ANALYSIS:Fás chief appears to have received package greater than he would have been given had he been sacked

DISCLOSURES OVER recent times have raised questions about the political oversight of Fás. An unhealthy relationship between the authority and its political masters lies at the heart of the problem, according to the Opposition.

The issue has arisen again in documentation given to the Dáil Committee on Public Accounts (PAC) in relation to the pension package agreed for the former director general of Fás, Rody Molloy, when he resigned in November of last year.

E-mails from the Department of Finance show clearly that the terms agreed for Molloy were discussed in the context of a 1998 circular from the department that governs the severance and early-retirement packages of chief executives of State-sponsored bodies.

The circular stipulates that the terms set out are for cases where a chief executive is dismissed, or is not having his contract renewed. The terms set out are “maximum” terms and, according to the document, it “is not appropriate to make such payments where the initiative for the termination of a contract comes from the CEO concerned”.

Also: “The Minister for Finance does not anticipate approving any improvement on the terms set out above, even in individual exceptional cases, other than on foot of a Government decision.”

Despite the content of the e-mails and internal memos, the Taoiseach, Brian Cowen, has said in the Dáil that the package agreed for Mr Molloy and sanctioned by the Tánaiste, Mary Coughlan, was not sanctioned under the terms of the circular, but in accordance with the earlier1987 Labour Services Act.

The decision appears to have been made to give Molloy a package greater than the maximum he would get if he had been sacked, even though the circular states that a chief executive who is retiring voluntarily should not be given any such terms.

A memo of a meeting on Tuesday, November 25th, 2008, attended by senior officials from the Departments of Finance and Enterprise, Trade and Employment (DETE), points in this direction. The attendance included Ciarán Connolly, secretary general, public service management and development, in Finance; John O’Connell, assistant secretary, central policy, again in Finance; Seán Gorman, secretary general at DETE; and his departmental colleague, assistant secretary Dermot Mulligan (who is on the board of Fás).

The two main documents considered at the meeting were the 1998 circular and Molloy’s contract (the circular is also an appendix to Molloy’s contract), according to the memo.

“The feeling was that since he himself was disposed to resigning, and the consensus was that his contract should be terminated, in the circumstances, he could reasonably have the terms of the 1998 circular applied to him.”

The memo also says Molloy sought two or three years’ salary as part of his deal, but that this was seen as unacceptable and the most he could be offered was three months in lieu of notice. In the event he got six months’ salary as part of his package.

Molloy had been in discussion with the then Fás chairman, Peter McLoone, during the day on Tuesday, November 25th. He announced his resignation late in the evening, presumably having settled the pension terms that would apply. No legal advice was taken by DETE.

On the following day, a letter was sent by Pádraig O’Conaill, in DETE, to O’Connell in Finance, seeking sanction for a deal based on 40 years of service, including an additional four-and-a-half years’ notional service, and six months’ salary (€111,243.50). The PAC has since been told by Gorman from Finance that the actuarial value of deal was €1 million.

The response from Finance noted that the terms “are not fully in accordance with those of the circular letter of 26 May 1998 from this department . . . Nonetheless I am to convey sanction to the proposed terms on condition that this is an exceptional case and that your department is satisfied that these terms are appropriate in the circumstances.” There was no mention of the 1987 Act.

Earlier that morning, officials within the pensions section of the Department of Finance had pointed out that the terms were not in compliance with the circular, as Molly had resigned and had not been dismissed. Furthermore, a Government decision was needed to sanction the six months’ pay, in the view of one official.

It may be that the deal agreed in the pressurised circumstances of Tuesday, did not stand up to calmer scrutiny the following morning, but it was felt at that stage that it was too late to undo what had been agreed.

At 10.16am on Wednesday, assistant principal at the pensions section in Finance, Lorcan O’Toole, wrote to Tony Jordan, principal officer in Finance, about the terms that had been forwarded from DETE.

“I understand from news media that Mr Molloy resigned voluntarily from his job at Fás. If this is correct then the terms set out in the draft letter are outside those permitted in the states (para 9) that the minister does not anticipate approving any improvement on the terms set out above, even in individual exceptional cases, other than on foot of a Government decision”.

“If, however, Mr Molloy has been dismissed by the Fás board (there is no indication from the media that this is the case) then we would have no objection to adding up to five years to his actual service and paying the pension benefits immediately: however, a Government decision would be required to pay him the six months’ pay in this case.”

Ten minutes later another e-mail was sent to Jordan, this time from Dave O’Reilly, higher executive officer in the pensions section. “I understand that Mr Molloy has resigned voluntarily. If that is the case, then our letter of May 1998 [the circular] regarding severance terms for CEOs does NOT apply.” O’Reilly wrote that, consequently, Molloy was entitled to either a pension at 60, or a lesser immediate pension, both based on actual service. Sanction for the request from DETE should be refused, he said.

O’Reilly said that if Molloy had been dismissed, then he could get the terms being suggested, apart from the six months’ pay, which would require a Government decision.

Jordan, an hour later, sent an e-mail to O’Connell and Connolly: “Given that the terms are different from the delegated sanction under the 1998 letter, should we not get this package referred to Government for approval? The 1998 letter requires a Government decision where we deviate from the terms. Meantime, I have a draft request for sanction from Dermot Mulligan. The Government decision may be the appropriate first step.”

Two hours later, at one o’clock, O’Connell responded to Jordan. “Dermot [Mulligan] rang me to request Finance sanction – apparently the resignation letter has been received. Could the sanction note that the deal is not strictly in line with the 1998 letter, given that this is resignation rather than severance, but that “approval is given on exceptional basis on condition that your department is satisfied that this is appropriate given the circumstances”? - Might need to think about running this by the Minister for Finance.”

In September of this year, after the Molloy package became a source of controversy, Lenihan said his officials had “briefed me on the matter verbally”. When asked why he did not demur from the arrangement, he said: “I inquired as to whether the payment was within the guidelines that applied to such payments and I was advised that they did.”

The papers released to the PAC include a draft letter from Mulligan to Connolly seeking sanction for the deal. It includes a sentence not included in the final letter sent by O’Conaill. “Please note also that the board of Fás has given the director general ownership of the car, which he has been using as director general.”

It is not clear how Mulligan, a director of Fás, could have written such a sentence. Fás directors Niall Saul and Des Geraghty briefed the media after a board meeting in October of this year. They said the offer of the 2006 Audi was not put to the board until its first meeting held after the deal had been agreed with Molloy, and that it had been felt that refusal to sanction the car could have unwound the whole package. The matter was put to a vote and agreed, though there were some who voted against.

The DETE was asked how Mr Mulligan could have written that the Fás board had approved Malloy keeping the car.

A spokewoman said that the letter was a draft letter, that the car was not part of the department’s remit, and could not have been given without board approval.

Fás oversight not supported - Varadkar

ATTEMPTS BY officials in the Department of Enterprise, Trade and Employment (DETE) to improve the oversight of Fás were not supported by successive ministers, according to Fine Gael TD Leo Varadkar.

It was his information, he said, that attempts to have certain Fás expenditures put on the “risk register” in the department did not receive political support.

Asked about the legislation introduced by the Tánaiste, Mary Coughlan, which will change the structures in Fás, Varadkar said his view was that Fás had too many functions.

“It should be broken into its constituent parts. Under the new structure the Fás board will not be made up of representatives of sectional interests, but will be appointed by the Minister for Enterprise, Trade and Employment.” He doesn’t believe this will change the relationship between Fás and the department.

Labour TD Roisín Shortall said the public accounts committee, of which she is a member, had recommended that the Dáil Committee on Enterprise and Small Business would have a key role in nominating directors to the Fás board and examining them in public session.

“There is a problem in the way the Minister has control of all board appointments . . . Arguably the new arrangements have the potential for greater cronyism. I think the relationship between Fás and [DETE] is much too cosy.” She is critical that Fás paid the travel and hospitality expenses of its political masters and DETE officials. “All that stuff should end.”