In 1965, having returned from the second Vatican council, the ultra-conservative archbishop of Dublin, John Charles McQuaid, reassured his flock that “nothing in this council will disturb the tranquillity of your Christian lives”. In a similar crisis of faith faced by the Irish State as it came close to collapse in 2008 and 2009, the same reassurance went out quietly to the professional classes: nothing in this crisis will disturb the tranquillity of your privileged lives.
While Government and Fianna Fáil politicians have set their hair on fire over lavish salaries at the Central Remedial Clinic, the underlying truth is that this reassurance came from both the last government and the present one.
Let's take one small example. Ernst and Young (now known as EY) acted as auditors to Anglo Irish Bank. In 2011, the former comptroller and auditor general John Purcell presented a report on their behaviour in that job to the Chartered Accountants Regulatory Board (CARB). He found that there was a prima facie case against Ernst and Young on three separate counts: "their failure to detect the scale of Mr Seán FitzPatrick's loans and their systematic refinancing over year ends"; "their failure to refer to the transactions in September 2008 between Irish Life & Permanent and Anglo in their audit report on the first set of Anglo's 2008 financial statements" and "their failure to ensure appropriate disclosure of a loan made to Mr William McAteer, a Director of Anglo, in the first set of Anglo's 2008 Financial Statements or in their audit report thereon".
Serious case
Certain criminal proceedings are pending and there has not yet been any action against Ernst and Young, but the fact remains that a very serious prima facie case stands for now on the public record. Ernst and Young refused to appear before an Oireachtas joint committee hearing on the banking crisis, so we have not heard its side of the story.
Yet Ernst and Young has continued to receive large contracts from the State. Needless to say, it was in on the Irish Water bonanza – to the tune of €4.6 million. In 2011 and 2012, Nama awarded the firm contracts worth €7.1 million. To do what? Believe it or not, as Michael Noonan has explained, the contracts relate "in the main to loan valuation and due diligence". The company that failed to detect very large loans on Anglo's books is being paid by us to exercise due diligence in relation to loans bought by Nama.
Meanwhile, Ernst and Young's Luke Charleton was appointed "special manager" of Newbridge Credit Union by the High Court in January 2012. The court approved hourly payments for Mr Charleton and his team as follows: "€375 for the Special Manager; €375 for partners; €300 for directors; €247 for senior managers; €191 for managers; €133 for senior assistants". To put these rates in context, the blind pension is €188 a week.
All of this is about sending out a signal: nothing – not even the catastrophe at Anglo Irish Bank – would disturb the tranquillity of professional privilege. For the masses, the message was that the most horrible things would have to be done to the most vulnerable people, not because the State had run out of compassion but because it had run out of money. There might have been a little moment when a chill of fear pricked the skin beneath the silk shirts of the €375-an-hour men, but the reassurance came very quickly. It was there in the initial plan for Nama, which set aside €2.4 billion over 10 years for fees and services – essentially a giant outdoor relief scheme for famished professionals. The State, it became clear, had not run out of money for important people.
Last week, Michael Noonan gave figures just for Nama’s current spending on lawyers: €18 million on legal advice; €14 million on “legal due diligence fees”; and €36 million on legal fees incurred on behalf of borrowers – that’s €68 million in legal fees alone. As it happens, that’s exactly the same amount allocated with great fanfare in November to carry out repairs to all of Ireland’s school buildings.
Professional advisers
The State is a vast purchaser of professional services: since 2009, the Department of Finance alone has paid out public money to 30 different consultancy firms for 39 different projects. It could have used its muscle to drive down fees to levels appropriate to a State that is worth in total minus €80 billion. Instead, in project after project, vast amounts of public money go to professional advisers. In November, for example, the Central Bank paid €750,000 for professional advice to Naas Credit Union to consider a possible merger with Newbridge Credit Union. The money went to lawyers and accountants but also to property consultants, public relations, and "business consultants". On January 8th, Naas Credit Union came back to say that it needed another €20,000 of public money for lawyers and "other advisers".
They’ll get it of course: for those who charge by the hour, the crisis of faith is long past. Having survived this great crash, they know, surely, that nothing will ever disturb their tranquillity again.
