If ever he desired to know what his fellow citizens wanted, Eamon de Valera famously said he had only to look into his heart. Were he around now, he might be better off trying RTÉ’s Liveline for a sense of some of them - Joe Duffy’s radio show famously moves to the rhythm of the plain people of Ireland.
If Dev had tuned in on Wednesday, he would have discovered that many listeners phoned in to ask that O’Flaherty Holdings, the company that sells Mercedes cars in Ireland, repay to taxpayers €1.8 million in Covid subsidies it claimed in 2020, while also sending a similar amount in dividends to the Isle of Man.
Profits
As he followed up an Irish Times report, Duffy revealed that Liveline’s switchboard had lit up with angry listeners. “Like a choir in the Pro-Cathedral” they were in unison, Duffy said, about wanting the company to pay back the public subsidies that, given it banked trading profits of near €10 million in 2020, clearly were not essential for O’Flaherty Holdings to safely negotiate the pandemic.
An investigation by this newspaper shows that O’Flaherty is not alone. Many other companies have behaved similarly, by claiming taxpayer supports while also paying dividends to their shareholders.
Financial records show they include Prometrics, the company that the State pays to run the system of driver licence theory tests, as well as Newbridge Silverware, the renowned luxury goods company.
Other companies identified by The Irish Times so far also include doughnut sensation Krispy Kreme; the highly successful Garvey group of retail outlets and hotels in Kerry; the group that owns John Sisk & Son, Ireland's largest construction company; the popular UK-owned cosmetics retailer, Lush; as well as several other smaller hospitality outlets and retailers. More are yet to be identified in financial records at the Companies Registration Office.
Support
Many other companies, such as the hospitality group controlled by Supermac’s founder Pat McDonagh, claimed subsidies and did not pay dividends, but still made hefty profits in 2020 to suggest they were not obviously in need of the level of taxpayer financial support for which they qualified. McDonagh’s group, for example, made profits of €20 million last year while also claiming large sums on subsidy schemes.
The State’s wage subsidy schemes were designed to save jobs, rather than limit shareholder returns. But the initial revelation that a cash-rich company such as O’Flaherty Holdings could pay a dividend while also qualifying for the State’s Temporary Wage Subsidy Scheme (TWSS), which paid close to €3 billion in supports early in the crisis, has sparked political as well as public recrimination.
The Government now says it may change the law to stop subsidised companies paying dividends. TDs on both sides of the Dáil have criticised Paschal Donohoe, the Minister for Finance, for the lack of taxpayer safeguards in the TWSS and its descendant, the Employment Wage Subsidy Scheme (EWSS), which pays a portion of a company's payroll if its sales in a qualifying period decline by 30 per cent.
Jim O’Callaghan, a Fianna Fail TD, wants companies that take subsidies and then pay shareholders to be banned from further supports. He asked Donohoe 14 months ago about the dividends issue, but was rebuffed.
Meanwhile, Labour TD Ged Nash told Donohoe on Wednesday that the "interests of the taxpayer are not being looked after". The minister appears now to concede that change is necessary.
Mantra
An occasional mantra of Irish policymakers in the pandemic has been that “speed trumps perfection”. Donohoe has highlighted that the subsidy schemes were designed in the teeth of a crisis to dissuade companies from the wholesale sacking of workers. Speed was of the essence to prevent the economy from cratering. In that primary objective, the wage subsidy schemes have been successful - an unemployment rate of 6.9 per cent, given all that has happened since March 2020, is near miraculous.
But the imperfection may yet turn out to be expensive for taxpayers. The two schemes together have cost taxpayers about €5.7 billion so far in what is the single biggest Government intervention in the economy in the pandemic. There are no figures available for how much of that outlay has indirectly helped to sustain a flow of dividends to company shareholders, regardless of the jobs saved.
In his radio show on Wednesday, Duffy suggested that the “sting in the tail” of the story that was enraging his listeners was that O’Flaherty Holdings paid its €1.8 million dividend in 2020 offshore to the Isle of Man, a corporate secrecy haven.
The group is owned by the O’Flaherty family, one of the wealthiest families in the State with a collective net worth of about €570 million in their latest entry in the Sunday Times Rich List. The Manx island is a popular location for the assets of Ireland’s wealthy.
The O'Flaherty dividend was paid to Hailstone Holdings, the ultimate shareholder of the group. Public records in the Isle of Man are scant, but the company's directors include several members of the O'Flaherty family, including Stephen O'Flaherty, grandson of the group's founder, and some of Stephen's nieces, such as Lauren O'Flaherty and her sister, Karenina Morrison-Bell, who married a member of the English aristocracy.
Jobs
The normally media-shy O’Flaherty group issued a statement on Wednesday highlighting that the subsidies it received were “used solely and entirely for the purpose intended, namely to maintain the jobs of its workforce as businesses faced into the unknown of an unprecedented lockdown”.
The group employs more than 310 people. It claimed further EWSS payments in 2021 as more lockdowns hampered the group.
Newbridge Silverware, controlled by the Doyle family, is one of Ireland's premier luxury goods brands. The most recent accounts for Rossbawn, the parent company of the group, show the impact of the pandemic on its operations as the retail outlets that normally sell its wares were hit by lockdowns.
The group’s sales fell 27 per cent to €11.6 million. It made an operating loss of about €1.1 million. But despite the pandemic, this was actually an improvement on the previous year.
A note on the 36th page of the accounts shows the company qualified for State assistance of about €300,000 in wage subsidies, as well as a further €75,000 in rates waivers and pandemic restart grants. Yet it also paid a cash dividend of €520,000 in 2020 to a Doyle family-controlled company in the Isle of Man, Mona Doyle Enterprises. Records on the island show it is majority owned by the group's chief executive, William Doyle, with smaller stakes held by his sister Oonagh Doyle, and other family members.
William Doyle made no response to a request for comment on whether it was appropriate for the Newbridge group to pay a dividend to the Isle of Man company while in receipt of State assistance, and whether it plans to return the subsidies.
Rossbawn’s accounts show a cash balance of almost €4.8 million at the end of 2020, more than three times the level of the previous year. Government records show Newbridge continued to claim subsidies in 2021 after it had paid the dividend.
Stores
Another of Ireland's most successful family-owned businesses in the Garvey group based in Kerry, which owns nine SuperValu stores across the southwest as well as two hotels in Dingle and a number of listed investments. The Garvey family's business has performed exceedingly well in the pandemic. In accounts for the 12 months to January 9th for Commidare Holdings, the holding company for all of the group, the directors state "they do not consider Covid-19 to have had a material effect on the group's operations".
As the retail outlets throbbed with business during lockdowns, the consolidated group’s revenues were up close to €8 million to €132.5 million, while operating profits rose by almost half to €6.4 million. The directors said the increase in profits from the shops had more than compensated for any losses in the hotels. Yet the group also reported more than €680,000 in State subsidies and restart grants.
It is obvious the group acted properly in claiming the grants for its leisure subsidiaries - hotels have been hammered by Covid and the subsidies will have helped to keep staff employed. But is also equally obvious that the wider Commidare group probably could have bankrolled them itself, without State assistance. The Garvey family also received a €336,000 dividend from the group. This was within the rules of the support schemes. Arguably it may be outside the boundaries of the public’s expectations.
It isn’t just family businesses that have been paying dividends while claiming Covid subsidies. Prometrics Ireland, which operates the State contract for Ireland’s driver licence theory tests, sent a €1.25 million cash dividend last year to a Maltese tax resident group company.
This entity then bundled it up with the proceeds of the sale of a UK business, and sent €4.44 million in cash to Luxembourg. Prometrics also claimed about €520,000 in Covid subsidies in 2020, and further tranches in 2021.
Payments
The company robustly defended itself when asked by The Irish Times if the dividends were appropriate in the circumstances. It denied it had paid “dividends to stakeholders or outside investors”, and it linked the cash payments to the sale of the business stake in the UK. It argued it had used the grants for the purpose they were intended - to be paid to employees in their wages as the business coped with lockdown.
Krispy Kreme, the cult US coffee and doughnut chain that regularly has had sugar fiends queuing around the block at its Blanchardstown flagship, reported after-tax profits in Ireland last year of almost €1.1 million.
It also claimed €121,000 in TWSS payments from the State in the first half of 2020. Yet on December 7th last year, it also chose to pay a cash dividend of €1.66 million to the UK entity that owns the Irish business. It declined to comment when asked if it would pay it back.
The Irish operation of popular international cosmetics retailer Lush, which incudes its flagship on Dublin's Grafton Street, remained profitable in 2020. It claimed €133,000 in State wage supports last year. Yet it also sent a €1.2 million dividend out of Ireland last year to its UK parent owner. It continued to take further State supports in 2021.
Income
Sicon, the holding company for the country's largest builder, John Sisk & Son, shrugged off the impact of the pandemic last year to post revenues of €1.5 billion and profits of more than €23 million, while it had cash of €273 million. It also claimed State wage subsidies last year, according to TWSS and EWSS records, although they are not precisely outlined in its accounts – it does declare €2.7 million of "grant income".
The group also paid a €10 million dividend to members of the wealthy Sisk family that own the group.
Donohoe has highlighted that some companies have chosen to return State subsidies that they "didn't need as much as they thought they would". CRH, for example, returned its State subsidies late last year. Months later, it might have been awkward for CRH to defend the subsidies when it was revealed it paid its chief executive, Albert Manifold, a salary in 2020 of more than €11 million.
The company that publishes The Irish Times has said it is returning €3 million in wage subsidies, as it is the “right thing to do” because the payments were intended for companies in distress – most newspaper publishers have performed well in the pandemic.
Grafton Group, the owner of Woodie’s DIY, sent its subsidies back after it had a bumper summer last year. Goodbody stockbrokers returned its subsidies, ahead of its sale and any payout for its owner executives.
Figures
Revenue does not have exact figures for the subsidies that have been returned by companies that decided they simply didn’t need them. Subsidies may also be returned for other reasons, such as errors made when claiming them, or subsequent ineligibility. But the tax service runs a voluntary system for companies that want to “reverse” out of EWSS.
In total, Revenue says 22,770 employers returned payments received under TWSS of almost €254 million, for a variety of reasons. About 3,000 employers have returned subsidies received under EWSS of over €91 million: “The process for returning subsidy payments to Revenue is the same regardless of the reasons why the payment is being returned.”
There also has been uproar in other countries, such as Canada, Australia and New Zealand, over companies claiming State supports while also paying cash dividends to shareholders.
"I would emphasise that the vast majority of companies needed the employment wage subsidy scheme," said Donohoe on Wednesday, in response to a grilling from Labour TD Nash.
“Some companies who found out that they have not needed it as much as they thought they would, have returned it to the Revenue Commissioners. I want to recognise that here this evening, thank them for that and ask other companies to consider the practice that their peers have engaged in.”
