ANALYSIS:Anglo Irish Bank colonised a public body with planning powers, and both took risks that blew up in all our faces
THERE’S A half-built office block in the Dublin docklands that neatly encapsulates what went so wrong there at the height of the Irish property bubble. The building was being constructed by a Liam Carroll company, North Quay Investments Ltd, and was to be the gleaming new headquarters of the then booming Anglo Irish Bank.
The finance for the building was coming from Anglo and the planning for the building was achieved using the Dublin Docklands Development Authority’s (DDDA) “fast track” system.
So far, so good. However the High Court ruled in 2008 that the nature of the dealings between Carroll’s company and the DDDA compromised the authority’s planning function.
There were other problems too that have come into sharp focus in recent times. There were directors on the authority’s board who also sat on the bank’s board, creating an obvious conflict of interest. At an Oireachtas committee meeting late last year the current authority chairwoman, Prof Niamh Brennan, said it was “absolutely clear” there were “systemic conflicts of interest” at the authority.
The desire for development and profit created a morass of conflicts and blurring of boundaries. Even as the seven-storey building was being built for Anglo using Anglo money with permission from the DDDA, the authority was drawing up new plans for the North Lotts that would allow for higher buildings.
The authority’s executive entered into an agreement with Carroll’s company that once this new scheme was agreed by the board, the company would be able to double the size of its North Quay building to 16 storeys. The executive did not disclose this agreement to its own board.
All these matters were happening in parallel to such an extent that the smaller building was being built with enough underground car spaces for a building twice its size. One of the documents circulated yesterday by Fine Gael’s Phil Hogan is a draft report to Minister for the Environment John Gormley from the authority’s board. It says the authority’s “planning functions were generally subservient to its development and architectural functions. Planning was used to promote development.”
In a line that chimes with boom-era practices at Fás, the report says that key information on planning issues was “deliberately and systematically withheld from the current executive board”.
Information now coming to board level indicates there are serious problems with inappropriate planning decisions over and above the North Quay one “with significant risks that legal steps may be taken against the authority arising from its past planning practices”.
In other words, inappropriate practices have cast a shadow over the legality of some major buildings in the docklands. The number of problem permissions appears to have increased at the height of the boom.
Across the Liffey hoardings surround the former Irish Glass Bottle site. The authority joined a joint venture vehicle called Becbay in 2006 which bought the site at the height of the property bubble. The site was bought for €412 million, with other costs bringing the total to €426.8 million.
The authority initially put up €32.8 million. The other parties involved were developers Bernard McNamara and Derek Quinlan, assets of both of whom are now on their way to the National Asset Management Agency (Nama). Another report circulated yesterday by Hogan shows the shareholders put up €138 million in total, with €293 million being borrowed from Anglo. The projected annual interest was €16 million.
The former industrial site needs extensive, and expensive, cleaning up before it can be developed. The authority’s apparent commitment to fast-track planning for the site has now evaporated. The site may be worth €50 million to €60 million, though Hogan said its value is “zero”. He claims the deal could end up costing the exchequer up to €500 million.
Although he unveiled three DDDA reports yesterday with great fanfare, his message was that the reports didn’t do what many have expected they might do: explain how all of this could have happened. However, sources close to the authority said the reports, which are still in draft form, are designed to show what happened, not why.
To do the latter would require an inquisition that had powers to look at not just the authority but also Gormley’s department, the Department of Finance, Anglo, the affairs of various developers and the actions of various individuals.
And in a broad sense, we know what went wrong. Anglo Irish Bank colonised a public body with planning powers, and together they took risks that have blown up in all our faces. The Government did nothing.
With hindsight the very purpose of the authority may have contained a flaw. It was established in 1997 and given both a development and a planning remit. Adequate structures were not put in place to prevent one function undermining the integrity of the other. This reached its apex when the authority became a joint venture partner in schemes the planning for which was being fast-tracked by the authority.
The other major reason for the disaster has got to be Seán FitzPatrick. When the authority was established in 1997, the chairman of the board was Lar Bradshaw. Also on the board was the head of National Irish Bank, Jim Lacey, but he resigned a year later and was replaced by FitzPatrick, the head of Anglo Irish Bank.
The arrival of FitzPatrick on the board was to prove disastrous. In 2004 Bradshaw was invited to join the board of Anglo. FitzPatrick and Bradshaw became involved in business dealings together, borrowing money from Anglo. Bradshaw continued as chairman of the authority up to 2007, when he was replaced in that position by Donal O’Connor. The following year O’Connor was appointed to the board of Anglo.
It was not so much people with conflicts being appointed to the DDDA board, as it was people on the board being invited on to the Anglo board. That said, the Department of the Environment had a representative on the board, but the cross-directorship issue does not appear to have become a political concern.
A “light touch” approach was adopted by the department. For Hogan the big political issue is the decision by the Taoiseach Brian Cowen in 2006, when he was minister for finance, to okay an increase in the authority’s borrowing powers, so it could buy into the Becbay deal.
Colm Keena is Public Affairs Correspondent