Colm Keena explains the background to the story
What happened yesterday?
The Dublin Docklands Development Authority was brought within the remit of the Comptroller and Auditor General, John Buckley, which means his office can now investigate how the body ran its business during the property boom.
The authority published three reports, copies of which were leaked some time ago, in draft form, by Fine Gael’s Phil Hogan. The reports deal with, respectively, planning, finance, and the board’s reaction to the planning and finance reports.
What do the three reports say?
The finance report says there was a “loose culture of internal systems of financial control” and no evidence of oversight of the former chief executive, Paul Maloney, by his superiors, in relation to the execution of his duties. This was “partly because it was found that the chief executive did not bring these matters to the board’s attention”.
Mr Maloney, in a short statement yesterday, said the report was flawed and that he and no doubt others would address this issue in another forum.
The planning report found “serious weakness” in the operation of the authority’s planning function in recent years. Planning was made subservient to the authority’s development function, which compromised the former. The report also says inappropriate planning decisions were found and that findings on these matters are “commercially sensitive”.
Key information on planning was kept from the executive board, with matters to do with the proposed new headquarters for Anglo Irish Bank being a case in point, the report said.
What did the board say?
It said it felt there was a need for further independent investigation into matters disclosed in the planning report. This view has now been accommodated by the move by Minister for the Environment John Gormley to bring the authority under the remit of the CAG.
The board, in its report to Gormley, pointed out most of the recommendations for change made in the planning and finance reports were already implemented or were being implemented. It also ran a list of scary figures.
How scary are the figures?
If we weren’t already becoming inured to huge figures, they would be the main news story for weeks. But even as matters stand, they are stunning. The authority joined a consortium that bought the Irish Glass Bottle site in Ringsend at the height of the property bubble. Its initial investment was €32.8 million, and the initial cost of the transaction was €426.8 million.
Approximately €293 million was borrowed from Anglo Irish Bank, and the shareholders in the consortium agreed they would shoulder the interest payments in proportion to their shareholdings.
The authority’s stake in the consortium has been valued at nil, and it has to pay interest at about €5 million a year on the loan. “The authority is incapable of operating on a break-even basis with this annual liability,” the board said in its report.
Is that it?
No. The shareholders were the authority, property developer Bernard McNamara and financier Derek Quinlan. McNamara, who has said he is broke, is bringing a High Court case against the authority, saying it failed to deliver on its part of the Glass Bottle site deal. (His complaint has to do with fast-track planning.)
According to the board’s report, the amount involved is circa €100 million. The authority is robustly defending the case, but the legal costs are substantial. To date, discovery has involved some 22,000 pages of documents
How is McNamara funding his case if he is broke?
Good question. It’s not a matter for the authority. The authority’s chairwoman Niamh Brennan says its legal costs are a “cashflow drain”. The board’s report says the authority is operating in a “very litigious environment, and it is possible that the authority might be subject to other legal challenges in the future”.
It is also having difficulty collecting money that is due, and was owed levies of €8 million as of the end of 2008. There is a dispute over €20 million going on that the authority won’t discuss as it is “commercially sensitive”.
The authority is operating within its borrowing limit of €127 million, but this might “come under pressure” because of the matters outlined in the report. Brennan told The Irish Times the authority is “in an extremely fragile position”, but has made progress on cutting costs.
What else did Niamh Brennan say?
She said the reports are based on the authority’s files and what they show happened. “We don’t have evidence on why certain things happened. Why the facts are as they are is outside the scope of the authority to examine.”
