from the list of institutions covered by FOI. “The omission of Ireland’s police service from the list of bodies covered by FOI is believed to make her unique among industrialized democracies.”

Transparency International’s recommendations:

The study makes over thirty recommendations to tackle a problem that TI claims contributed to the world financial crisis, and could be costing the Irish economy an additional €3 billion each year in lost business revenues and foreign investment.
These include:
1. The introduction of laws, similar to those in the UK, to protect whistleblowers in the public and private sector who report concerns of public importance.
2. The introduction of a Register of Lobbyists that would bring more transparency to the relationship between government, regulators, business and interest groups.
3. The ratification of international conventions against corruption, including the UN Convention described as the “Kyoto Protocol” on global corruption.
4. The establishment of a Garda Anti-Corruption Unit and more resources for law enforcement agencies including the Director of Corporate Enforcement, the Competition Authority, the Criminal Assets Bureau, and the Garda “Fraud Squad”.
5. Reform of Freedom of Information fee system. Irish FOI fees and costs of appeals are the highest in the developed world.
6. The publication of local Councillors’ declarations of interest on the Internet.
7. The scrapping of Government plans to treble the amount of gifts and loans politicians can receive and keep secret.
8. The publication of an annual report by the Comptroller and Auditor General on some of the most costly public contracts each year.
9. The opening of all appointments to the Boards of State bodies to public competition.
10. The publication of clear no-bribe and conflict of interest policies by newspaper organisations and journalist unions.

This report is welcome and timely. It sets out clearly the roles and functions of many institutions in Irish public life. The recommendations are in the main, sound, and the issues of lobbying and freedom of information certainly need to be tackled. The finding that decision making and policy development are based largely on networks of influence will surprise no-one. But it needs to be said, the culture needs to be tackled and the problems arising from that way of doing our business need to be solved.

Read it yourself:
The full report here.
The executive summary here.