In April, Independent TD Catherine Murphy called on the Government to order a full independent inquiry into a number of IBRC transactions, including the 2012 sale of Siteserv to a company controlled by Denis O'Brien. Ministerial briefing notes, prepared by officials at the Department of Finance, were released to the TD. They revealed concerns within the department that "a large number of transactions were poorly executed" by IBRC. Below is her contribution to a debate on the matter in the Dáil on Wednesday night.
Deputy Catherine Murphy: I thank Fianna Fáil for tabling the motion and allocating me some of its speaking time. While Siteserv is at the centre of this controversy, it is part of a wider set of issues.
I want to refer briefly to an article in The Sunday Times from last Sunday. It states that in summer 2011, around the same time as the decision was made to sell Siteserv, Sierra Support Services, a Siteserv subsidiary, started preparing a bid for contracts to install water meters. Siteserv already had a contract with Bord Gáis to service boilers. According to Sierra's managing director the company began hiring water meter specialists in mid 2011. Siteserv was haemorrhaging cash and owed IBRC and the taxpayer €150 million, yet was planning for the future which involved water metering.
On 26 July 2013, a Sierra joint venture, GMC Sierra, won three contracts, worth €62 million each, to install water meters for Irish Water. To understand that, one has to go back to June 2011 when the sales process for Siteserv, led by Siteserv itself rather than an examiner, was commenced. IBRC took a hands-off approach despite being owed €150 million. A sales team was assembled, comprising Walter Hobbs, four Siteserv executives and board members, Davy Corporate Finance and KPMG. Somewhere along the way a decision was made to exclude trade buyers. Some 50 candidates were whittled down to nine expressions of interest in November 2011. On 11 November 2011 those interested parties were contacted and asked to sign a confidentiality agreement.
Once they were signed, an information pack about Siteserv was sent to potential bidders. This allowed for due diligence and there was a deadline of 5 p.m. on 7 December 2011, a date which should be remembered because it is important. Parties were informed that the sales team wanted the entire process to be concluded by mid-January, which was quite hasty. We now know that Millington, which was the eventual bidder, was not incorporated until 7 December 2011. Given that the entity did not exist, how could it have undertaken the three week due diligence period required of the other bidders?
Millington could not have signed a confidentiality agreement in November 2011, nor could it have received a Siteserv information pack because it did not exist at the time. If Millington was able to make a bid later in the process than all other bids, how did it come by the information it needed to make the bid? These things are not made on the back of an envelope. Who gave it the information?
It is possible that Millington used a proxy to obtain that information on its behalf. If so, how does that sit with confidentiality agreements? Given that Millington only came into existence on 7 December, the same day as the deadline for the first round of bids, how can we find out how soon after that Millington made a bid? Did that bid follow the 16 point checklist required of the other bids or was it a three page submission to which Mr. Dukes referred when he confirmed that Mr. O’Brien had advance knowledge of the sale?
Acting Chairman (Deputy Jack Wall): Deputy, you must not use people's names.
Deputy Catherine Murphy: Various sources involved in the process have indicated to me that they always felt that all bidders were not playing from the same starting line. In the information pack sent to prospective bidders who had signed confidentiality agreements it stated that it should be assumed that the company will be acquired on a debt free and cash free basis, yet I have had strong indications that when Siteserv was sold to Millington it had €10 million on its balance sheet, a combination of cash and debtors, something which has to be inquired into.
We now know that Millington paid €40 million to IBRC and €5 million went to the shareholders of Siteserv in order to get them to agree to the deal. Yet others involved in the process clearly said they would have paid more. When a person from Altrad, a trade buyer which was excluded from the bidding process, turned up at the shareholders’ meeting on 5 April 2012 the person commented that they wondered about the confidentiality aspect of the deal. It was said that if one looked at any of the acquisitions it made, it kept everything in total confidence.
He went on to dismiss claims by Siteserv that there was only a slim chance that Altrad would stick with the higher bid. He said that the reality was that with the synergies it had with Siteserv, €60 million would have been a low bid, but that was his company’s opening bid. If an open fight had been taken place and people with synergy had been allowed in, the deal could have gone well beyond €60 million.
Another point that leads to a question is share activity. At the start of November 2011, the share price for Siteserv was 3.5 cent, yet over the course of the month as the supposed confidential process intensified, the purchasing of Siteserv shares increased 53 fold. The review the Minister has commissioned is to be undertaken by Kieran Wallace of KPMG. It cannot be considered to be independent, no matter how much one tries to stretch the imagination. It led the sale and represented the personal interests of many of the key players involved in the sale, and Kieran Wallace led the liquidation of Siteserv plc.
The Siteserv special liquidator's report was signed off by him and he was the one who distributed the €5 million to the shareholders when it was formally signed off. A map of almost all the key players in the Siteserv saga leads back to one place and that is KPMG. Let me read a list. The chairman of Siteserv during the sale is a consultant and company director with KPMG. Robert Dix, a non-executive director at Siteserv, was a partner in KPMG----
Acting Chairman (Deputy Jack Wall): Deputy Murphy should not be referring to names.
Deputy Catherine Murphy: We have to be able to create these links.
Acting Chairman (Deputy Jack Wall): Please do not refer to names.
Deputy Catherine Murphy: The independent person appointed by IBRC was himself a former director of IBRC. The person who acted for Davy in the sale and now works in the shareholder management unit at the Department of Finance was a former KPMG employee. KPMG's Kieran Wallace and Eamonn Richardson were sued by Mike Aynsley, Tom Hunersen and Richard Woodhouse, following the winding up of IBRC.
KPMG's own global code of conduct states specifically that it must maintain independence and objectivity and avoid actual or perceived conflicts of interest. By having KPMG undertake this process, it has undermined the process right from the word go. Of course, KPMG acts for the person who owned the process as auditor in Topaz, Communicorp, Independent News and Media and the Beacon Hospital.
There are other elements of the Siteserv transaction which need to be explored and which the terms of the review do not cover. For example, the Sunday Independent reported that it asked the CEO of Siteserv at the shareholders' meeting on 5 April 2012 whether the CEO had significant personal borrowings from IBRC. It is essential that any inquiry take a look at how those loans played out after the process and after a significant amount was paid to him. The ultimate buyer of Siteserv was one of the largest debtors of IBRC. His loans had expired and he had apparently written to Kieran Wallace in his role as special liquidator seeking the same terms IBRC had allowed him, which was to pay off his loans in his own time at low interest rates. When a loan expires, one expects a penalty to be put onto it, not a discount. My understanding is that it was costing IBRC 7% for its money, significantly higher than the 1% NAMA was borrowing at. Even if Denis O'Brien's loans were eventually paid off in full-----
Acting Chairman (Deputy Jack Wall): I have asked the Deputy three times not to mention names.
Deputy Catherine Murphy: The interest rate represented a subsidy. I cannot understand why this is not a factor, given that more money would have had to be borrowed to purchase the company. As I understand it, it was the State-owned AIB which put up the money for the purchase of Siteserv to Millington. I must say I find it really astonishing. Surely it is clear that the proposed review is not only conflicted; it is just not wide enough to give a true picture. KPMG should really recuse itself from the process because this will damage its reputation. This is not an independent review and it is essential that one is held.
