COMMITTEE of PUBLIC ACCOUNTS debate -
Thursday, 6 May 1999

Vol. 1 No. 5

1997 Annual Report of the Comptroller and Auditor General and Appropriation Accounts (Resumed).

Vote 17 - Office of the Ombudsman.

Mr. P. Whelan (Director, Office of the Ombudsman) called and examined.

Chairman

Item No. 5 on our agenda is the 1997 Annual Report of the Comptroller and Auditor General and Appropriation Accounts. Our first business today is Vote 17 - Office of the Ombudsman. We will subsequently deal with Vote 31 - Department of Agriculture and Food (resumed) and the Irish Intervention Agency, Annual Financial Statements 1994 (resumed).

Witnesses should be made aware that they do not enjoy absolute privilege and should be apprised as follows: attention is drawn to the fact that, as and from 2 August 1998, section 10 of the Committees of the Houses of the Oireachtas (Compellability, Privileges and Immunities of Witnesses) Act, 1997, grants certain rights to the persons who are identified in the course of the committee's proceedings. These rights include the right to give evidence; the right to produce or send documents to the committee; the right to appear before the committee, either in person or through a representative; the right to make a written and oral submission; the right to request the Committee to direct the attendance of witnesses and the production of documents and the right to cross examine witnesses.

For the most part these rights may be exercised only with the consent of the committee. Persons being invited before the committee are made aware of these rights and any persons identified in the course of proceedings who are not present may have to be made aware of these rights and provided with a transcript with the relevant part of the committee's proceedings if the committee considers it appropriate in the interests of justice.

We will now deal with Vote 17 - Office of the Ombudsman. I welcome Mr. Pat Whelan, Director of the Office of the Ombudsman. Perhaps he will introduce to the committee his accompanying officials.

Mr. Whelan

With me is Ms Maureen Behan, senior investigator and finance officer.

Chairman

Ms Behan is welcome. Mr. Joe Meade is present to deputise for the Comptroller and Auditor General and I ask him to introduce this Vote.

Mr. Meade

This is a relatively small Vote which, apart from direct expenditure for the expenses of the Ombudsman's office, also includes administration expenditure for the Office of the Information Commissioner and the Public Offices Commission. Total expenditure for the office in 1997 was £1.416 million. The cost of salaries, wages and allowances amounted to £1.06 million which represents 75 per cent of the expenditure. The bulk of the remaining expenditure was accounted for by travel costs, post and telephone costs, office machinery and incidental expenses.

Deputies will be aware that the Comptroller and Auditor General and the Ombudsman are but two members of the Public Offices Commission among the tasks of which are the provision of guidelines, advice and assistance generally with regard to the Ethics in Public Office Act, 1995. The commission also has a supervisory role under the Electoral Act, 1997. The Information Commissioner's role includes reviewing freedom of information decisions made by Departments and Offices, local authorities and health boards.

There were no matters arising in the course of audit of the office which needed to be brought to the attention of the Committee of Public Accounts.

Chairman

Would Mr. Whelan like to make a brief opening statement?

Mr. Whelan

Yes. As Mr. Meade indicated, the duties and roles of the office expanded considerably in recent years and now encompass the functions of the Public Offices Commission and the Information Commissioner. The roles of Information Commissioner and the Ombudsman are complementary in many ways in that both are ultimately seeking to raise the overall standards of administration throughout the public bodies covered by their remit.

Chairman

I call on Deputies Rabbitte and Cooper-Flynn to put their questions.

Deputy Rabbitte

I have no questions.

Deputy Cooper-Flynn

On what was the money allocated to consultancy and legal fees spent? How were the consultancies awarded?

Mr. Whelan

Practically all the expenditure relating to the consultancies involved the taking of legal advice for the three functions within the office. In accordance with standard procedure, we tender for such legal advice every two to three years when different firms of solicitors are invited to make presentations to the office. Because the offices are independent, we do not use the services of the Attorney General's Office. Instead, we use a firm of private solicitors.

Deputy Cooper-Flynn

Has the same firm of solicitors been used for the past number of years?

Mr. Whelan

The same firm has been used in respect of the Ombudsman. The contract was put out to tender last year and that firm was again successful in obtaining it. A separate firm acts for us in relation to the Public Offices Commission. That firm was appointed when the commission was established in 1995.

Deputy Cooper-Flynn

Did that firm submit a tender for its contract?

Mr. Whelan

Yes.

Deputy Cooper-Flynn

How many staff are employed by the office?

Mr. Whelan

There are 58 staff spread between the three offices.

Deputy Foley

How is that number broken down?

Mr. Whelan

Approximately 38 are based in the Ombudsman's office, 14 are based in the Public Offices Commission and eight work for the Information Commissioner.

Deputy Foley

How many consultants were employed by the office?

Mr. Whelan

As previously stated, our expenditure on consultancies is almost exclusively related to legal advice sought for the offices. In addition to obtaining legal advice in respect of issues arising from legislation affecting our offices, we must also obtain legal advice on issues which arise from the Social Welfare Acts and other Acts relating to the bodies within our jurisdiction. From time to time, the office may be taken to court by someone seeking a judicial review of our proceedings. On a number of occasions we have been taken to both the High Court and the Supreme Court as co-defendants with one of the bodies within our jurisdiction. When such situations arise we are obliged to bear our own costs. It is not possible to predict when such situations will arise.

Deputy Foley

For the year ending 31 December 1997, with how many queries did the Office of the Ombudsman deal?

Mr. Whelan

In 1997, approximately 3,000 complaints were dealt with.

Deputy Foley

How many related to the Department of Social, Community and Family Affairs?

Mr. Whelan

We received the greatest number of complaints in respect of that Department, approximately 1,000.

Deputy Foley

How many were resolved?

Mr. Whelan

We tend to view complaints in terms of either partial or complete resolutions. In rough terms, in approximately 50 per cent of cases we obtain some form of assistance for the complainant either by way of a complete or partial resolution of their complaint. The other 50 per cent are not upheld.

Deputy Foley

Of the complaints received, how many were genuine?

Mr. Whelan

It depends on what the Deputy means by a genuine complaint.

Deputy Foley

One which could be followed through.

Mr. Whelan

In any given year I set a figure of about 3,000. About 700 or 800 complaints per year would be invalid as they relate to bodies which are not in our jurisdiction or they may be more appropriate to banks, insurance companies or whatever. The vast majority of complaints, about 95 per cent, are bona fide.

Deputy Foley

I congratulate Mr. Whelan and his staff on the manner in which he deals with complaints. A number of people I have spoken to in the past few months have complimented them.

Deputy Durkan

I am curious about the statistic of 50 per cent. By how much has the volume of inquiries increased in the past five years? Is there a backlog or a delay in resolving inquiries which fall within Mr. Whelan's remit?

Mr. Whelan

The number of complaints in 1998 were slightly down on the previous year. In 1997 they were up by 40 per cent on the previous year. However, leaving out 1997, when there was a slight blip in the system, in 1998 we received the highest level of complaints in ten years. The number of complaints in 1997 was greater than ten years previously.

Deputy Durkan

What was the cause of that blip in the system?

Mr. Whelan

To be honest, I do not really know. The office received a fair amount of publicity in 1997. The annual report got a high degree of coverage. We also published a special report on the payment of late pensions to social welfare recipients. This also received a fair degree of publicity and generated an increase in the number of social welfare complaints. Those two factors account for it to some degree but not entirely. In general, the underlying trend is roughly 3,000 complaints a year, which seems to be the figure we are settling down at.

Deputy Durkan

Which Departments generate most appeals to the Ombudsman?

Mr. Whelan

The Department of Social, Community and Family Affairs generates the highest number. That is not a bad reflection on the Department but is rather an indication of its enormous client base and the huge number of transactions. It affects almost every member of the community when one includes child benefit etc., as well as the traditional areas of unemployment or disability benefits. There are also insurance issues which can affect many people. Local authorities are also quite high on our list. This seems to be one of the areas which is growing more rapidly than any other - this area has increased substantially in the past three or four years and continues to do so.

Deputy Durkan

What is the nature of inquiries in relation to local authorities?

Mr. Whelan

Housing issues are near the top of the list. People complain that they have been unfairly denied a local authority house or that they cannot find out exactly where they are on the waiting list. There are also complaints as regards housing repairs and planning. We are not involved in planning appeals which is the preserve of An Bord Pleanála. However, we are involved in planning enforcement and deal with complaints where local authorities have failed to enforce planning conditions attached to particular developments. That is a time consuming area for us to be involved in and it generates a great deal of work.

Deputy Durkan

Is planning enforcement not a matter for a local authority?

Mr. Whelan

Yes, absolutely. However, when a local authority fails to act or fails to act reasonably in relation to a planning enforcement matter, members of the public are entitled to complain to the Ombudsman.

Deputy Durkan

The Ombudsman would then have to pursue the same procedure as the local authority was supposed to.

Mr. Whelan

We would question the local authority about why it had failed to enforce conditions. I am talking about a particular development, a housing estate, factory or whatever, which was built with certain planning conditions attaching to it, which in the view of the complainant have been ignored by the developer and the council. Complaints have been made to the council by the complainant and it has failed to take action in relation to enforcement, either because it does not consider it expedient to do so or because it has not explained it to the complainant. We would then investigate the issue.

Deputy Durkan

Do any particular local authorities feature in inquiries of that nature?

Mr. Whelan

No. Unfortunately, it is an area which causes us a great deal of difficulty. We do not find local authorities very receptive or well disposed to dealing with planning enforcement issues as well as we think they should.

Deputy Durkan

As regards staff etc., does Mr. Whelan think he has sufficient resources available to do the job he has been given within a reasonable time? What is the backlog at present?

Mr. Whelan

We do not have a problem with a backlog. We have roughly 1,000 complaints on hand at any one time. That sounds like a large number but in terms of the time it takes to turn these around——

Deputy Durkan

How long does that take on average?

Mr. Whelan

We would dispose of about 80 per cent of our complaints in about a four month period. The remaining 20 per cent can take an extremely long time. Some cases would run for a year, two years or maybe even three years for exceptional ones. The reason for that is that some of the issues are complex. There may be legal issues which the council or whatever body is involved wishes to clarify. We may also need to get legal advice. A body may not be receptive to our approach to the issue in any event which means we have to spend a considerable amount of time marshalling arguments and evidence to convince the body it should review its decision.

Deputy Durkan

Are there any areas in respect of which the office has been asked to extend its remit in terms of its authority?

Mr. Whelan

The Government has approved the drafting of an Ombudsman (Amendment) Bill which has a number of provisions, the most important of which is to extend the remit of the Ombudsman to a further range of bodies.

Deputy Durkan

Such as?

Mr. Whelan

The non-commercial State bodies such as FÁS, the Health and Safety Authority and Teagasc, which are all outside the Ombudsman's jurisdiction at the moment, for no good reason. For example, as regards FÁS, when the Ombudsman's office was set up in 1984, the National Manpower Service, as it was at that time, was included within its jurisdiction. However, it fell outside its jurisdiction on the creation of FÁS. The vocational education committees are also outside our jurisdiction and it is proposed to include them. Other bodies not under our jurisdiction are the third level institutes and public voluntary hospitals. This is an anomaly as health board hospitals are within our jurisdiction but public voluntary hospitals are not. However, this will be put right. I understand the Department of Finance is working on the drafting of this legislation which will be brought forward later this year.

Deputy Durkan

The insurance industry is not within the ambit of the Ombudsman.

Mr. Whelan

No, the insurance industry has a separate Ombudsman.

Deputy Durkan

An independent one.

Mr. Whelan

Yes.

Deputy Ardagh

On planning enforcement and local authorities, have you any further powers with which you can encourage local authorities to be more responsive in enforcing the planning conditions pertaining to certain developments? The Comptroller and Auditor General performs value for money audits. Is there some way the Ombudsman could prepare reports on specific issues which seem to be of national importance and which are spread widely? Are you in a position to prepare such reports for tabling before the House so that they can be examined in greater detail?

Mr. Whelan

Yes, we do. We have already done this in some areas. I mentioned our report on the late payment of social welfare pensions. As a result, the Department of Social, Community and Family Affairs amended the regulations to make the system fairer to people who did not know they were entitled to a pension. The issue was they were only entitled to six months' retrospection but that has now been more favourably extended. We also compiled a report two years ago on the school transport system as far as disabled children were concerned and we found the system operated in a discriminatory fashion against them.

We would be able to compile a report on planning and it is something we are considering. We are like any other organisation in that we have a number of priorities with which we want to deal and we believe these two reports are important. We will compile a supplementary report on the pensions issue because there have been developments since our last report. We expect to publish something on that in the next four to six weeks. We also intend later this year to publish a report on nursing homes where we found many problems. We have been successful in getting health boards and the Department of Health and Children to change their approach to many of the issues with which complainants were having problems. Planning is an issue we can address in that way.

We also have the power relating to complaints about planning to compile an investigative report. That could be done by way of a special report which could also be laid before the Houses to bring it to the attention of the Oireachtas.

Deputy Ardagh

How has the level of customer service within Departments and bodies under your aegis which you can investigate improved over the past ten years?

Mr. Whelan

The one thing we always notice and which keeps us awake at night is the failure of Departments and other bodies to give reasons for their decisions when they refuse someone a benefit or entitlement. Many of the complaints we receive are centred on the lack of information available to the complainant about why he or she was refused in the first place. Not enough information has been given to complainants to allow them articulate and appeal in their own case. That is the one area which is beginning to improve dramatically. An important catalyst has been the Freedom of Information Act because it imposes a statutory duty on public bodies to give reasons for decisions which may adversely affect people. We hope the provision in the Freedom of Information Act will bring about a significant improvement in that area.

Deputy Ardagh

How many cases arose in 1997 regarding the Department of Agriculture and Food? Has there been an improvement over the past ten years in the service complainants receive from the Department?

Mr. Whelan

In 1998 we received 198 complaints about the Department of Agriculture and Food.

Deputy Ardagh

Would that be a relatively low number?

Mr. Whelan

It is number two on the list of Departments.

Chairman

After the Department of Social, Community and Family Affairs?

Mr. Whelan

Yes. That Department has about 800 to 1,000 complaints. There is a big gap between it and the Department of Agriculture and Food; the Department of Education and Science as a close third.

Deputy Ardagh

Regarding the Department of Agriculture and Food, what are the main items in which the people who approach you are interested? Where do they feel aggrieved?

Mr. Whelan

Issues such as headage payments and beef premium schemes.

Deputy Ardagh

How many headage payments are made in a year?

Mr. Whelan

I do not know; my colleagues in the Department might know.

Deputy Ardagh

What percentage of the total number of customers would 198 be?

Mr. Whelan

The number of complaints we receive about the Department is low in terms of its potential client base. That does not indicate everything is fine within it. Many farmers are not inclined to use the service of the Ombudsman for various reasons.

Deputy Ardagh

Deputy Cooper-Flynn would probably receive more than 198 requests about headage payments.

Deputy Cooper-Flynn

They are all satisfied.

Mr. Whelan

The Department has made a number of important moves in recent years to introduce an appeals systems and this is another reason the number of complaints we receive is lower than one might expect.

Deputy Ardagh

I am trying to find out if the level of service to the customer is improving. Do you perceive an improvement in the level of service to the customer in the Department of Agriculture and Food?

Mr. Whelan

The Department is very large and we have noticed it is better in some areas than in others. Some sections seem more responsive to the needs of their customers and to our office than other sections.

Deputy Ardagh

What sections are most responsive?

Mr. Whelan

I do not have those details with me but I can supply them.

Deputy Ardagh

I am sure the Secretary General would like to have a list.

Mr. Whelan

He probably already knows. We have been in touch on that.

Chairman

The Department of Agriculture and Food is the Department to which you most often had to apply under section 7. Will you explain what is section 7 and why the Department is out of line in that respect?

Mr. Whelan

Last year in the annual report we introduced a league table for the first time showing a list of section 7 notices. Such a notice refers to section 7 of the Ombudsman Act which empowers the Ombudsman to compel any Department or body to supply him with any information, document or thing.

Chairman

This would be when they fail to produce on request.

Mr. Whelan

Exactly, and they can be compelled by the Ombudsman to produce the information or to attend before him with that information and to address the issue. We have issued these notices as a matter of course to Departments and other bodies which have not supplied what we require by the due date. We gave notice in our annual report and I wrote to all the heads of bodies two years ago to say that we would publish these details in the annual report and we did so in our most recent one. The Department of Agriculture and Food heads that list in terms of Departments, but a number of local authorities and one health board are also included. In terms of the number of section 7 notices issued, the Department of Agriculture and Food came top of the list, the Department of Education and Science second and the Revenue Commissioners third. In terms of local authorities, Mayo County Council was top of the list.

Deputy Ardagh

What were the numbers?

Mr. Whelan

In the case of the Department of Agriculture and Food, we had to issue 13 section 7 notices in the year; those notices went to different sections of the Department. Some sections were very good all the time while others were not so good and required them on a more regular basis.

Chairman

Do you ever have difficulty getting Departments or agencies to respond to a section 7? What would happen if they did not respond?

Mr. Whelan

Thankfully we have not had to face that.

Chairman

Would you have to go to court?

Mr. Whelan

It is an interesting question. There is provision in the Act for obstructing the Ombudsman and one can be deemed to be in contempt of court. However, the Act does not follow through to explain what should be done. To their credit, Departments respond to us.

Chairman

You should not have to resort to section 7 with public agencies.

Mr. Whelan

No, we should not. We give fair warning about this and Departments and other bodies are aware of the time limits within which they must respond. Those limits are agreed with those bodies so it is not as if they are unreasonable.

Deputy McCormack

Some planning authorities are not very receptive to inquiries and perhaps Mr. Whelan is not alone in that. We who are members of local authorities often find that they are not very receptive and I have been outspoken on the customer service they give. However, we must recognise that in my area, for example, the number of planning applications have doubled in the last two years, yet the planning staff has increased in number by approximately 5 per cent. There are great difficulties in planning offices due to the boom in housebuilding and planning applications and the authorities are finding it very hard to keep up.

The only section relevant to Mr. Whelan would be that relating to non-compliance with planning conditions but planning authorities are finding it hard to comply as they do not have the staff. There is crisis management in most planning offices and perhaps we should make some recommendations in that regard. To appoint permanent staff in planning offices one must get the permission of the Minister and the Department as well as the local authorities appointments commission, all of which takes approximately a year. Planning offices are now bringing in temporary staff for a few months. It is a mess and Mr. Whelan will face more and more work. It is a good thing he deals only with compliance or there would be many more complaints. How many times were section 7 notices used to get information from planning authorities?

Mr. Whelan

In their defence, local authorities have not told us they cannot deal with planning applications due to staff shortages.

Deputy McCormack

They are saying it is worse.

Mr. Whelan

It is not an issue with which we can deal. We deal with planning complaints on their merits and we have difficulties getting local authorities to review their approach or to take action based on our assessment of the merits of the case. I do not have details with me but I can get the number of section 7 orders issued in planning cases.

Deputy McCormack

You specifically deal only with compliance with planning conditions?

Mr. Whelan

The other area we deal with is planning administration. There have been some classic cases in this area. Members will be aware that individuals have the right to object to conditions of planning decisions and are notified when the decision is made by the planning authority so that they can exercise their right to appeal within the specified time limits. We have come across a couple of cases, though not many, where planning authorities have failed to notify objectors of their right to appeal with the result that those objectors lost the right to appeal in those cases. In one instance we recommended compensation of £5,000 to an individual who lost that right due to what was accepted as an administrative failing by the planning authority. In another case we also proposed compensation but the complainant was not interested.

Deputy McCormack

To clarify further, as well as non-compliance you can take complaints about the level of customer service. Can those complaints be taken from members of local authorities also, because some members, myself included, have reason to complain about the inadequate service some planning authorities are giving?

Mr. Whelan

If it is a complaint from a member of a local authority against that local authority, the answer is no. We cannot deal with that. If it is a complaint on behalf of a constituent we can.

Deputy McCormack

Every complaint is related to what a constituent brings to the attention of the public representative, therefore it can be a complaint from a constituent. Is a public representative entitled to present that complaint on behalf of the constituent.

Mr. Whelan

Absolutely, yes.

Deputy McCormack

Incidental expenses of £1,000 are included in the Supplementary Estimate. What was that for?

Mr. Whelan

It was a new telephone system that was introduced that year. We had been on the Government telecommunications network but a new system was introduced that year.

Deputy C. Lenihan

You mentioned that social welfare matters form the biggest volume of complaints and, like the Department of Agriculture and Food, this is no reflection on the excellent service both Departments provide. I am interested in the profile of the complainant. Is there any average or is the type of complaint broken down? Is a profile of complainants provided?

Mr. Whelan

This is social welfare?

Deputy C. Lenihan

Do you have a socio-economic profile of the kind of person who would make a complaint?

Mr. Whelan

No, we do not. It is something we have thought about and when we receive complaints we have thought of getting details from complainants to get a better idea where people are coming from. We thought it might be useful for publicity for the office if we could target complainants like that but, as of now, we have no such indications.

Deputy C. Lenihan

But you do have plans for an anonymous survey? Anonymity should be guaranteed as this very important. Whatever about agriculture, social welfare matters affect people who are very vulnerable and who depend on the State to make provision for them. This can be denied to them without reasons being given; such people may be victims of illiteracy and unable to access their rights. Priority should be given to funding such a survey on your part.

Mr. Whelan

Deputy Lenihan is right but I assure the committee that we take confidentiality very seriously. There is no question of us making people's details available.

Deputy C. Lenihan

When you say social welfare provides the highest volume of complaints, how many are there?

Mr. Whelan

Last year there were 800 complaints.

Deputy C. Lenihan

Is there a regional spread? I know there are important confidentiality issues and an ongoing anonymous survey would be very valuable to us and policy makers. Is this broken down into regions, such as Dublin against the rest?

Mr. Whelan

In our report we publish the number of complaints per county by using the complainants' addresses.

Deputy C. Lenihan

Dublin obviously has the bulk of the complaints.

Mr. Whelan

Yes.

Deputy C. Lenihan

How many of the 800 come from Dublin?

Mr. Whelan

Last year Dublin had 727 complaints in total - I am not just talking about social welfare. This is all complaints.

Deputy C. Lenihan

Out of?

Mr. Whelan

Out of 2,800.

Deputy C. Lenihan

Of the social welfare complaints is there a breakdown for Dublin?

Mr. Whelan

I do not have a breakdown by region.

Deputy C. Lenihan

If we have the addresses——

Mr. Whelan

It would be possible to do this.

Deputy C. Lenihan

It would be possible to break it down within the city.

Mr. Whelan

We would be able to do that.

Deputy C. Lenihan

Could the committee be provided with that information? Dublin Deputies would be interested to know from where in the city the complaints are coming.

Mr. Whelan

Is the Deputy interested in social welfare complaints?

Deputy C. Lenihan

Social welfare complaints by postal district. Obviously there will be a big difference between Dublin 4 and Dublin 24.

Mr. Whelan

That is no problem and we will do that. The other interesting fact revealed by the figures is that counties such as Kerry or Mayo seem to be particularly good at using the Ombudsman's service. For instance, we visited Tralee two weeks ago——

Deputy C. Lenihan

They are good at offshore banking in Tralee.

Mr. Whelan

We got 100 complaints in one day, all of which were valid.

Deputy C. Lenihan

How does that happen? I do not want to stray into Deputy Cooper-Flynn's area of Mayo so we will stick with Kerry. How it is that the people of Kerry or Tralee have such expertise?

Deputy Foley

I refer them to the Ombudsman.

Deputy Cooper-Flynn

So do I.

Mr. Whelan

That may partly be the answer. In some of these counties we find that constituents are used to using their local TDs and councillors. Because of that they equally feel at home with coming to the Ombudsman or they may be referred to the Ombudsman by TDs and councillors.

Deputy C. Lenihan

Is that something which Mr. Whelan wishes to encourage?

Mr. Whelan

We are primarily into awareness of the office. We do not care from where the complaints come. If they are there they should be dealt with. If they come via Deputies we are happy to take them and we try to encourage that.

Deputy C. Lenihan

It is the quality of the TDs which drives these complaints rather than the cuteness of the native Kerryman or woman.

Mr. Whelan

That is why there can be a problem in Dublin. In our experience people in Dublin are not quite as aware of, or do not use, their local representatives quite as much as people in rural areas.

Deputy Foley

Mr. Whelan mentioned 198 complaints against the Department of Agriculture and Food. That is a small number when one considers the total number of transactions dealt with by the Department. What is the total number of transactions dealt with by the Department?

Mr. Malone

We have approximately 1,000,000 transactions per annum - roughly 1,000,000 individual payments.

Chairman

Thank you, Mr. Whelan. We note the accounts and discharge you as a witness.

The witness withdraw.

Vote 31--Department of Agriculture and Food (Resumed) and the Irish Intervention Agency, Annual Financial Statements 1994 (Resumed).

Mr. J. Malone (Secretary General, Department of Agriculture and Food) called and examined. Chairman: We now move on to the Department of Agriculture and Food. We are joined by the Secretary General of the Department, Mr. John Malone. You are welcome. Would you introduce your officials to the committee.

Mr. Malone

Thank you Chairman. I am accompanied by Ms Marian Byrne, Mr. Tom Arnold, Mr. Denis Byrne, Mr. Michael Sheridan, Mr. Kevin Cassidy, Mr. John Fox and Mr. Richard Healy of the Department of Agriculture and Food. I am also accompanied by Mr. Kevin Cardiff and Mr. Niall McSweeney of the Department of Finance.

Chairman

You are all welcome. It was agreed at the meeting of 28 January that when examination of the above matters resumed Deputy O'Malley would be offered the opportunity to comment on the rebuttals by the Department of Agriculture and Food and to leave himself open to questioning and that, thereafter, the Secretary General of the Department would be invited to respond. It was also agreed that the 1994 Financial Statements of the Irish Intervention Agency and the relevant paragraph of the 1997 Appropriation Accounts should be concluded and that the remaining paragraphs and accounts should be dealt with.

I should recall for the benefit of the committee that the Government agreed to the Committee's recommendation that an in-depth study of the Department be undertaken which would report in June or July. We are not dealing with that matter today. We want to dispose of the rest of the paragraphs and to allow Deputy O'Malley to comment on the rebuttals which are included in the report circulated to Deputies. The Deputy's evidence starts at page 26 and the comments of the Secretary General are on the other side of the page.

The Deputy is welcome. While Members of the Oireachtas have full privilege at committees, witnesses do not have the same privilege. However, section 10 of the compellability Act provides certain rights for people mentioned in proceedings. Members should also note the long-standing parliamentary practice that they should not comment on, criticise or make charges against a person outside the House or an official either by name or in such a way as to make him or her identifiable.

Following the previous sessions of the committee which arose because of Deputy O'Malley's letters to me concerning the Department of Agriculture and Food, we had some severe reaction from unions representing staff in the Department. Some of the reaction is understandable and some may not be justified. On the other hand, they felt strongly that some of the things said were inaccurate and unfairly reflected on the staff of the Department.

I intend to allow Deputy O'Malley ten minutes to comment on the rebuttals. I will allow the Secretary General a similar amount of time. We will then have questions.

Deputy O’Malley

Thank you, Chairman. I will avail of the ten minutes but the commentary on my evidence is quite lengthy and some of the matters are quite complicated. It is somewhat difficult to cover all of them in the time allowed. Perhaps the issues I do not cover can be covered afterwards in questions.

Chairman

I am anxious to clarify the matter. We will not be tied too strictly.

Deputy O’Malley

As a Member of the Oireachtas I have privilege in the Oireachtas. I am not clear about the form of privilege I now have. Have I qualified privilege? I am not here as a Deputy in a sense.

Chairman

I cannot grant you privilege but I might grant you absolution. I will take advice. My understanding is that you have the same privilege as a Member of the committee. I will read the section of the Act. Members are covered by absolute privilege. Members of the Oireachtas before Oireachtas committees are covered by absolute privilege.

Deputy O’Malley

So I can proceed.

Chairman

The Deputy has to take into account that officials are not in the same position. To some extent that is an uneven playing pitch. It will be my job to see that fairness is done.

Deputy O’Malley

The first point which arises from my evidence and the commentary on it is the question of the shortfalls. The Secretary General of the Department accurately describes the shortfalls as "losses borne by the State". I said in my evidence that there was a shortfall of something in excess of £250 million on the FEOGA beef account. The accounting officer's response to that is that a loss of £300 million has been borne by the Exchequer so I underestimated the figure by £50 million. We cannot be certain what the up to date figure is but presumably it is higher. We only have audited FEOGA accounts up to the end of 1994.

I stated in my evidence that the total of FEOGA 'disallowances' which is another word for fines was approaching £120 million. The Comptroller and Auditor General's figure is £119.8 million. The accounting officer disputes that figure, saying it is £99 million. There is no major difference there and I see no reason why I should not accept and use the figure issued by the Comptroller and Auditor General.

The next item relates to the Ballaghadereen fire where losses were incurred. In my evidence on 5 January I calculated the loss arising from irregularities in dealing with the fire in Ballaghadereen in January 1992 as amounting to £32,769,000. It now appears from the commentary of the accounting officer that I again underestimated the figure which is, in fact, £40 million. I was not aware that in addition to the £32,769,000 lost, the State paid interest totalling over £7 million on the borrowings made to refund the EU for the value of the beef lost.

Under the heading of shortfalls in general, the total amount seems to be in the region of £460 million, which is significantly higher than the figure I outlined to the Committee on 5 January. I would draw Members' attention to the evidence given to the Committee on 6 April 1995 by the then accounting officer, Mr. Dowling. In reply to a question from me he stated on page 40 of the evidence that "no matter what way you add up the figures, they do not add up to several hundred million pounds" as I had claimed. At the moment, they add up to £460 million and the figure is still increasing. I submit that Mr. Dowling's evidence to the Committee was not correct.

The next point I will deal with is the issue of recovery under article 8. I am not necessarily dealing with issues in chronological order; I am trying to deal with some of the more significant ones. I described the obligations and rights which arise under article 8 of EU Regulation 729/70. It was as a result of the failure of the Department of Agriculture to fulfill its duties and obligations under that article that these substantial disallowances were imposed on Ireland. The accounting officer's commentary on what I had to say - in which I was very careful and absolutely accurate - is rather disingenuous. He says "this article has been mentioned as providing a mechanism whereby the State might recover the £70 million beef fines from the beef industry . . . the clear legal advice is that this contention is, unfortunately, incorrect". I never said the article could be used to recover the beef fines; it is evident to anyone who reads and understands the article that that cannot be done. However, the moneys lost by the irregularities which, in turn, led to the imposition of the fines can be recovered.

Those irregularities arose from a variety of improper activities. The most widespread, but by no means the only one, was the over-recovery - above 68 per cent - in the de-boning of carcasses in intervention. Clear evidence was given to the Beef Tribunal that this was a common practice, particularly in the largest group of companies which frequently recovered 75, 76 and 77 per cent when de-boning intervention carcasses. In every case, they returned 68 per cent or thereabouts which was the required level. The Department did not do anything about that and that is why Ireland was fined. It is entirely disingenuous to say that there is any provision for the recovery of the fines. There is not. We know that from the case of Italy versus Frutti Cultura in which the Italian Government sought to recover fines which had been imposed on Italy from the olive oil or some other industry. Italy had not implemented the regulations and the court made it clear that fines could not be recovered. Article 8 imposes a duty on member states to recover sums - from processors in this case - and the Department failed completely to do that. That is why Ireland was fined and why the taxpayer must pay.

To my mind, it was entirely disingenuous and quite misleading - I submit it was deliberately misleading - to have informed the Committee that I was talking about recovering fines when that is impossible. I was not talking about recovering fines; I was talking about recovering the improper enrichment of certain people in this country towards whose activities the Department turned a blind eye. It was not just this Committee which was misled; what is described by the accounting officer as a 'high level group' was set up to look into the question of recoveries. The group produced a report on the recoverability of EU disallowances of which this Committee received a copy. That is wrong. We are not talking about irregularities, rather the losses caused by the irregularities. Is it any wonder we are not recovering the money in view of the approach taken to the matter?

Chairman

I am not clear about the difference between disallowances, losses and fines.

Deputy O’Malley

'Disallowance' is a kind of euphemism for 'fine'.

Deputy Rabbitte

It is the value of the misappropriation which should be sought, not the fines. This is not the only place where that has been represented.

Deputy O’Malley

Beef was stolen from intervention stocks on a wide scale. In some cases, such as Rathkeale, it was simply taken away directly and inferior meat was substituted. In other cases, it was the surplus above the 68 per cent yield which was stolen. That was allowed to happen with impunity over a long period. Therefore, the Accounting Officer's commentary on what I had to say is irrelevant, misleadingand should not have been delivered. It is a matter of concern that the money has not been recovered.

The Accounting Officer in the Emerald Meats case said there was no fraud involved in the actions taken by the Department in the Emerald Meats case. The fraud can be seen on the two sheets of paper. One instance was provided under discovery in a court case - the Emerald case against the Department. An application was sent in by Ballywalter Meats Limited, trading as Slaney Cooked Meats, Bunclody, County Wexford, for a licence to import 39,361 kilogrammes of frozen meat of bovine animals. It was submitted on 5 February 1991. The Department discovered that it was late but wanted to facilitate this application in order to exclude the person who was lawfully entitled to the licence. It changed the date to 25 January 1991 to purport to put it in on time and submitted it to Brussels. That was done by an official of the Department. I understand an official of the Department has made a statement to the Garda in which he has admitted making this alteration. I think Mr. Malone knows who it is. I do not know whether it is necessary for me to name him openly in this Committee, but I know who he is.

Chairman

No, it would not be appropriate.

Deputy O’Malley

At least I know the official who made the statement to the Garda. I have a slight suspicion that the alteration may have been made by someone more senior. At least this man has admitted it. This is fraud.

Chairman

Will the Deputy again summarise the background to this and what the certificates purported to certify?

Deputy O’Malley

It is an application for what was then called a GATT licence, under the old GATT regime to import meat from a third country into the Community. Ireland had a quota under that GATT regime. This was not a big quota, it was approximately 1,000 tonnes. It was very valuable because one could buy meat on the world market at world prices and sell it in the Community at Community prices.

Chairman

What is the relevance of the changed date?

Deputy O’Malley

This was done to validate an otherwise invalid application. The amount was 39,361 kilogrammes and it was intended to import it from Australia.

Deputy Cooper-Flynn

What was the change of date involved?

Deputy O’Malley

It was changed from 5 February 1991 to 25 January 1991. I understand the closing date was 30 January.

Deputy Cooper-Flynn

Was this the only instance of a change of date on an application form?

Deputy O’Malley

It is the only one I have here now. However, there were other instances in the Emerald case which was very lengthy. There are people available who can given evidence regarding that case.

Chairman

Let me put an innocent explanation to the Committee. The date was overlooked by mistake. Was there anything more sinister than a late application or were people falsely claiming for something for which they should not have been claiming?

Deputy O’Malley

No, I am not suggesting that Ballywalter Meats Limited were in any way at fault.

Chairman

If this application had been made before the closing date of 30 January, would it otherwise have been in order?

Deputy O’Malley

I do not think it would have been in order anyway as was subsequently found to be the case by the High Court and Supreme Court.

Chairman

Why?

Deputy O’Malley

Because Ballywalter Meats were not the importers under the regulations. Therefore, they were not entitled to it.

I want to draw the attention of the Committee to what the Accounting Officer said in page 48, under the heading page 35. Obviously he is commenting on what I had to say. The paragraph reads:

Since the processors were not in a position to supply the import proofs required by the EU regulations because they were held by Emerald Meats, the Department sought and obtained from customs copies of the supporting documents and associated them with the applications from the meat processors. In so doing, the Department took the view that having taken a decision to treat all processors as the importers, it should also take reasonable steps to enable that decision to be implemented.

When analysed, this statement is a very serious matter. They knew these people were not the importers. They knew the import documents were held by Emerald Meats who were the importers. Obviously, they could not get the import documents from Emerald Meats so they went to the customs, got copies of them and then submitted them to Brussels, with the applications from the processors. That sentence may seem innocent enough on first reading it, but it contains some very deep implications. This is the sort of thing some traders might do in the heat of trade. However, for a Department of State to do it on behalf of certain people, to the detriment of others, seems to me to be quite extraordinary.

On that case, I should draw the Committee's attention to the fact that on 7 March 1997 in evidence to this Committee, the then Accounting Officer, Mr. Dowling, when it was put to him that he had misled the Committee on a previous occasion in what he said in regard to the Emerald Meats case, replied, "Had I been asked, I would have corrected my error." He went on to repeat this later when he said, "Had I been asked, I would have explained that it was an error." It is not satisfactory when one gives evidence which is wrong to this Committee, and it comes to his notice that it is wrong, that he is not prepared to correct it unless the correct question is asked of him by a member of the Committee.

At the outset, the Chairman mentioned the concern of trades union representing people working in the Department of Agriculture and Food. I got two letters from unions, signed by a number of people, expressing concern and outrage. They stated that it is very unfair to brand the whole Department and all its employees for the shortcomings of a few people. There is evidence that I have never sought to suggest that there was impropriety on the part of the vast majority of people working in the Department but there is impropriety on the part of some. I will not be deflected from saying it and I am not alone in saying it. The public service is one of the better places one could approach for an opinion on a matter like this. I will quote from the March edition of the Public Sector Times, which is a Civil Service newspaper. It reprinted part of an article originally printed in the Administration , a journal published by the Institute of Public Administration which is responsible for the training of public servants. It reads as follows:

The Department of Agriculture and Food paid the last instalment of £536,000 in court costs to a Dublin company, Emerald Meats Limited, arising from the Supreme Court, upholding an earlier High Court decision that the company had been the victim of unlawful collusion between the Department and a number of beef processing companies. The Supreme Court had found gross breaches of Irish European law by the Department. This case, and that of the AIB scandal, indicate that even with the SMI and the general moves to more effective and responsive public services there is a need for constant scrutiny of the practices and procedures of Government Departments and offices.

I hope it disposes of the suggestion that I am anti union or whatever else people working in the Department feel is the significance of this matter. I, along with many other people, share their concern about this matter.

The current review of the Department was mentioned earlier. It was initiated as a result of our meeting with the Secretary General on 5 January when he called for a forensic audit of the Department. We have not got that. The review is entitled A Systems Review of the Department of Agriculture and Food but that is a long way from a forensic audit. It is unusual to discover that the Department's officials are helping to conduct the systems review. It appears from the response given by some people who wanted to give evidence to the group concerned that they are not interested in the kind of things that were discussed at our meeting of 5 January. They are primarily concerned with reviewing the computer systems and matters of that kind in the Department. They want to see if these systems will be able to cope with various work and problems that may arise in the future.

I was heartened by what the Secretary-General said after the accounting officer and I had concluded at our last meeting. My enthusiasm for a forensic audit has disappeared because we are not getting that.

The accounting officer remarked on page 35 that "the Department has no record of a second official at Rathkeale of a second official signing other people's names to official documents". This is carefully done. His report would have been produced about two weeks after our hearing on 5 January. He did not say that the Department did not know there was a second official. He simply says that it has no record of a second official signing other people's names. I can give him the name of the second official who was John Vaughan.

Chairman

I remind the Deputy that it is not in order for him to mention people from outside the House.

Deputy O’Malley

I looked towards Mr. Malone and he nodded in agreement that I should give him the name. In future I will give this type of information in private.

The accounting officer relies on a statement in the report of the beef tribunal. He quotes:

As a confusion of the Tribunal Mr. Carroll stated in evidence that in respect of all the documentation submitted to the Department of Agriculture and Food in respect of all intervention purchases made in Rathkeale during the period January 1990 and October 1991, Mr. Larry Kelly, the company's representative whose name appears on all such documentation, including the tender for intervention purchases of beef, the certification of the IB4, IB6 and IB7, did not sign any of them and that he, Mr. Carroll, with Mr. Kelly's knowledge, signed his name to such documentation.

That is not a conclusion of the beef tribunal but a report of what Mr. Carroll said in evidence. It is also invalid for the accounting officer to rely on that statement of evidence given to the beef tribunal in justification of his Department because at the subsequent criminal trial of Mr. Larry Kelly there was sworn evidence given which was not rebutted that six or seven people in the Department signed these forms. I can make copies of those forms available if Mr. Malone disputes that. The Department would have been aware that six or seven signed those forms but the accounting officer still makes the assertion that Mr. Carroll was the only person who had forged signatures. That is wrong.

Further down page 35, under the heading of veterinary certificate, the accounting officer says:

The position is that the forgery was not discovered by the Department until 1992. It was immediately brought to the attention of the Beef Tribunal which fully investigated the matter. The Department was not involved in the forgery.

The clear implication from that is that as soon as the Department discovered the forgery, it reported it to the beef tribunal. That was the meaning I took from it. That is not what happened, however. The Department did not report the forgery to the beef tribunal. The Department was aware of the forgery in this document since 1989, when I sent it to the Department, but it was concealed. The forgery was spotted and reported to the tribunal by Mr. Gerard Durkan SC, acting on behalf of Deputies Spring and Desmond. It was he who reported it.

Chairman

We will pause there for a moment because we have allowed the Deputy 30 minutes. I do not like to interrupt but we have a flavour of the Deputy's opinions and most of the material is not new. I would like to afford the accounting officer an equal opportunity to answer.

In respect of the systems review, which was a response to my request for a forensic audit, it should be remembered that this review will be brought to this committee and this committee will have to satisfy itself that the review addresses adequately the problems we have identified in the Department of Agriculture and Food. These problems have been ongoing for many years, through many changes of accounting officers, Ministers and Governments. The committee has taken an initiative which I intend to see through to ensure the Comptroller and Auditor General will not be in a position in the future where each year his report contains several paragraphs on this Department. I hope this review which is under way will address the future. We acknowledge it does not address the issues of the past which the Deputy has so persistently raised.

Perhaps Mr. Malone would comment on the points raised?

Mr. Malone

I will make a few broad points. We have provided a considerable amount of information to the committee and endeavoured to clarify some of the points which have been raised and some of the differences of opinion which have developed.

We have provided a document on the financing of the intervention system. On the argument about whether certain figures are running costs or losses, it is our view that they are running costs, given the environment in which we work in intervention - a high cost economy, borrowing outside the State and a determination on the part of the European Commission to get its own costs down. It was inevitable that there would be a significant cost to a member state for the running of intervention.

We have also given details of various court cases which are currently under way. I refer in particular to a number of court cases we have taken concerning what are known as intervention operations. That is of relevance in light of the points raised by Deputy O'Malley.

I hope this comes across from the documentation that we have made a strenuous effort to adjust our systems and controls to the changes and new developments we have had to accommodate since the beef tribunal, the advent of direct payments and the MacSharry reforms. It does not do any harm to repeat that we have developed an accreditation process which is acknowledged to be very professional. We have strengthened our internal audit unit and now have an external audit committee, an accreditation review group and have dramatically changed our approach to the control of beef intervention. There is now much greater reliance on spot inspections and a new contract has been negotiated. Our approach to this area has changed totally.

It is important to comment on the culture of the Department. I have not seen the article on public administration. I assume, however, that it is the view of one person. I strongly defend the integrity of the staff in the Department. Our approach is that we will root out wrongdoing. When people are found to be doing their jobs dishonestly, we will deal with it. I emphasise that we are a large Department and we are an old Department - we will be 100 years old next year. The culture of the Department is one of honesty and integrity.

At the back of the document there are details of forfeitures on a range of areas. There is a long, complex range of tables which shows the number of forfeitures of export refunds amounts to a sum of £45 million. That is a significant amount of money.

Chairman

In respect of what period?

Mr. Malone

For the period 1988 to 1998. The figure is in the long table at the back of the document. Deputy Durkan asked for the information. It shows that we are doing our business.

Deputy O’Malley

Which document is this?

Mr. Malone

It is in the printed report.

Chairman

Is it an appendix to the report?

Mr. Malone

Yes. It sets out clearly how we approach the situation and that we apply the regulations. If the rules are respected, that is fine, but if the rules are broken, we deal with it.

On a general basis, Deputy O'Malley volunteered a name. If he was to give me the name privately, I would not have a problem. However, I will state categorically that this is the first time that I have heard that. The statement written in regard to Rathkeale is not written as carefully or ingeniously as he seems to accept. I checked the situation when he gave evidence at the last meeting and asked a number of people if there was a second official and I was told there was only one official. If there is a second name we will investigate it but that is the first time I have heard the name of a second official mentioned.

On article 8, I do not accept that we have written a rebuttal to that point in a disingenuous fashion. I have made this point before. The fines, which were substantial, were imposed because of systems failures. They were imposed under a formula known as the bell group, where a person is fined 2 per cent, 5 per cent or 10 per cent. That is the category of fine. The bell group formula was used to determine the beef fines. It was seen by the Commission as a systems failure and the Department had not provided sufficient protection for FEOGA funding. In our defence, the system was overloaded. In two years we took in 0.5 million tonnes of beef, the equivalent of 1.5 million animals.

Article 8 is an old article which goes back to 1970. To pursue a recovery one must have evidence of an irregularity and one must operate within the law. There is no great difference between Deputy O'Malley and ourselves on this issue. The EU Commission imposed a fine with regard to a failure of the system. Where we have evidence that irregularities occurred and we can pursue a case under Irish law, we are obliged to do so. I do not dispute this. I draw Members' attention to the table we circulated which shows we are doing that. A number of court cases are being pursued but getting these cases to court is a long and slow process. There is no doubt about our determination that these cases will come to court. We will pursue them to the end.

There was a reference to the recoveries group. This comprises officials of the Departments of Agiculture and Food and Finance and the Attorney General's office with an independent legal adviser. It was set up in 1995 to examine options for recovery. It was not clear if the fines could be recovered easily and generally. It was necessary to examine the possibility of imposing a levy on the beef industry. The group reported in 1996 and that report is contained in this document. The group examined a range of options and found that possibilities were very limited. We were forced to accept that prima facie evidence of an irregularity was required as well as the necessity to pursue a case under Irish law. That is the approach we have taken.

Deputy O'Malley quoted figures regarding the fire at Ballaghadereen and he is correct in saying the valuation has increased. This is because the EU Commission have grossed up the figures to factor in a calculation of boneless beef. They use a formula of 1.47 so that beef valued at £1 million is calculated by the Commission as a loss of £1.47 million.

Chairman

Why?

Mr. Malone

Because it is the inverse of the 68 per cent yield argument. If 68 per cent is calculated the opposite way, one arrives at a formula of 1.47. The Commission have maximised the value of that beef. We have begun a long and protracted court process and the matter will not be resolved for a long time. Approximately ten court cases are pending. We are suing our broker professionally and personally and the two lead insurers. One of the lead insurers is challenging jurisdiction and cases are pending between insurers and brokers. This has become a complex legal issue and it will drag on for some time. We wish it was otherwise. We insured the beef in good faith and paid the premium. If we are obliged to pursue the matter down a long legal route, we will do so.

I have already set out the position regarding Emerald Meats. The dispute regarding Emerald Meats arose in 1990. The High Court and Supreme Court cases referred to the allocation of quota in 1990. The episode referred to by Deputy O'Malley relates to 1991 so I cannot see how it can be regarded as part of the Emerald Meats case. I know the official involved and he has been quite open with regard to what happened. An application arrived before the closing date, 31 January 1991. The application was valid but not complete; two pieces of information were missing. First, confirmation was not given that an application had not been made to another member state and second, information was not given as to the origin of the beef. Those two pieces of information were provided after the closing date, on 5 February 1991. The official put that information on the file, giving it the earlier date. I am satisfied that there was no ulterior motive on the part of the official, that he acted in good faith and that he regarded the application as valid.

Chairman

With hindsight, do you regard it as a valid application?

Mr. Malone

Yes. If it was a valid application then, it is valid.

Chairman

It was the official's opinion that the application was valid.

Mr. Malone

The application came in before 31 January.

Chairman

Was the date the only problem with the application?

Mr. Malone

The date was the only problem. The date is important. There should not be any misunderstanding of that point.

The Department of Agriculture and Food co-operated fully with the systems review. The terms of reference of the review were agreed by the Government. The group which carried out the review included officials of the Department. This is not unusual. It would be very difficult for any group to review the operation of such a large Department as the Department of Agriculture and Food, given the range of schemes and complexities, without the benefit of a presence from the Department of Agriculture and Food. However, I emphasis that we co-operated fully. This is an independent review of the systems. We have not tried to stymie or curtail the operation of the review. We have provided much detail, information and back-up which would not have been available had we not been involved in the exercise.

In the context of the costs of intervention and to explain the difference between the £250 million which Deputy O'Malley mentioned and the figure of £300 million in our document, our figure is more current. It covers up to 1998 and that might explain the difference. I do not think there is any real difference between the figures. The only difference is that we are looking at different periods. Obviously there is a difference of interpretation but regarding the figures, the explanation might be the different periods.

Deputy Rabbitte

Much of the ground has been covered and it has been a long time since we met Mr. Malone. The main reason for the postponement was his involvement in Brussels, where, by common consent he seems to have done a good job for Irish farmers. Nevertheless, we have broken the continuity of these hearings. Then there was the cavalry charge by the Association of Higher Civil Servants which further delayed it. That surprised me. I wrote to the Association of Higher Civil Servants following its letter to the Chairman and invited it to request the Chairman for a hearing. Unfortunately it has not taken up that request. I do not recall any Member of the committee reflecting on the general civil service. Rather we attended to very pertinent and important matters. Any attempt not to allow us to do so is effectively a challenge to——

Chairman

To clarify, I had discussions with the Association of Higher Civil Servants and exchanged correspondence. I informed it of the committee's readiness to hear it. Its ultimate response was that it was a matter for the committee whether it wanted to hear it, and that is still an option.

Deputy Rabbitte

I am glad to hear that Chairman. I encourage it to accept your invitation. There are important questions in terms of the role of this committee——

Chairman

It is not without complications

Deputy Rabbitte

——and its duties to the Oireachtas about which I am concerned. I would like it to say where unfair procedure, denial of natural justice or anything else was engaged in by any Member of the committee or any witnesses who appeared before it.

A great deal has been covered but I wish to return to where we were last December, that is the question of whether the separate autonomous agency to administer FEOGA funding in the future has been established by the Department. Mr. Malone will recall that in March 1996, the Cabinet decided this should be taken from the aegis of the Department and a distinctive autonomous unit should be established to do it and report separately to this committee. I remember Mr. Malone told us that Bill would be published within a few weeks. I do not follow agriculture that carefully but I believe that has not happened. Has it?

Mr. Malone

The Deputy raised two points. My inability to appear before now meant the continuity of this process was broken. I want to be clear that I was in Brussels virtually every week, sometimes for full weeks. It was a physical impossibility to be here and that was explained to the committee secretariat.

Deputy Rabbitte

I accept that.

Mr. Malone

The second issue was the concern of staff. I - and the committee must acknowledge this - did not make any complaint about the questions asked during my last appearance. I still do not have any complaint. However there was widespread concern among the staff of the Department.

Deputy Rabbitte

To what did it relate?

Mr. Malone

Their concern was that there was a one-sided presentation of events. The unions can speak for themselves. I am not a member of a union so I have no axe to grind on this issue. They asked for a meeting with me and a meeting with the Minister. Their concern was that as officials in the Department - many of them had worked their full careers in the Department of Agriculture - they were being unfairly castigated and criticised.

Deputy Rabbitte

How was it one-sided? Questions are asked and one answers the questions.

Mr. Malone

I think it was mainly in relation to the media presentation. I do not want to labour the point.

Deputy Rabbitte

Is the agency established?

Mr. Malone

No, it is not but the position is as follows. When I appeared before the committee at the end of January, I indicated we were in the process of finalising a proposal. The momentum on that was broken because of the Agenda 2000 negotiations. The Minister circulated a draft proposal in a memorandum to other Government Departments for the establishment of an agricultural payments agency. I think I explained at previous meetings of the committee that the situation had changed by virtue of proposals in the Government's action programme which envisaged a wider and broader approach to this issue. That memorandum was circulated on 16 March. We have received comments from almost all Departments but issues need to be clarified with the Department of Finance, particularly in staffing issues. I explained - and I hope it was understood - that this is a complex issue in organisational terms. There are significant staff issues. I understand the Department of Finance hopes to finalise its view very soon. Once we have the views of the Department of Finance, the matter goes to the Government. That is the normal procedure.

Deputy Rabbitte

We are still a long way from a Cabinet decision in March 1996. This is May 1999 and we have not even got to the stage where the heads of a Bill have been drafted.

Mr. Malone

I explained the last day and I have listed here what we have had to cope with in organisational terms as a Department.

Deputy Rabbitte

Rather than doing that again - it is on the record and he does not need to convince anyone here that it is a very complex matter - could Mr. Malone tell us when he thinks the agency will be up and running?

Mr. Malone

I have laboured the point that it is complex. To have it up and running in 2000 would be a good achievement.

Deputy Rabbitte

It is a millennium project we would all welcome

Mr. Malone

Yes.

Deputy Rabbitte

To return to the fire, in response to Deputy O'Malley's latest submission, Mr. Malone told the Chairman of the vigorous steps he is taking to prosecute the serious issues for the taxpayer which arise from the fire. The fire occurred in 1992 and the original £22 million has now been revalued to include a further £9 million and £7 million interest which amounts to £38 million. Is that correct?

Mr. Malone

Yes.

Deputy Rabbitte

That happened in 1992. The judicial process is fairly topical at the moment. I read about a case decided in Europe because of a delay of six years. How can a case initiated in 1992 be being pursued vigorously, if we still have not come to the tape, so to speak? Once cover was repudiated the taxpayer was liable to pay that money and has paid it for the fire at Ballaghaderreen.

Mr. Malone

That probably would be the same position whatever way the insurance situation developed. The European Commission would have sought its money. We would have had to remit that money to Brussels, so the Deputy is correct.

Deputy Rabbitte

Have we paid up the extra £9 million and the £7 million interest?

Mr. Malone

We have not.

Deputy Rabbitte

Have we paid the £22 million?

Mr. Malone

We have paid £22 million

Deputy Rabbitte

Are they billing us for the rest?

Mr. Malone

They are billing us for the rest. The interest does not relate to interest charged by them but is interest by virtue, in accountancy terms, of our having to park the £22 million. Obviously we do not want to prejudice our position in regard to the insurance cover.

Deputy Rabbitte

Is the court system responsible or are you responsible for the fact that seven years later this case has not come to action?

Mr. Malone

To be honest, I do not think it is either. What has happened ——

Deputy Rabbitte

If my house was burned down in 1992 and I had to put a roof over my head again, is it reasonable to suggest that nine years later I would still be waiting for a decision on whether the insurance company is viable?

Mr. Malone

I agree it is not reasonable but the position is as follows: there is a case against the insurance broker, an argument between the lead insurers, a definite policy on the part of one of the lead insurers to challenge jurisdiction and, in effect, to fight us every step of the way.

Deputy Rabbitte

Can they not come to trial in seven years? I realise there is an argument and a dispute but how long does it take?

Mr. Malone

To be honest I cannot give a precise answer as to when this case will be brought to a conclusion. I understand that insurance and insurance law is a very specialised area. Cases such as this tend to be solved over years rather than months. I wish we could put all this behind us. There is not any advantage or benefit to the Department in dragging the process out.

Deputy Rabbitte

Is Mr. Malone aware of a relatively recent article by Kathleen Barrington in the Irish Independent of 20 February 1999 which states that: “Dublin insurance broker Mike Murphy sold his luxury County Dublin home for almost £1 million last year, just months before the Department of Agriculture served legal proceedings on him personally,. . . ”?

Mr. Malone

No, I am not aware of that. What I have said, and the position still stands, is that we have instituted proceedings both against the broker, as an insurance broker, and against the broker, as an individual.

Deputy Rabbitte

Does Mr. Malone not think this should be brought to the attention of his lawyers?

Mr. Malone

Yes, but at the end of the day we are into a complex and protracted case. I wish it was otherwise.

Deputy Rabbitte

The article states: ". . . just months before the Department of Agriculture served legal proceedings, the Irish Independent learned yesterday”. That would imply that the legal proceedings were served only recently. He sold the house last year.

Mr. Malone

That is on him personally. We started on the basis that this product was insured and we had a valid policy and were entitled to claim on it. When there were arguments about that obviously ——

Deputy Rabbitte

When exactly were the legal proceedings served on him?

Mr. Malone

On the broker or on the individual?

Deputy Rabbitte

On Murphy himself.

Mr. Malone

I can get the dates for the Deputy as I do not have them here.

Deputy Rabbitte

I am curious to know why it took six years.

Mr. Malone

We have been getting legal advice on this issue. Obviously the tactics and the procedures are dictated by legal advice.

Deputy Rabbitte

Has not the Department placed a great deal of business with this broker?

Mr. Malone

The broker was appointed on the basis of a three-year tender. So far as I know this is the third year in the tender. We had used other brokers.

Deputy Rabbitte

Is it correct to say the Department used him in the early 1990s?

Mr. Malone

Yes, he was our broker.

Deputy Rabbitte

He would be doing a multi-million pound business with the Department. Was he not involved in respect of export credit insurance as well?

Mr. Malone

No, the only dealings the Department had with him was in relation to the tender issue.

Deputy Rabbitte

Does Mr. Malone know if he had any role in underwriting the guarantees in respect of the export credit insurance system?

Mr. Malone

Not to our knowledge and it would not come into our bailiwick.

Deputy Rabbitte

Is Mr. Malone aware this man is the subject of investigation at Dublin Castle?

Mr. Malone

Yes.

Deputy Rabbitte

Has Mr. Malone transferred the file to Mr. Justice Moriarty?

Mr. Malone

We have been asked for information and we have indicated to that tribunal that our files are there to be inspected any time it wishes. To the best of my knowledge it has not come to inspect the files yet.

Deputy Rabbitte

Did it make that request to you?

Mr. Malone

It made that request and there is no problem. The invitation to tender for that contract was on 23 March 1990.

Deputy Rabbitte

Was that for an initial three year period?

Mr. Malone

It was for a three-year period.

Deputy Rabbitte

Was that the first time he was taken on?

Mr. Malone

Yes.

Deputy Rabbitte

I suppose there is no point in asking if Mr. Malone recalls if anyone made representations on his behalf.

Mr. Malone

I cannot answer that but he had the lowest tender.

Deputy Rabbitte

Has he not proved to be very expensive since?

Mr. Malone

Yes, the whole episode has proved to be painful, to put it mildly.

Deputy Rabbitte

I want to consider a few other matters raised in response to ——

Chairman

Is Mr. Malone aware of any political representations?

Mr. Malone

No.

Deputy Rabbitte

I want to go back to a few other matters raised with Deputy O'Malley. Before doing so, may I clear with Mr. Malone a matter I raised with him the last day concerning the investigation by the European Union mission arising from fraud in the Netherlands that ended up at Nenagh? Does Mr. Malone recall the information my colleague, Deputy Gilmore, secured under the Freedom of Information Act and which we dealt with the last day?

Mr. Malone

I do.

Deputy Rabbitte

Does Mr. Malone recall that when he got the information under the Freedom of Information Act a number of paragraphs were blocked out? After the last meeting something he said caused me to check the Internet and I found the document on the Internet without these excisions. Is it the case that the world at large is entitled to see the detail of these documentsbut a Member of Dáil Éireann has to have excisions made in case it might pollute his mind somehow?

Mr. Malone

We brought it to the Deputy's attention that the document was available on the Internet. There are key procedures in relation to discoveries under the Freedom of Information Act. The request for information related to a particular factory so we gave the information on that factory. There was no conspiracy.

Deputy Rabbitte

I accept there was no conspiracy. Why is the document on the Internet in its pristine condition and excisions must be made to it before a Member of Dáil Éireann can get it?

Mr. Malone

We did not put the document on the Internet.

Deputy Rabbitte

If it was put on the Internet by the Department, it is fair to say the rest of us would have to face the expurgated version.

Mr. Malone

We are bound by the procedures set down under the Freedom of Information Act. It is not that we are trying to hide anything.

Deputy Rabbitte

As Mr. Malone will have found over a number of meetings, I am not familiar with this territory. What was the significance of the information he did not reveal to us?

Mr. Malone

It referred to two other plants.

Deputy Rabbitte

I might return to that point at another time. As regards the plants we dealt with, Mr. Malone will recall the information he gave Brussels. It states inter alia that the Department has initiated disciplinary action against the two senior Department officers at the plant in question. There was some difficulty the last day in that it appears it is not exactly clear that disciplinary action was initiated? Is that right?

Mr. Malone

There was some confusion the last day.

Deputy Rabbitte

On whose part?

Mr. Malone

On mine because I did not have the benefit of the document.

Deputy Rabbitte

So long as Mr. Malone makes that clear.

Mr. Malone

First, there was a reference, which the Deputy brought to my attention, to court action initiated by the Department against three individuals who it is alleged interfered with official health markings. That did not relate to the plant at Nenagh. It was a cross reference indicating we had initiated court action and had been successful in relation to another plant.

Deputy Rabbitte

This was Rathkeale plant.

Mr. Malone

Yes.

Deputy Rabbitte

A note sent to the European Commission states that court action has been initiated by the Department against three individuals who it is alleged interfered with official health markings, which is part of the malpractice going on still at Nenagh. Mr. Malone was referring to a case disposed of some time ago at Rathkeale, but the information submitted to the European Commission implies it was in relation to the inquiry at the Nenagh plant and I submit no other inference could be drawn from it. Is that not correct?

Mr. Malone

No, it is not. The cross reference related to specific measures to be implemented. It states that Department personnel and plant management have been reminded of the provisions of national legislation, which make it an offence to alter or erase a health mark. The point we were trying to convey to the European Commission was that we take the legislation in this area seriously and where we had found health markings had not been respected we had instituted legal proceedings. Whether it was wise to make that cross reference is a moot point, but this report was discussed at a meeting of the standing veterinary committee and the situation was explained.

Deputy Rabbitte

Is it not a wonder the note did not read that court action has been initiated by the Department against three individuals at Rathkeale? This document is about what happened at Nenagh.

Mr. Malone

It is a bit more than that.

Deputy Rabbitte

It is a bit more than that, but it relates to Nenagh. In this context it could have no other meaning than relating to Nenagh.

Mr. Malone

I do not think that is a fair assessment. Let us go back to the beginning. This investigation took place in the context of allegations about the laundering of British beef, and that is how the situation developed in the Netherlands in the first instance. The EU mission came to Ireland and did not find any evidence of laundering of beef. That is an important point to bring to the attention of the Committee. However, they found certain practices relating to hygiene, the control of product and health matters gave cause for concern in Nenagh. Our obligation was to respond to that report. In responding our officials would be expected to respond not only to the specific situation but also to the general controls in place across various meat plants, which is reasonable. In other words, if it could happen at one plant, it could happen at others. What we were trying to convey was that we take the issue of health marking very seriously. There were difficulties and the kind of difficulties that were encountered in Nenagh could be encountered in other plants.

Deputy Rabbitte

That is the significance of it. Notwithstanding what we have been through over the past ten years, it is still going on. To any average or more than average reader, what is said in the document could only mean it related to the case of Nenagh, but I am puzzled as to why it has turned out that was not the case. Has Mr. Malone made this clear since to the Commission?

Mr. Malone

The Commission knew because there was a discussion on this issue at the standing veterinary committee.

Deputy Rabbitte

So the Commission knows you had not initiated action?

Mr. Malone

The Commission knew what we had initiated in Nengah.

Deputy Rabbitte

I wish to ask Mr. Malone about the other official who is referred to earlier, when Mr. Malone referred to disciplinary measures. When I asked him about this the last day he said "all that I can tell you is that the official is no longer working at the plant." The Sunday after he told me that an interview between Mr. Des Crowley and the official at the plant was reported in The Sunday Business Post in which the official was reported as saying “they think they have me, but I am still here and fighting”.

Mr. Malone

I indicated at the time I was speaking from memory on the issue. The official has retired on age grounds.

Deputy Rabbitte

When did he retire? During the hiatus at our hearings?

Mr. Malone

In early February. He was due to retire. I thought he had retired.

Deputy Rabbitte

He had not retired on 5 January when I asked Mr. Malone the question.

Mr. Malone

He had not retired on 5 January but he retired early in February. I was speaking from memory. There is an issue of disciplinary procedures and that process is being followed. The official is appealing the sanction imposed on him through the established procedures.

Deputy Rabbitte

Having regard to what Mr. Malone described as the culture of honesty and integrity in one of the oldest Departments of State, which I am not questioning generally speaking, does he believe anything has been learned by the Department from the fact that we are having such difficulty in getting answers to simple questions that unless we get information from elsewhere or have such a minute knowledge of a matter that we find the information given on it is not what it seems? Does he believe this whole process is producing results among all the staff who are concerned about unfairness and one-sided questioning here?

Mr. Malone

I emphasise that on my part there was not any intention to mislead the Deputy. I did not have the benefit of the document at the last meeting.

Deputy Rabbitte

Mr. Malone had already said things to the mission that was investigating this situation.

Mr. Malone

Yes.

Deputy Rabbitte

It turns out they were not true.

Mr. Malone

No, what we said——

Deputy Rabbitte

I am not saying Mr. Malone deliberately did that but it was not correct.

Mr. Malone

No. This was not said to the mission. The mission came primarily to investigate alleged laundering of beef, which would have been quite serious given our concerns about BSE and our presence in International markets. When the mission visited plants, it found certain aspects with which it was not satisfied. It submitted a report and our document is a response to that report. There was a discussion at the standing veterinary committee, the cross-reference was intended to show we enforce herd marking vigorously and is part of the general approach to our controls in meat plants. If there is a particular problem in a plant, it is fair to ask if the problem applies elsewhere.

Deputy Rabbitte

On Deputy O'Malley's point, the recoverability of the value of misappropriated properties, Mr. Malone says there was no prima facie evidence and that evidence of irregularity was needed, which he did not have. Is that his considered view?

Mr. Malone

No.

Deputy Rabbitte

Under Article 8——

Mr. Malone

If I said that, it was not what I was trying to say.

Deputy Rabbitte

With respect, Mr. Malone, that is what you said.

Mr. Malone

What I was saying is that we need prima facie evidence to pursue an irregularity. What I then said is that there is a list of cases we are pursuing.

Deputy Rabbitte

What I took from it was that the reason Mr. Malone did not act under Article 8 was that he did not have the prima facie evidence. This could be a genuine misunderstanding or Mr. Malone could be uniquely gifted in saying things from which different meaning are capable of being taken. In Mr. Malone’s opinion was there any prima facie evidence to warrant an Article 8 invocation?

Mr. Malone

There is prima facie evidence and we have a list of cases that we feel enable us to bring prosecutions in the Irish courts for the misappropriation of intervention product.

Deputy Rabbitte

Does any of that or how much of that refers to the area Deputy O'Malley has been complaining of?

Mr. Malone

Virtually all of it. I would refer the Deputy to the table——

Deputy Rabbitte

I am puzzled now. I thought we started this exercise because Mr. Malone was not seeking recoverability of the value of misappropriated stock. Is Mr. Malone telling the committee that he is now doing that?

Mr. Malone

In specific cases, yes.

Deputy Rabbitte

I thought it covered all of Deputy O'Malley's——

Mr. Malone

No, what I was trying to explain and I would be concerned if the Deputy felt I was trying to phrase replies in a way that could be open to a number of different meanings. I was trying to get across that B fines, general fines, imposed on the Department relate to the Bell Group formula, 2 per cent; 5 per cent or 10 per cent. The Article 8 provision has to be read in the context of another regulation, requiring a proven irregularity. The obligation on us is to examine the situation, see what evidence exists and where we have the evidence, bring a successful prosecution.

Chairman

I will have to intervene because there is a vote in the Dáil.

Sitting suspended at 12.35 p.m. and resumed at 12. 40 p.m.

Chairman

While we are awaiting the return of Deputy Rabbitte, I wish to raise a couple of other issues with the Secretary General which are not directly connected. Has the question of FEOGA borrowings being transferred to the National Treasury Management Agency been finalised? At what stage is it now?

Mr. Malone

That is proceeding, Chairman. There is a provision in this year's Finance Bill that will enable that transfer to the NTMA to take place. The NTMA has already been handling the guarantee borrowing and the intervention borrowing on behalf of the Minister for Agriculture and Food. In this year's Finance Bill that particular part will now be tidied up and there will be a legal basis for the NTMA to carry out the borrowing.

Chairman

When will it take full responsibility for that?

Mr. Malone

It already has a de facto responsibility. However, once that particular provision comes into effect it will be done in two phases. In other words, to try to have an orderly transition from one system to another. The net point is that the legal basis is there for the NTMA to take over this borrowing.

Chairman

Will it involve a transfer of staff from your Department to the NTMA?

Mr. Malone

No.

Chairman

That is in the process of being done and the payments agency will be up and running next year. Your Department will, more or less, look at policy aspects of agriculture thereafter.

Mr. Malone

It depends on what decision the Government takes as regards the proposal. I cannot predetermine that. What is set out in An Action Programme for the Millennium is that there will be an agency dedicated to making payments.

Chairman

Deputy Rabbitte followed a definite line of inquiry before we suspended, and I will resume on that. It is my intention to adjourn in a half an hour. We may resume this afternoon or at another date. Do Members have a preference?

Deputy Rabbitte

We should resume this afternoon. I am sure that is the wish of the Department.

Chairman

In that case, we will suspend at 1.15 p.m. and resume at 2.30 p.m.

Deputy Rabbitte

I was trying to get an idea of the order of the claims being processed by the Department under Article 8.

Mr. Malone

I do not know if the Deputy had the chance to look at the heading in the document we were examining. There is a number of claims. One claim is for £2.7 million in relation to Rathkeale and a second claim for £933,000 in relation Shannon Meats. There is also the case relating to the 68 per cent. Claims are being finalised against ten plants. We have not finalised that particular aspect yet, but it should be done within days. I hope that gives the Deputy some indication——

Deputy Rabbitte

It is a relatively minor amount in the context of what Deputy O'Malley talked about.

Mr. Malone

Yes, but we must assume we will be successful in these prosecutions and that it will add up to a not too insignificant sum.

Deputy Rabbitte

How realistic is this debate? How many of these claims being contemplated by the Department are statute barred?

Mr. Malone

None of these claims, as I understand, are statute barred.

Deputy Rabbitte

Deputy O'Malley's point is that the main malfeasance happened in 1987, 1988, 1989 and 1990. Are we not creating a smoke screen on both sides of this table in that they would, effectively, be statute barred?

Mr. Malone

Yes, if one goes back that far, but then it makes to suppositions.

Deputy Rabbitte

Can we agree that I have to go back that far because that is when the major chicanery went on?

Mr. Malone

I am not disputing that point. That is not the point I was trying to make.

Deputy Rabbitte

It is important. Other people may not be so familiar with the matter.

Chairman

Does the statute bar operate after six years in this case?

Mr. Malone

Yes.

Chairman

Presumably, if a case starts within the six years, the fact it has not concluded within that period would not prevent it going ahead.

Mr. Malone

As I understand it, that does not matter. The problem we have now is essentially the same one we had when the beef tribunal concluded and when we got the report. One had to have specific evidence. I refer to part of the confusion which may have arisen in relation to Article 8. I explained that at the time the Government looked at a general approach rather than at specific cases and at way in which money could be recovered from the beef industry through a general levy, a levy across the industry or a levy on specific operators in the industry. That was not legally possible. Inevitably, that creates a situation where one has to have prima facie evidence and be able to prosecute a case under Irish law.

Deputy Rabbitte

That is why I asked you earlier whether it was the case that you or the Department concluded that you did not have such evidence.

Mr. Malone

I outlined the cases in which we believe we have prima facie evidence.

Deputy Rabbitte

The significance of an Article 8 invocation would be that in the event of you doing that, the State would not be responsible and the Commission would bear the ensuing costs.

Mr. Malone

I do not believe that is a correct interpretation of Article 8. The Commission would look at the overall systems. As I explained earlier, it imposed general fines. Pursuing individual prosecutions would not have relieved our particular problem in this instance.

Deputy Rabbitte

I was sure that once we were seen to prosecute under Article 8 that whatever the resulting penalty it would not be borne by the Exchequer but by Europe, irrespective of the outcome.

Mr. Malone

I explained that Article 8 is a very old provision which goes back to 1970. The Commission has fairly radically changed its approach since then and is more into risk assessment and risk management. The formula to which I refer the Deputy, the 2 per cent, 5 per cent or 10 per cent, put agencies in member states in a situation where they have to satisfy the Commission as regards their overall systems, irrespective of what they do in individual instances.

Deputy Rabbitte

In any event, we will seek to clarify that later. The point is that in respect of the years for which we know there was the most major transgressions, 1987 to 1990, it is not feasible to initiate actions because of the statute of limitations. It is important that isput on the record. Is that not right, Mr. Malone?

Mr. Malone

The difficulties arose, as far as I recall, in 1990 and 1991 with the scale of intervention in those years. The scale of intervention in those years - I do not have the figures to hand but I can get them - was not quite as significant. It assumes the prima facie evidence exists to enable prosecutions to take place. The substance of the Deputy’s point is right that, at this stage, to initiate cases going back that length would get one into the statue barred situation.

Deputy Rabbitte

What does Deputy O'Malley think about that?

Deputy O’Malley

It would seem that if a case had not been started before now, it would be impossible to make a recovery. Mr. Malone gave the impression there was a long succession of cases that the Department had taken seeking to recover but, in fact, there are virtually none. If one looks at page 3 of section A of the appendix to this report, the only two cases are the Rathkeale ones about which we have known for years and which I finally shamed Mr. Dowling into taking in around 1995, although he was most reluctant to do so because of the ownership presumably. There was flagrant larceny of intervention beef.

The next one is where the proceedings were issued over a year ago but not served. Then they were served at the last minute to keep them alive. If they had not been served after 12 months, the statute would have run against them.

In effect, there is nothing new. What are listed here are simply those which we knew about already. The other two cases which are listed as intervention operations litigation are actually against the Minister.

Deputy Rabbitte

May I ask Mr. Malone is that fair? Before we broke to vote, I was under the impression the Department had a large number of cases for contemplated litigation or actual litigation. It does not amount to a hill of beans in the context of what we are talking about.

Mr. Malone

We discussed this point already where the Deputy put it to me that cumulatively these cases do not amount to very much when set against the overall extent of the beef fines. We have proceeded where we have prima facie evidence. I did not convey or attempt to convey that we had a long list of cases. I did not argue either that these were new cases or that they had not been brought to the attention of the committee before. The reality is that these are the cases where the evidence exists. It depends on how one adds up the figures. Cumulatively it will come to millions of pounds.

Deputy Rabbitte

With your indulgence, Chairman, I want to come back to that but, since time is precious, I want to move quickly to the Emerald Meats case. What is the up to date position? We agreed the last day that £600,000 was already paid to the plaintiff in this case and I think it was to go back to court to assess general damages. Does Mr. Malone know anything about that?

Mr. Malone

To my knowledge, it has not gone back to court. The Deputy's assessment is correct. As the committee will be aware, this case has been through the High Court and the Supreme Court. There is this issue of general damages. As I understand it, that has yet to go back to the High Court.

Deputy Rabbitte

How much has the State paid?

Mr. Malone

The State has paid roughly £1 million.

Deputy Rabbitte

Has the State any indication of the expected quantum of general damages?

Mr. Malone

No. Obviously that must be assessed in the High Court.

Deputy Rabbitte

Does Mr. Malone know the order of the claim?

Mr. Malone

We have seen in correspondence from the solicitors for Emerald Meats that a figure of £7 million has been mentioned.

Deputy Rabbitte

To return to the document which Deputy O'Malley produced in evidence from Ballywalter Meats, how did the Department conclude that this was a matter of such little significance? I am talking about the altering of the dates from 5 February 1991 to 25 January 1991. How could the alteration of such a document, which carried a high value if it were successful, be a minor or relatively innocent matter?

Mr. Malone

I do not think I said it was a minor matter. I think it was implied that there was fraud involved. I attempted to explain the circumstances: first, that the officer involved has been quite open about this; second, that my information is that there was an application which was lodged within the timeframe and, third, that there was extra information of a kind which would not validate or invalidate the application.

Deputy Rabbitte

The Chairman asked if this was the only matter. Let us in two sentences retrace the situation as I understand it. This was a question of the importation into the EU of a quota of beef from a third country which was allowed under GATT rules. One had to be licensed to do so. In about 1989, the European Commission changed the rules, taking away the authority from the national Governments because of chicanery in some countries, and the Commission made the decision on allocation on licensing. This was an application for such a licence. The criterion which had to be met was that the applicant had to be a traditional importer. Is that a fair summary?

Mr. Malone

There are one or two points which I would contest. First, the Commission changed the system because of a court case involving the textile industry which had nothing to do with the particular issue of GATT quotas.

Deputy Rabbitte

I read that there were specific matters in Italy, for example, but I take that point. It does not matter.

Mr. Malone

The position was that because of the implications of that particular case in regard to the textile industry, where apparently national arrangements had applied, these national arrangements were no longer possible and the Commission found it necessary to change the system. It was legally obliged to do so. The reason it changed the system was purely and simply legal.

Deputy Rabbitte

Other than that, is my summary accurate?

Mr. Malone

Yes. The Commission marginally changed the system in 1989 and it totally changed it in 1990.

Deputy Rabbitte

Is it the case that the critical requirement which had to be met was that one was the traditional importer?

Mr. Malone

Yes, but equally the whole dispute centred around who was the actual holder of the import licence.

Deputy Rabbitte

In this case Ballywalter Meats was not the traditional importer. Is that correct?

Mr. Malone

There is a little confusion here. The Ballywalter Meats issue came up in 1991.

Deputy Rabbitte

No. I am questioning Mr. Malone on the Ballywalter Meats document.

Mr. Malone

I think Ballywalter Meats would have been an importer. I would have to check that fact but, as far as I know, Ballywalter Meats would have been involved in previous years. The issue in the Ballywalter Meats case was plainly and simply the date.

Deputy Rabbitte

Chairman, that is a hard and fast statement from the Accounting Officer and it is on the record. We must give consideration to calling other witnesses on this to see if Mr. Malone's understanding is accurate. Is it not the case that this entire dispute arose because of the presentation of a bogus document to Brussels dividing up the Irish quota among 11 enterprises and excluding the company which was actually the traditional importer?

Mr. Malone

First, I do not accept that it was a bogus document. Certainly there was a dispute. In so far as the Department was concerned, there were conflicting demands.

Deputy Rabbitte

I can understand us disputing some of the issues we raised today but in this case the court of Mr. Justice Costello found that it was a bogus document. Why must we go over that?

Mr. Malone

No. The Deputy is being unfair in that presentation. If I could be permitted to explain this in context because it is important. Up to 1985 we did not import GATT meat. Therefore, the concept of a traditional importer would be of fairly recent vintage. The importation of this GATT meat became a reality because of a change in our veterinary legislation at that time. There was a small quantity imported in 1985 and then the importations took off in 1986 and 1987.

Chairman

Was it to fill shortfalls in national production?

Mr. Malone

No. It was simply that the EU had to allow a certain amount in for GATT reasons.

Chairman

We were required to import some.

Mr. Malone

Yes, and we had the opportunity of importing. There was a policy decision taken in 1985 to give the benefit of this to what would be called meat processors. These would be people who would use meat, generate added value and generate employment. There was a conscious policy decision, which did not go back that far - it went back to 1985 - to give this meat to the meat processors. Emerald Meats became involved in acquiring the licences from the processors.

Deputy Rabbitte

In other words, the processors sold the licences?

Mr. Malone

Yes. There is no question but that they were sold by the processors.

Chairman

Was that legal?

Mr. Malone

Yes. As far as I am aware, that happened in 1987 and 1988. The situation changed marginally in 1989 when 90 per cent of the quota came under the then current national system and 10 per cent came under the new system. I do not believe any great difficulties arose in 1989. Emerald Meats purchased the bulk of the licences. Difficulties arose when the system changed in 1990 because the critical issues then revolved around traditional importers. Legal arguments centred around who held the licences. An infamous formula had been applied in 1987 and 1988 when the licences had been given to Emerald on the basis that they would be used "for and on behalf" of the processors. In other words, the Department was led to believe that the licences were given to Emerald to be used for and on behalf of the individual processors from whom the company purchased the licences.

The Department was then confronted with a situation where the processors and Emerald claimed the licences. A decision was taken to allocate approximately two-thirds of the licences to the processors and the remaining one-third to Emerald. With regard to the one-third of licences granted to Emerald in 1990, this occurred where licences had been transferred to the company in an orderly and clear manner. In respect of the other two years, the Department took the view that the processors had been the real holders of the licences. Essentially that was the nub of the dispute.

Deputy Rabbitte

Is it correct that the court did not agree with the Department's assessment and that it found otherwise?

Mr. Malone

Yes.

Deputy Rabbitte

Is it not a fact that a document was submitted at that time to Brussels which broke down the quota between 11 companies to the exclusion of Emerald Meats?

Mr. Malone

Emerald was included for one-third and received a quota of 100 tonnes.

Deputy Rabbitte

I appreciate that. However, I am referring to the document which was the subject of litigation and in which it was established that the company had fallen off the edge altogether. Is Mr. Malone familiar with the document to which I refer?

Mr. Malone

Unless we are referring to different documents, Emerald was included on the list submitted to Brussels for 1989 and consequently obtained one-third of the allocation.

Deputy Rabbitte

Chairman, I believe we will have to return to this matter because I want to deal with each year separately. The point I am trying to make is that under the "traditional importer" requirement none of the companies listed met the criteria to be considered.

Mr. Malone

The Costello and Supreme Court judgments both hinged on the identity of the real holder of the licence and not on the definition of a "traditional importer". In technical terms, what was at issue was who was responsible for putting the product into free circulation. That is an important factor in relation to the licence. Therefore, the whole issue hinged around the licence. By way of providing some background information to this, I should state that in the United Kingdom there was a trade in licences. However, licences there could be sold with or without rights. In other words, one could actually sell the quota that applied to a licence for a particular year while still holding the right to the licence.

The court found, contrary to the Department's interpretation, that by virtue of having put the product into free circulation, Emerald had effectively acquired the rights and, by definition, should be adjudged to be the traditional importer.

Deputy Rabbitte

The European Commission, in light of the view taken in Brussels of the definition of a "traditional importer", wrote to the Department following receipt of the document to which I referred in order to query what had happened in the case of Emerald Meats.

Mr. Malone

The Commission queried what had happened in respect of 1987 and 1988. It did not state that this was a bogus document but I do not dispute the fact that questions were asked about it.

Chairman

The committee has agreed to continue these hearings in the afternoon. We will resume our deliberations promptly at 2.30 p.m.

Sitting suspended at 1.20 p.m. and resumed at 2.30 p.m.

Deputy Rabbitte

I was trying to focus on the document, the list of importers, submitted to Brussels by the Department in respect of the quota we were discussing. I could not obtain the document at the time but I have it here now. I am puzzled by some of the remarks made by Mr. Malone, which he may be able to clarify. The document lists 12 companies. As regards the company at issue, Emerald Meats, in respect of the years 1987 and 1988 the document states "nil" - it is on the top line. How did that come about?

Mr. Malone

This brings us to the centre of the issue. For clarification, the document states: for Emerald Meats; 1987, nil; 1988, nil and 1989, £311,932. The view the Department formed at the time was that the processors in 1987 and 1988 were the holders of the licences. In 1989 a correct transfer of the licence had taken place. In 1987 and 1988 because of the use of the formula for and on behalf, the processors were the actual holders of the licence. Consequently, the Department took the view that the processors fitted into the category of traditional importer, also bearing in mind where this process came from, which, as I explained earlier, was a decision taken in 1985 to give these quotas to the processors.

Deputy Rabbitte

Mr. Malone said that and we know that. The Department knew the licences had been sold and what the practice was for the years in question. Is that right?

Mr. Malone

That is a moot question, as can be seen from the Costello judgment. It is correct to say the Department knew but not all people involved in the decision were fully aware.

Deputy Rabbitte

At the last meeting, Mr. Malone told me:

Since the processors were not in a position to supply the import proofs required by the EU regulation, because they were held by Emerald Meats, the Department sought and obtained from customs copies of the supporting documents and associated them with the applications from the other meat processors.

Did Mr. Malone say that?

Mr. Malone

Yes.

Deputy Rabbitte

Would you not have known then what the position was?

Mr. Malone

The position became clear the more we delved into it in 1990. The position up to then was that a policy decision had been made to give the benefit of these quotas to beef processors. It is a statement of fact which emerged very clearly in the High Court hearing that the processors were not using these licences themselves but selling them on.

Deputy Rabbitte

According to the documents the word used in the rest of Europe was "importer".

Mr. Malone

Yes, but it is more complex than that. One can have numerous precedents, where the person who holds the licence - the phrase, which the Deputy queried at the last meeting, is the "titular holder" - can still remain the holder of a licence and sell on, in a way, the rights of that licence.

Deputy Rabbitte

That is the view the Department took with which Mr. Justice Costello did not agree. There is no point in us going through the court case again. Mr. Malone said in response to Deputy O'Malley's point about the altered document - this was 2 February to 25 January, alteration made by an official - that 31 January was the closing date.

Mr. Malone

Yes.

Deputy Rabbitte

In fact it was 25 January. I have the article here, article 4, which says that for the purposes of applying article 1.1, importers - the word always used - shall present to the competent authorities the application for an import licence, together with the proof referred to at article 1.3, by 25 January 1991 at the latest. Hence the significance of 25 January 1991, which was the latest day that would have qualified the applying company.

Mr. Malone

I was speaking from memory. I do not dispute it was 25 January. In 1990 I think the date was 31 January.

Chairman

It was probably the last day of the month.

Mr. Malone

The dates can vary in these regulations.

Deputy Rabbitte

The significance is that the article reveals a different point, that the application had to be made with the proof referred to at Article 1.3, that is the customs documents.

Mr. Malone

You have documents I do not have. I understand the issue is that information was not included in an otherwise valid application. One was a declaration that the applicant had not made an application in another jurisdiction, and the other was the country of origin of the product. I do not condone the changing of dates, nor can anyone, but what is at issue is whether the application was valid. In my view it was. There are numerous precedents.

Deputy Rabbitte

You are missing my point. According to this, the applications were required to be accompanied by the proof documents required by Article 1.3. These are the Customs documents. This would seem to be borne out by your answer the previous day when you said the Department sought and obtained from Customs copies of the supporting documents and associated them with the applications from the meat processors.

Mr. Malone

There is some confusion. The Ballywalter Meats case was in 1991.

Deputy Rabbitte

I understand that. You said to the Chairman earlier that the only matter required to make it an eligible application was the change of date. Otherwise it was kosher.

Mr. Malone

That is as I understand it.

Deputy Rabbitte

However, without the proofs, it was not kosher and the proofs could not have been submitted because there were no such Customs proofs. That is why you sought from Customs these documents which were the property of Emerald and, to use your phrase, you associated them with the applications from the meat processors.

Chairman

To where are we leading?

Mr. Malone

We are talking about two different years. The proofs would have to have been submitted in 1990, but you are talking about 1991. I do not have the documentation with me because I did not anticipate this point being raised. The Chairman's question I answered was about the issue of the date. I accept the date was 25 January rather than 31 January, but the point is the same - was there backdating of an application? The answer is no. I understand the application was submitted on time.

Deputy Rabbitte

If it was submitted on time, why would it be altered?

Mr. Malone

The additional information came in subsequently. This is the point I have been trying to make.

Deputy Rabbitte

One answer to the Chairman's questions is that there seems to be a pattern of document alteration - to put it at its mildest - in a number of the matters raised by Deputy O'Malley. This is one of them. In the main document, which is the genesis of this case, a document was submitted to Brussels purporting to be a list of the traditional importers. The position was that the company, Emerald Meats, imported roughly 90 per cent of the quota. The remainder of the companies imported roughly 10 per cent, yet for the years 1987 and 1988, Emerald Meats is recorded as having imported nil, while the entire quota was distributed apparently at random among 11 other companies.

Chairman

Is that accurate?

Mr. Malone

No. This gets down to the point we were explaining earlier about the interpretation of the issue of the licence, especially in regard to who put the product into circulation. The formula used for allocating the product to the processors was not done randomly, as has been suggested. It related to the way applications were made in 1987 and 1988.

Deputy Rabbitte

If that is your contention, what about the case of Shannon Meats, for example? For the years 1987 and 1988 you listed a tonnage of 66,000 and 61,000, respectively, imported by Emerald Meats, and Shannon Meats imported no meat in those two years.

Mr. Malone

This is the nub of the matter. It is on foot of licences issued. Who physically imported the product does not really matter.

Deputy Rabbitte

Despite the fact that the understanding in the Commission is that it was the importer. Is this not the line behind which you sheltered in the court case which you lost?

Mr. Malone

It is unfair to say we sheltered behind anything.

Deputy Rabbitte

That is the position you adopted.

Mr. Malone

We took a certain view on the basis that these quotas had initially been allocated to processors. We based it on an interpretation of the application of licences. As I said, the issue is not who physically imported the product. There was also a formula for allocating licences in 1987 and 1988 of "for on behalf of". A licence would be issued to Emerald Meats for on behalf of a certain company. We took the view, wrongly as it happens, that the companies remained the titular holders of the licences.

Deputy Rabbitte

Why did you not then change your position when the Commission responded to you and stated:

. . . . .your office has listed Emerald Meat as an importer of substantial quantities of GATT-meat for the years 1987 and 1988. In your declarations for GATT allocation for 1990 Emerald Meat disappeared as an importer for 1987 and 1988. Could we have an explanation about this change?

Mr. Malone

This is where the question of interpretation arose. In 1989, we were not confronted with the situation of dual applications. We also felt in 1989 that there was a clear transfer of the licences from the companies to Emerald Meats. Hence, Emerald Meats was on the list in 1989 for 311,932 and, as a result, was allocated one third of the licences. In 1990 we were confronted with dual applications whereby the processors and Emerald Meats claimed the same licences. We had to get into the issue of interpretation then.

Deputy Rabbitte

What reply did you give to the Commission?

Mr. Malone

We replied that we had interpreted the issue in a certain way and had taken a view of what happened in 1987 and 1988 that Emerald Meats was not the titular holder of the licences.

Deputy Rabbitte

Did you not say in your initial reply some months later on 5 April 1990: "As I indicated to you on the telephone recently, I can find no record here of receipt of Mr. Ventura's telefax of the 6th of February."?

Mr. Malone

All this happened in 1990. The original telex was mislaid but a reply was issued to the Commission.

Deputy Rabbitte

Is it not odd for a telefax to go missing?

Mr. Malone

Not really. It must be borne in mind that the old telex system was in operation at the time. We did not have the fax machines we have now. There would be hundreds of telexes every day. I saw the telex room. One could scarcely get into it with the amount of telexes. The Commission was issuing telexes at regular intervals. No one denies the telex was sent and itwas replied to, but I believe a copy of it had to reissue.

Deputy Rabbitte

The point is that it was not replied to until contact was made with you again.

You then sought to enlist the support of the beef processors in prosecuting or defending this action against Emerald Meats. You sought the indemnity of a number of the companies involved. Is that right?

Mr. Malone

I do not think we sought their support. Emerald Meats initiated legal proceedings fairly quickly after the decision was taken. I think if we had taken the decision the other way the processors would have brought us to court, so either way there probably would have been a court hearing on this issue.

Deputy Rabbitte

But you did write to——

Mr. Malone

No, we wrote looking for indemnities, which is a slightly different issue. We sought the involvement of the processors in the event of this decision going against us.

Deputy Rabbitte

The Minister told the House, on a date which I will find if you oblige me to, that a specific number of those had been returned. Do you remember that?

Mr. Malone

I am not denying it.

Deputy Rabbitte

Can you help me, Mr. Malone, or do I have to remember everything here? You do not remember the reply given by the Minister in the Dáil to the effect that nine, ten or whatever number of these indemnities had been returned?

Mr. Malone

I do not think it is necessary——

Deputy Rabbitte

I only ask the question because I asked you on the last couple of occasions if we could have copies of those indemnities.

Mr. Malone

The difficulty with that is we have legal advice and we have now gotten into the process of trying to activate these particular indemnities. The committee has asked for a copy of the indemnities and we consulted the Chief State Solicitor's office. They gave us advice, a copy of which we gave the committee, to the effect that we are not in a position to provide that information. We are bound by that legal advice. It is not a good time to be awkward or obfuscate the issue.

Deputy Rabbitte

Can you tell the committee why it would compromise your position to give copies of the indemnities?

Mr. Malone

We are now possibly entering into court proceedings. I am telling you what I have been told by the Chief State Solicitor. We copied that advice for the committee secretariat. If the Deputy wishes, I can go back and get a further review.

Deputy Rabbitte

No. It seems that if we had not received as much legal advice as we had down the years the Exchequer would be better off, certainly in the Emerald case. Maybe it is unfair to blame the legal advice for ploughing ahead at a cost of £7.5 million to the State but I am puzzled why it would compromise the State if the indemnities exist. How many of them exist?

Mr. Malone

We sought one for each of the companies, which would make it 11.

Deputy Rabbitte

I think you told the Dáil about nine. Are these nine or 11 extant?

Mr. Malone

We do not really know. It was not something we could——

Deputy Rabbitte

Surely you know if they are extant as distinct from being valid? You know whether they exist. Do they exist?

Mr. Malone

Yes.

Deputy Rabbitte

You have a copy——

Mr. Malone

Yes, we kept copies of all the documents.

Deputy Rabbitte

They will be produced before the courts in due course?

Mr. Malone

Yes.

Deputy Rabbitte

What about recovering the moneys involved here? The State ends up paying a huge bill for this enterprise but those who benefited from the wrong-headed decision taken by the Department in the first place have still got the benefit. Will action be taken against them to recover the moneys?

Mr. Malone

There are two headings. One is the issue of costs. A decision was given by the court that the costs were to be shared between the Department and the processors. We have almost completed the process of recovering the costs - we have recovered all bar £9,000. The indemnities are at the heart of the issue of trying to recover the benefit or, to put it another way, the cost that was imposed on the Exchequer because of the benefit that accrued to the processors, or the cost that accrued to the Exchequer as a result of this decision. That is why the indemnities are so important.

Deputy Rabbitte

You see my point. There seems to be a theme running through this. We are talking about the same companies that were on the list of matters produced by Deputy O'Malley earlier. There seems to be a marked reluctance to initiate action to recover from them benefits that they secured improperly.

Mr. Malone

I do not think that is a fair comment. This process had to go to the High Court and the Supreme Court, then there was the issue of costs to be sorted out. It was only in the last couple of months that we could activate the matter of trying to recover the benefit. The first aspect to deal with was the cost, where there was a clear——

Deputy Rabbitte

The cost issue was a clear 50-50 decision by Mr. Justice Costello. How are you interpreting that decision? We have had this before. You seem to be interpreting it on the basis of 50 per cent of the costs of the plaintiff and the State bearing its own costs. Why is it not 50 per cent of the total?

Mr. Malone

That is the way the court adjudicated the issue.

Deputy Rabbitte

I do not have the phrase of the court clear in my head but I will find the reference. The court said 50 per cent of the legal costs.

Mr. Malone

The court was quite specific on the issue. First, I do not have the exact amount of the State's legal costs but they were nothing like Emerald's costs. Second, the court was quite specific on the issue. Third, we got legal advice on this. It is not open to us to interpret. It is argued between lawyers.

Deputy Rabbitte

You got legal advice on it. Who was the primary beneficiary of this?

Mr. Malone

There are 11 companies that I can list out.

Deputy Rabbitte

We know them. Who was the prime beneficiary?

Chairman

Perhaps they should be read out for the record.

Mr. Malone

Certainly. Goldstar Meats, Dawn Farm Foods, Shannon Meats, Taher Meats, Silvercrest Foods, Heritage Foods, Rangeland Meats, Barford Limited, Convenience Foods, Irish Country Bacon, Dawn Fresh Foods and Ballywalter Limited. I can give a copy of this to the secretariat after the meeting.

Deputy Rabbitte

Yes. We should put this document into evidence if that is acceptable to the Chairman. Who is the primary beneficiary?

Chairman

Of those 11, who is the single biggest beneficiary?

Mr. Malone

Possibly Rangeland Meats and then Shannon Meats.

Deputy Rabbitte

I am not asking that. I can see the figures for myself.

Mr. Malone

That is not——

Deputy Rabbitte

I am talking about dominance in the industry and ownership. I suspect that even in the Department of Agriculture and Food it must jump out at you that Goodman is the main beneficiary. Is that not right? Does he not own most of these companies?

Mr. Malone

No.

Deputy Rabbitte

Was the greatest share of the allocation that was wrongly made by you given to the Goodman group?

Mr. Malone

No.

Chairman

We cannot wrong people who are not present. Do we know who the beneficial owners of these companies are?

Mr. Malone

Yes. I think we do but that is going back to 1989-90. My information is that two of the beneficiaries would be owned by that company - Shannon Meats and Silvercrest Foods would be in the same ownership.

Chairman

Who owns them?

Deputy Rabbitte

What about Rangeland Meats?

Mr. Malone

We always considered and we had no information other than that Rangeland Meats was a separate company. This is our view.

Deputy Rabbitte

With no involvement by AIBP or the Goodman group?

Mr. Malone

We cannot get into the share ownership of every company. Our view and our interpretation would be that it was a separate company. I know there are different views but the Deputy is asking a straight question. The straight answer is that there are two companies in the ownership of that group.

Deputy Rabbitte

I asked a straightforward question for no other reason than to establish what is widely known in the industry that the main beneficiary is one group. If I cannot get that answer then we will have to ask for it to be furnished to the Committee. It is not just a question of naming two companies as being in the ownership of that group. One has to take into account the proportion of the quota they get. It is hard going, even when one has a High Court and Supreme Court decision on one's side. It is still hard to establish certain facts.

Mr. Malone

Between Shannon and Silvercrest it would be 28 per cent.

Chairman

Are you saying that they are the only two companies?

Mr. Malone

To our knowledge. There are different views about Rangeland but we can only go on what we know to be the case.

Chairman

What do you know to be the case about Rangeland?

Mr. Malone

What we feel to be the case is that Rangeland Meats is a separate company in separate ownership.

Chairman

Do they have common shareholders - even in part?

Mr. Malone

No. We never had any evidence of that.

Chairman

Does Deputy Rabbitte accept that?

Deputy Rabbitte

I do not want to make a particular issue of this. My understanding is that Rangeland is a separate company but with a holding by AIBP or one of the Goodman companies. That has always been my understanding. I may be wrong.

Chairman

How material is this to your line of inquiry?

Deputy Rabbitte

We have established that there was no effort made at recoverability against the issues which Deputy O'Malley raised this morning. Now there are a small number of cases in prospect. The major area of wrongdoing between, roughly, 1987 to 1990 is now statute barred and we cannot prosecute them. I am seeking to establish that, irrespective of the ownership, the necessary action will be taken by the State to recover benefit which wrongfully accrued. Can we ask Mr. Malone about the cases initiated?

Mr. Malone

In which category?

Deputy Rabbitte

In the category of the 11 companies he read out.

Mr. Malone

First we had to deal with the issue of recovering the costs. We are now seeking to serve notice of the indemnities. We started that process on 26 January.

Deputy Rabbitte

I thought we had recovered all the costs except £10,000 or so.

Mr. Malone

Yes.

Deputy Rabbitte

The Department is not taking legal action.

Mr. Malone

No.

Deputy Rabbitte

Why mention that?

Mr. Malone

The Deputy asked specifically what——

Deputy Rabbitte

I asked what was contemplated in the litigation.

Mr. Malone

I am sorry I should not have——

The Deputy is putting an interpretation on the comment I made which is not justified. I think I am answering the question.

Deputy Rabbitte

Then may I put the question again? What is contemplated in the litigation now being taken?

Mr. Malone

What is contemplated in the litigation is that we will serve notice of the indemnities which we discussed earlier. We started that process on 26 January.

Deputy Rabbitte

Does that include the benefit secured by these companies as a result of the misallocation of the licences or is it just in respect of the amount to which they indemnified the Department?

Mr. Malone

Essentially it is to recover what was lost to the Exchequer in this exercise.

Deputy Rabbitte

That is a limited and narrow focus. I was seeking to establish the action being taken with regard to the benefit which accrued to these companies as a result of the misallocation of licences.

Mr. Malone

I would have thought they are one and the same thing. These companies got the benefit for 1990. Subsequently, we abided totally and absolutely by the court's decision. One is just talking about the benefit of licences for one particular year. I would have thought it is one and the same thing. The court put a value on these licences in adjudicating on the damages to Emerald. The loss to Emerald would be the same as the benefit to the companies.

Deputy Rabbitte

The loss to us is a putative £7.5 million. Is the case prepared? What stage is it at? The figure given by the Accounting Officer was £7 million. The figure given in press coverage is £7.5 million. It has not been assessed by the court - I understand that.

Mr. Malone

The £7 million has not been. That is a figure put forward by Emerald. We will not know the figure until we get to the end of the process concerning the High Court.

Deputy Rabbitte

We want to finish this today. We do not want to have to go back over all of this again. At what stage are these actions? Has Mr. Malone a quantum in the prosecutions under way? What stage have they reached?

Mr. Malone

We are basing our case on the indemnities we discussed earlier. We have to assess a quantum which I think will be made up of the value of the licences and the damages given to Emerald. We will have to try and work general damages into the equation as well. I go back to the point that we started this process on 26 January 1999.

Chairman

And it is before the courts now.

Mr. Malone

It has not come before the courts yet. We have served notice of the indemnities. It then gets into a process of discovery statements, counter statements and so on.

Deputy Rabbitte

What about the statement obtained by the Department from Customs and Excise - copies of the supporting documents and associated with them the applications from the meat processors? Did the Department have a right to go to the Customs and Excise to get documents which were the property of an importer?

Mr. Malone

I do not want to go back over the argument again, but this goes back to the question of interpretation. I would have thought that we were entitled to get the documents from Customs. As it happens, Mr. Justice Costello commented in the court case that who had the Customs documents had no bearing on the case. The Department got the Customs documents essentially to fill out the picture. The processors did not have those documents.

Deputy Rabbitte

To fill out the picture - the Department got the documents to support the applications of the meat processors to whom it was allocating the quota.

Mr. Malone

There is no denying that.

Deputy Rabbitte

How could one seek to use the import documents of another importer from whom one had taken the quota to support the application of processors who did not have the quota as the court found?

Mr. Malone

It gets down to the question of who you regard. Going back to the terminology I used earlier - who one regards as the titular holder of the licence. A situation developed where processors claimed to be the holders of the licences which they did not actually have. The licences were in Customs. Having taken the view that the processors were entitled to the licences, the issue was to get them from Customs and associate them with the applications. The essential point is that at the end of the day, that particular issue did not make any difference. That comment was made by Mr. Justice Costello.

Deputy Rabbitte

What did you mean by "associating" the licences with the applications from the other meat processors?

Mr. Malone

As I understand it, the licences were used to support the applications.

Deputy Rabbitte

But they were the actual import documents in respect of a different importer - Emerald. How could they be used to support the applications of beef processors who were not importers?

Mr. Malone

This is the point.

Deputy Rabbitte

Did you not go to extraordinary lengths to make a case to Europe on behalf of people whom you have stated did not have licences in the first place?

Mr. Malone

Physically they did not have them. The matter came down to one of interpretation as to who the titular holder of a licence was and what rights transferred. Reference was made throughout 1987 and 1988 of the use "for and on behalf of". The Department and the officials involved at the time genuinely believed that these licences were the property of the processors and that Emerald, in effect, was acting on their behalf. There is no arguing that Emerald organised bringing the product into the EU but what was at issue was the definition of who actually was regarded as the traditional importer. The court found that, at the end of the day, the phrase "for and on behalf of" did not mean that much, that Emerald had carried out the actual importation on its own behalf and that the quotas which had been allocated to the processors in 1985, through an interpretation of the regulations and the procedures undergone, transferred to Emerald.

Deputy Rabbitte

You told Deputy Lenihan on 5 January that the Department took the decision to send the information to which we are referring to Brussels on the basis that it had consulted with the Attorney General. That is not quite truthful or accurate, is it?

Mr. Malone

It is actually. There is no written record of the meeting but the officials involved consulted the Office of the Attorney General on the morning of either 30 or 31 January; the officials in the Office of the Attorney General would confirm that.

Deputy Rabbitte

The impression given on the last occasion we met was that the Attorney General was consulted when he was not. The judgment of Mr. Justice Costello was very specific in this matter. He said he did not regard the advice as having come from the Attorney General. There is no written record of the advice, no written record of any meeting having taken place and the advice, if there was any, was verbal. That was clearly established by Mr. Justice Costello.

Mr. Malone

That is the point I am making. The Office of the Attorney General was consulted verbally.

Deputy Rabbitte

We do not know that.

Mr. Malone

In fairness, we do. Groups of officials on both sides will confirm a meeting took place.

Deputy Rabbitte

There was nobody from the Office of the Attorney General to confirm it when you were on the witness stand.

Mr. Malone

I do not think that was the point Mr. Justice Costello was making. I believe he was making the point that the Attorney General did not give written advice. It is necessary to understand the timeframe within which this occurred. The whole issue had to be decided within a week.

Deputy Rabbitte

I do not know about that. We have been talking about cases which have been ongoing for seven, eight or nine years and suddenly we find that when the shoe is on the other foot, matters must be decided within one week.

Mr. Malone

The reason it had to be decided within one week - and I would not like the wrong interpretation to be put on this - is that the issue blew up around 24 January. Applications had to be in Brussels by 31 January so, in effect, that allowed one week for a decision to be made. I think that point stands up to analysis.

Deputy Rabbitte

Colleagues have persevered with this matter all day. I have a number of other matters I wish to raise. It may well be far more productive for the committee to decide to call people in a position to give direct evidence rather than have Members trying to prosecute it at one remove. If it were possible - although I do not know what the procedure is - I would like to put Mr. Justice Costello's judgment in evidence in order that people could read it for themselves rather than us arguing about its interpretation. Mr. Justice Costello is crystal clear on this point. In fact, he described the substantive issue as a "travesty of the truth". I submit that we look at the case of Ballywalter Meats, for example, which incidentally did not alter the document. I want to make that point clear and I presume Deputy O'Malley would agree with me. The alteration was made in the Department.

Deputy O’Malley

Absolutely, I made that clear this morning. There was no question of Ballywalter Meats having done anything wrong. The alteration was carried out by a departmental official of whose identity we are aware. He may have done that off his own bat or he may have been responding to the request or suggestion of a senior officer.

There is one other point about which I may be able to be of some assistance to the committee as I ascertained some facts at lunchtime. I say this in support of Deputy Rabbitte's suggestion. Mr. Malone stated this morning that the fact that the altered document relating to Ballywalter Meats was dated 1991 showed it had nothing to do with the Emerald case. That is not true. The Department, having deprived Emerald of its licences in 1990, went on to deprive them of licences in 1991 also. Emerald obtained permission from Mr. Justice Costello to amend its statement of claim to include 1991. The altered document was very relevant and very much part and parcel of the case which was eventually heard in March 1991. That document, incidentally, was submitted by the Department to the Commission where it was used in evidence in a case which Emerald took against the Commission in the European Court. The Commission used it in all good faith as it was not aware the Department had forged it. As far as the date is concerned, it is very relevant. It was not just some minor clerical error.

Chairman

Why is the date relevant? The Secretary General has stated that the application was received before the appropriate date, 25 January, and was subsequently changed. Does Deputy O'Malley accept that it was received before 25 January?

Deputy O’Malley

I do not. By way of proof, there is the fact that when the document was discovered by the plaintiff and his solicitors in the Emerald case, a cover letter from Ballywalter addressed to the Department and date stamped by the Department as having been received on 5 February, was attached. Therefore, the application was 11 days late.

Chairman

That directly contradicts what the Secretary General has told us. Would he like to comment on that?

Mr. Malone

All I can do to help is to say that we have obtained a statement from the official involved setting out clearly what happened and why he did what he did. There is no evidence of this. It is news to me that he was acting on behalf of, or instructed by, a superior to alter the date. Perhaps we can make a copy of the statement available to the committee.

Chairman

Is it correct that it was date stamped as having been received on 5 February?

Mr. Malone

I have not seen that covering letter.

Deputy Durkan

Can that be produced?

Chairman

Did Deputy O'Malley see it?

Deputy O’Malley

No.

Chairman

Have you seen evidence to that effect?

Deputy O’Malley

I have been told by the person who saw it. This is why I said this in support of Deputy Rabbitte's suggestion. I suggested also in my letter to the Clerk of the Committee of 18 January last, when sending back my evidence with the corrections, that Mr. McCarthy of Emerald Meats, who can give direct evidence of this, should be called. Otherwise this will all be done second-hand.

Chairman

I will consider what the next steps should be. I would like to consult the Committee about what we are trying to establish and who are the appropriate people to call. For this reason, I suggest that we set a date three weeks hence to resume hearings and make a decision next week on who should be called.

Deputy Rabbitte

I accept that and I will desist from further questioning on the Emerald Meats issue.

I have one or two questions about the alteration of documents. My first question relates to the veterinary certificate which Deputy O'Malley brought to our attention at the last meeting. The Secretary General's comments are to the effect that the forgery was not discovered by the Department until 1992. Deputy O'Malley dealt with this matter earlier. I noted the emphasis he put on it. He said it was not discovered by the Department.

Deputy O’Malley

I did not say that; I said it was not disclosed by the Department. The Department would have discovered it when I sent it to the Department in November 1989, but it kept quiet about it for obvious reasons. It was discovered by Mr. Durkan BL, acting on behalf of Deputy Spring and Deputy Desmond. He brought it to the attention of the tribunal.

Mr. Malone

May I clarify the position? The question of this licence was examined during the beef tribunal and the position is as follows. The veterinary officer who signed the certificate gave very clear evidence that the certificate provided did not have the alteration when it was signed. Therefore, the certificate was altered after it left the control of the Department. Second, the company gave evidence that the certificate which had come from the Department, and the certificate which was provided subsequently, was altered subsequently. The conclusion arrived at by the beef tribunal was that the alteration took place outside of the country. It was a relatively minor but important alteration about the beef having been produced within 90 days. The alteration was not noticed when the certificate was forwarded to the Department because the age of the beef was not an issue. At that stage the main issue was the origin of the beef. I do not dispute that it was brought to the notice of the tribunal by other parties, but it was also brought to the notice of the beef tribunal by officials of the Department at the time.

Deputy Rabbitte

Why did you refer to this as a forgery in page 35 while in page 36 you referred to the CBF alteration as an amendment to the briefing document?

Mr. Malone

With respect, if someone alters a veterinary certificate and puts in an alteration that has a clear commercial benefit, there was a clear commercial reason.

Deputy Rabbitte

—— and there was no commercial significance in the CBF alteration?

Mr. Malone

No, definitely not.

Deputy Rabbitte

Mr. Justice Hamilton said :

If this briefing document had been made available in its original form to the Department of Industry and Commerce, as was the intention of the CBF, then they would have been aware, prior to the decisions made by the Minister on the 21st day of October 1988, that the major portion of the beef being exported to Iraq was from intervention stock and not commercial beef.

The Department of Agriculture was at all times aware of the fact that the beef purchased by the Goodman Group during '87 and '88 was intended for export to Iraq. The CBF was also aware of the fact that the beef purchased from intervention stocks was being supplied to Iraq.

The omission was of major significance because one of the major issues to be discussed at the meeting of the Irish-Iraqi Joint Commission was the issue of increasing of beef exports to Iraq, extending this period of credit for payment in respect thereof and the provision of export credit insurance in respect thereof.

I cannot be expected to have at my fingertips a page out of the 969 pages in Mr. Justice Hamilton's report each time I put a question to you. How can you possibly say that was of no significance when it was at the heart of the issue of the sourcing of beef and the putative enormous claim against the State following the voiding of export credit insurance?

Mr. Malone

The first question the Deputy asked was about the distinction between forgery and alteration. I do not think anyone suggested there was any commercial advantage to the official involved in altering the CBF document.

Deputy Rabbitte

There was enormous commercial benefit. I am not talking about the official concerned.

Chairman

Allow the Secretary General to answer the question, Deputy.

Mr. Malone

The official was asked to prepare a brief for a trade mission to Iraq. The CBF provided an input to that brief. In that contribution, CBF referred to the fact that some of this product was being sourced either from intervention or from APS and that that, in essence, should not be brought to the attention of the Iraqis. The official took the view, rightly or wrongly, that that information should not be included in the brief. Deputy Rabbitte quoted from the findings of the beef tribunal. However, one must look at it in the context of what the official was asked to provide. He was not asked to provide an input or a brief on export credit policy; he was asked to provide a brief for the visit of a trade delegation to Iraq. The official appeared before the beef tribunal, he explained that he was not pressurised in any way and that there was no motivation other than taking the view that it would not be wise to have this included in the brief. That is all I can say about the matter.

Deputy Rabbitte

Deputy O'Malley, briefly, was this incident of any significance?

Deputy O’Malley

It was of enormous significance because if the Department of Industry and Commerce had been aware that the great bulk of the beef going to Iraq was coming out of intervention, it would have made strenuous efforts to prevent the then Minister, Deputy Reynolds, giving huge amounts of export credit cover to the two exporting companies because there was no benefit to our economy or farmers. It was intervention beef, farmers had been paid for it and, therefore, it could no longer be regarded as Irish beef. However, it was of huge significance. It is incorrect to say that no enormous commercial benefit was obtained by someone by the deletion of this part of the report. Deletion, just like adding something, is forgery. That deletion and the lack of knowledge on the part of the Department of Industry and Commerce resulted in the two exporters to the Iraqi market benefiting greatly in a commercial sense. AIBP received about 80 or 90 per cent while Mr. Murphy's company, Hibernia, received the remainder.

Chairman

Does the Secretary General accept what Deputy O'Malley has said?

Mr. Malone

It all assumes that had the information been included in the brief the export credit would not have been provided. I am not in a position to give a view because another Department and Minister were involved. I am satisfied - and the official has indicated such - that there was no pressure on the official. He just took a view.

Chairman

Is there anything wrong with the facts outlined by Deputy O'Malley? Is the value of the export credit correct?

Mr. Malone

There is no argument about the value of export credit because it is beyond dispute. However, one can argue about whether that information was included in the brief. We must bear in mind that it was the Department, not CBF, which was asked to prepare the brief. CBF provided an input to the brief. It was a brief on a trade mission not on the issue of export credit. Whether the export credit issue hinged on this extract from a particular brief is a moot question.

Chairman

We will pause for a moment and reflect on where we are going with regard to this issue. Whatever lingering disappointment there is about the outcome of the beef tribunal, this committee cannot be a second chamber for it. That is not our role.

I am concerned that deficiencies found in the Department of Agriculture and Food in the past are corrected in the future. That is the purpose of the systems review or forensic audit that is operating at present. This committee will receive a report on that review on 24 June.

With regard to issues that still have to be examined, I propose we decide what our next step should be in private session next week. I also propose we set aside our meeting of 27 May for that purpose. Under section 10 of the Committees of the Houses of the Oireachtas (Compellability, Privileges and Immunities of Witnesses) Act, 1997, we are obliged to alert the companies and individuals named that they have been identified in today's proceedings. We must also give them a copy of our proceedings and offer them an opportunity to appear before us. A public official, a former Taoiseach and 11 companies have been named. The clerk of the committee will peruse the transcripts of today's evidence and draw the attention of those persons to the fact that they have been named. I will also inform them that they can, if they so wish, appear before this committee.

I would like the committee to focus on the issues that need our further consideration rather than act as a forum for general unease about the agriculture and farming industry. Many people within the Department of Agriculture and Food have let me know that they feel they are victims of having to deal with an industry that is fundamentally non-compliant here and elsewhere. They are dealing with a difficult industry and believe they should not be blamed for it. They also feel the criticisms levelled at the Department are misdirected. Nonetheless, there have been deficiencies within the Department which have persisted over several Governments and accounting officers. We have all spent our share of time in Government over that period. However, this committee cannot do the Government's job.

Deputy Rabbitte

I associate myself with the Chairman's remarks, which are fair. However, it is incorrect to caricature the examinations or hearings as unease about the industry or the Department. These are very specific issues and we are seeking to establish why decisions were made while other decisions were not. The fact that a number of forgeries, altered documents and decisions which have reached the Supreme Court have gone against the Department etc has a significant revenue implication for the Exchequer or a financial implication for the taxpayer. I reiterate that it will be difficult to make progress on the basis of once removed. There are key players that ought to be invited to appear before the committee and the Chairman has kindly agreed to consider that proposal next week.

I repeat the concern expressed by the Association of Higher Civil Servants - in so far as it was directed at the committee - that it would be wrong to impute to any Member any intention of making blanket references to civil servants. However, that does not mean this committee cannot probe specific decisions and seek explanations, if not satisfactory ones, for what went on.

Chairman

I accept what the Department has said. The view has been expressed that Deputies O'Malley and Rabbitte have been obsessive about the Department and that their well-known gladiator skills have been applied to it unfairly. Does Deputy O'Malley accept that viewpoint?

Deputy O’Malley

Such modest skills which I may possess are only aimed at those for whom it is appropriate and necessary. I do not find it necessary to be highly critical and concerned with the vast majority of the Irish public service. Everything I have said has had nothing to do with 98 per cent of the people serving in the Department. In case this view that is put out by trade unions and others were to be regarded as the unanimous view of people in the Department, I would like to make it clear that during the two weeks following my appearance at the meeting of 5 January I received four telephone calls from people who identified themselves as civil servants in the Department of Agriculture and Food. They told me I was correct in what I was doing and I was going in the right direction. They also said I did not know the half of it and that I should continue to pursue the issue.

Chairman

I will offer Mr. Meade from the Comptroller and Auditor General's office an opportunity to speak before I call on the next Deputy.

Mr. Meade

The reports of the Comptroller and Auditor General have, over the years, contained many paragraphs, some for information purposes and some of a critical nature. These reports and paragraphs should be viewed in the context of the many varied and difficult schemes administered by the Department of Agriculture and Food, the complexity of those schemes, the new schemes introduced following CAP reform, the political imperative to get payments to farmers as early as possible as well as the control procedures which have been put in place when matters of a control nature have been brought to the attention of the Department.

As auditor, I make no apology for bringing to notice matters which I consider to be of a material nature and which should be brought before this committee or where, in specific instances, control weaknesses have arisen. The reports have also outlined where remedial action has been taken in the specific matters noted.

The losses of £400 million have been raised. On a normal basis, like other FEOGA agencies throughout the European Union, member states have to incur expenses such as handling, freezing, storage and the cost of borrowing for intervention and other FEOGA operations. For all EU countries, the European Union later recoups a proportion of those costs. There are various methods of calculation and in general the amount recouped does not square with the expenses incurred. To run the FEOGA schemes, therefore, national bodies, such as the Department of Agriculture and Food and other FEOGA agencies, have to incur certain costs. In the period 1973-98, the Department of Agriculture and Food incurred £1,500 million in such costs. The EU coughed up £1,200 million as its contribution to those costs. The net £300 million is a normal expense and cannot be classed as a loss. I would class it as the normal running cost of FEOGA operation which would apply in every country.

That is not to say the State has had to bear that portion of the costs. When we talk about losses we are referring to real losses such as amounts disallowed by the EU or other losses incurred. In the period 1973-98, some £100 million was disallowed, including the famous £70 million beef fine. If one considers that total FEOGA expenditure in that period was £20 billion, an overall loss of 0.5 per cent of FEOGA expenditure was incurred. Be that as it may, even this loss, together with loss in the Emerald Meats case and the possible loss in the fire - because until the insurance case is completed, one does not know if that will result in a loss - is not satisfactory. Any loss of taxpayers' money or any malfeasance incurred is not to be condoned.

An audit cannot and will not, by its nature, bring to notice everything which can happen in a Department; it is a systems check. Furthermore, matters of a current nature raised by the committee will not be duplicated in later audit reports.

I hope this clarifies the position on the losses and the role of the audit, since the last meeting the 1995 composite account has been signed off by the Comptroller and Auditor General and we hope to have the 1996, 1997 and 1998 accounts cleared by October.

Chairman

For FEOGA?

Mr. Meade

Yes.

Deputy Durkan

Surely the committee has a duty and a responsibility to follow the report presented by the Comptroller and Auditor General and to test it? That is the job of the committee. Government Departments or civil servants who feel aggrieved should recognise that is the work of the committee and that it is not a personal matter. It is not a question of members of the committee pursuing people for individual retribution, it is a fact of life of the job we have to do - to pursue the case presented to us and ensure we get answers. If we do not get answers we are not doing our job and someone at a later stage may ask why the committee did not thoroughly investigate the points raised. I support the points raised by Deputy Rabbitte about fears expressed by the union or unions. That should not go unnoticed.

I have questions which I would like to ask about this issue and other issues referred to in the Comptroller and Auditor General's report and would like an opportunity to ask them before the matter is closed.

Chairman

Will fines imposed by the EU be borne by the Exchequer or will it be levied on the industry?

Mr. Malone

This is the point we discussed this morning. The fine has already been paid. The report of the recoveries group is contained in the document. The group looked at various options for recovery on a general basis. One idea was for a levy on the industry but that was found to be illegal - there was a precedent in Italy. The option of levying on specific companies was looked at and, again, legally that is not possible. Recoveries can only be pursued where there is prima facie evidence under Irish law. That means assembling evidence and prosecuting a specific irregularity.

Chairman

Seeking recovery in the court?

Mr. Malone

Yes.

Chairman

Is there a list of outstanding issues which the Department feels need to be resolved? This is one such issue. Are there any others?

Mr. Malone

There was a number of items. The composite account was unfinished but we are now coming out of the woods on that. As Mr. Meade has said, we should be well on the way by the autumn. The Comptroller and Auditor General has signed off the 1995 account, we have submitted the 1996 account, we are well advanced with the 1997 account and then we will proceed with the 1998 account. That is one item of unfinished business.

Chairman

Then it will be on a current basis.

Mr. Malone

Yes. We have cleared up many of the difficulties which arose with the direct payments to farmers - there was a backlog in the area aid unit and that has been addressed. There was a concern last year over animal traceability. We now have a system where each animal in theState is registered at birth. That gives us a very good database on animals.

Chairman

Registered and tagged at birth?

Mr. Malone

Yes.

Chairman

Can the tag still be interfered with?

Mr. Malone

Any tag can be interfered with but, with the system of double tagging used now, it is much more difficult to interfere with it. The animal has to have a passport so it is a difficult exercise now to set up a false identity for an animal. We are virtually finished with that issue.

Last year the backlog in land annuities was raised and we have introduced an offsetting system for that.

The big issue is the improvement of our IT capability. There is ground to be made up in availing of our database. We have a large amount of information and it is a question of making best use of that information in terms of information management systems. The big issue will be the operation of the new arrangements and schemes coming from Agenda 2000. There will be an even greater reliance on direct payments in the new schemes which will come into effect from 1 January 2000. We have been trying to do some risk assessment in that area in advance. In other words, we are looking at the problems before they arise rather than after they arise, as we have tended to do.

Chairman

Tell me about the Department's present relationship with the beef industry. Is it strained? Is it formalised or how does it differ from the period leading up to the establishment of the beef tribunal?

Mr. Malone

It is fair to say that this is a difficult industry to regulate. Many of the schemes are complicated with many regulatory requirements. In relation to intervention, it is important that we have deployed our resources more effectively. In the past we relied too much on permanent presence. We have attempted to have less reliance on permanent presence and more on unannounced inspections or spot checks. In any year we now do several hundred spot checks. We have also strengthened our hand. A unit which was originally set up for the control of hormones and the abuse of illegal substances is very effective. Where we have problems in particular factories, we use that unit to do investigations.

We have learned a lot there. In relation to intervention, we now have a better contractual arrangement; we have a clearer contract for intervention. In the current system intervention does not apply to such a great extent. However, if the product is taken into one plant, it must be deboned in a different plant. This has given us a great deal of control.

The big issue to be considered in the beef industry is its structure and the need for rationalisation. There is now a clear view that we have too many factories and over-capacity. If that issue could be addressed the industry would be improved and it would make things easier forthe Department in its role as a regulatory authority.

Chairman

You say there are too many factories. How many are there and how many should there be?

Mr. Malone

There are more than 30 licensed operators. It has been suggested in study done by McKinsey that four to six operators might be a better idea. However, farmers might have something to say about that in terms of competition. There is a case for reducing capacity by approximately one-third.

Chairman

Without affecting competition?

Mr. Malone

Without affecting competition.

Chairman

One other area which has been of concern to the committee is animal disease, especially bovine TB and brucellosis. Do you see the eradication of those diseases as unfinished business or has any significant progress been made in those areas?

Mr. Malone

It is unfinished business. We have had an upsurge in brucellosis and we tightened our controls very substantially last year. We have kept those new controls in place this year and if we persist with those controls we will deal with brucellosis some time within the next two years. The TB situation is more difficult because it is technically difficult to eradicate TB. It is established in the wildlife population, particularly in badgers. We are encountering the same difficulty as they are in Northern Ireland and in Britain. Regarding TB, the focus is on new technology. We are putting a great deal of effort into working in collaboration with groups in the UK, in Northern Ireland and further afield. A vaccine for badgers could be developed. If one could deal with TB in the badger population it would be easier to eradicate it in the cattle population.

Chairman

Deputy O'Malley, did you wish to raise a final point?

Deputy O’Malley

I do not think so at this stage, Sir. May I come back on the day we complete this discussion and make some points then?

Chairman

Of course. Many of the witnesses then will be coming as a result of your own evidence and Deputy Rabbitte's questions. You should attend then if you can.

Deputy O’Malley

You will notice, Sir, that I did not deal with everything the Accounting Officer said in his commentary - which I was provided with - on my evidence the last day because I did not feel I had time to do so. You gave me more than half a hour but I could not deal with all the points fully.

Chairman

We will see if we can take those on board.

Deputy Durkan

In relation to disease eradication and particularly with regard to BSE, there was an outbreak of BSE in Moorepark. This was outlined in the Comptroller and Auditor General's report. What kind of investigation was done into the circumstances surrounding that outbreak? Was some degree of traceability applied to identify the origins, for example? I would have considered it quite embarrassing for the Department that, in one its own institutions, there should be an outbreak of a disease which the Department was taking a particular interest in attempting to isolate and curtail.

Mr. Malone

The Deputy is right. The outbreak was embarrassing. We could have done without it. One must understand that BSE is a sporadic disease. We get about 70 or 80 cases each year. It is a disease which affects individual animals and it can happen on any farm. Very considerable work and trace back was done in relation to the Moorepark incident. Very considerable trace back was done on the origin of the animals and it is important to understand that the Moorepark herd is very valuable and in many ways, in effect, it is a closed herd. One can never be absolutely certain of what causes an outbreak. The best view is that the outbreak was feed related. The view all along has been that an animal gets BSE from consuming contaminated feed - meat and bone meal. Because there was some home mixing taking place on the farm in Moorepark, there may have been an element of what is called cross contamination from feed being prepared for pigs. It is not the case that pig ration was actually given——

Deputy Durkan

When did the outbreak take place?

Mr. Malone

In 1997.

Deputy Durkan

When were restrictions relating to the use of bonemeal introduced by the Department?

Mr. Malone

We have had restrictions on the actual feeding of meat and bonemeal going back to 1990. The animals were not fed meat and bonemeal but there could have been some cross contamination. It is legal to feed meat and bonemeal to pigs, for example. We have learned, over the past couple of years, that cross contamination - little pieces of dust flying around in a feed mill, for example - can set up contamination from meat and bonemeal in another feed line.

Deputy Durkan

Is meat and bonemeal still used for pigs?

Mr. Malone

It is.

Deputy Durkan

And for poultry?

Mr. Malone

The poultry industry has had a voluntary ban on the use of——

Deputy Durkan

Why?

Mr. Malone

They have done it mainly to give assurances regarding their product. It was a decision they took themselves. There is no legal requirement. We have put very strict requirements on meat and bonemeal. We do a considerable number of tests on the feed industry and we have very strict requirements. Effectively, a plant producing meat and bonemeal must be a dedicated plant. It cannot produce bovine rations. We also have very strict controls on all farms. If a farmer feeds bone meal to pigs, he must have a very tight and controlled system so there is no way it can be fed to cattle.

Deputy Durkan

In view of the concern about a possible link between bone meal and BSE, is it wise to allow the use of such meal in adjoining yards or premises?

Mr. Malone

We do not allow that.

Deputy Durkan

It is not allowed any more?

Mr. Malone

No.

Deputy Durkan

Is it still fed to pigs?

Mr. Malone

Yes, but they have to be dedicated plants.

Deputy Durkan

Are they licensed?

Mr. Malone

If they are licensed, they are licensed for that and for nothing else.

Deputy Durkan

Is it wise to use it, given that other food producers have decided not to continue its use?

Mr. Malone

There is no evidence to show pigs are prone to BSE.

Deputy Durkan

There was a suggestion by some researchers that a possibility exists.

Mr. Malone

They set it up once in a pig, but they gave the pig live BSE in massive doses to do so. Regarding the production of meat and bone meal, it is important to note that it has been scientifically proven that if it is produced at the right pressure and temperature——

Deputy Durkan

I put it to Mr. Malone that it is unwise to have agriculture associated with anything which is likely to be linked with a possible area of concern in relation to BSE for the valid reason that the evidence of BSE in this country has caused considerable damage to the national economy in terms of meat export markets. Is that not true?

Mr. Malone

Yes, BSE has caused difficulties in many markets. However, I think we have regained our position in almost all those markets. The point I was making in relation to meat and bone meal - and it is a scientific requirement - is that if it is produced at the right temperature and pressure, which is 133 degrees and three bar for 20 minutes, it is virtually impossible to transmit BSE. All our producers are operating to that requirement.

Deputy Durkan

Is the number of BSE cases increasing or decreasing?

Mr. Malone

It is staying roughly the same. There were 79 cases last year and approximately the same number the year before. We would like the number to begin to decline, but we take some comfort from the fact that the cases which are occurring tend to be in older animals. That is important. If they were in younger animals, it would be a matter for concern. If it is in older animals, it means they got the infection at an earlier stage.

Chairman

It could die out.

Mr. Malone

It could die out, that is the hope.

Chairman

How stands the transfer of most of the staff to Wexford?

Mr. Malone

Over 100 staff are there and another group has been earmarked to go next July and another in September.

Deputy Rabbitte

Is it the official position that the problem with tuberculosis is the badger? I thought the badger was a carrier because tuberculosis already exists.

Mr. Malone

I think the Deputy is right. I think the badger got it from cattle in the first instance. However, badgers are heavily infected with tuberculosis. They are infected with the same strain as the cattle. A farmer can pursue a very prudent policy, by buying in very carefully and testing regularly for a clear herd. However, if there are infected badgers in the vicinity which interact with the herd, that can cause a breakdown.

Chairman

To summarise, this is a period of significant change for the Department. The National Treasury Management Agency has taken over FEOGA borrowing arrangements, a new payments agency will be established in the coming year, many staff have transferred to Wexford and there is a systems review on which we expect a report from the Department of Finance and the Department of Agriculture and Food on 24 June.

We will adjourn on the question of where we have come from and into what else we need to inquire. That will be on the agenda for the private session of the committee's meeting on Thursday, 13 May at 10 a.m. Also on the agenda will be minutes of the previous meeting, matters arising, correspondence and reports received and the work programme which will include what I have just outlined, plus a draft report on the National Roads Authority. In public session we will deal with financial statements from 1994 to 1997 from the rent tribunal and item 8, the report on value for money, examination and administration of supplementary welfare allowances from the Department of Social, Community and Family Affairs and any other business.

The committee adjourned at 4.10 p.m.