Dáil Éireann debate -
Wednesday, 15 Mar 1995

Vol. 450 No. 7

Adjournment Debate. - Goodman Group Restructuring.

Mr. O'Malley

The announcement last week that Mr. Larry Goodman and a group of investors have acquired control, from a consortium of banks, of most of the assets of the former Goodman Group raises a number of disquieting questions which have not been dealt with in the announcement nor have they been dealt with by the Minister for Enterprise and Employment or the Minister for Agriculture, Food and Forestry. The amount of information disclosed is minimal and I have had considerable difficulty getting any of the matters concerned clarified from official sources.

In view of the fact that consent was refused under the mergers Acts for certain proposed take-overs by the Goodman organisation before its collapse, and prohibition orders were made by me in 1990, it seems strange that the present take-over which is far more extensive has been approved by the Minister for Enterprise and Employment, to whom I understand it was notified late last November. It appears he gave this consent about a month ago without referring the matter to the Competition Authority, although they had already looked at various aspects of this and are familiar with the background.

So far as I can ascertain, not all the assets of what was popularly known as the Goodman Group have been included in this arrangement. Certain assets which Mr. Goodman claimed he did not own but which the then Fair Trade Commission found he exercised effective control over, have apparently been excluded. It appears that the assets formerly known as the Master Meats Group, together with some other plants, have been excluded from this transaction.

Before they went into examinership in 1990, the Goodman Group had over 40 per cent of the beef export market and there was considerable concern about that at the time. The information available suggests that a large group of banks have written off £300 million due to them. I believe the public is entitled to know why this should have happened given that banks generally, and in this country especially, pursue people relentlessly for small sums of money and often force small companies and businesses to close down because of their inability to pay off their liabilities quickly enough. The public is also entitled to know whether the Revenue Commissioners have been paid in full all income tax, corporation tax, PAYE and PRSI due to them. In view of the findings of the beef tribunal at page 335 that:

there was a deliberate policy in the Goodman Group of companies to evade payment of Income Tax ... the records of the company were misleading and calculated to deceive the Revenue Authorities in the event of an investigation and did so deceive them: the records submitted by the Goodman Group of companies were misleading and intended to be so.

In addition the beef tribunal report, at page 334, states that after June 1993 negotiations between the Revenue and the Goodman Group of companies took place in the context of the provisions of the Waiver of Certain Tax Interest and Penalties Act, 1993 — the tax amnesty scheme. To what extent did the Goodman Group avail of this tax amnesty? How much money have the Revenue had to forego in penalties and interest as a result of the Goodman Group availing of the tax amnesty Act?

Now that Mr. Goodman has been restored to a dominant position in the Irish beef trade we are entitled to ask what will happen to beef cattle prices if the present live export trade were to come to an end for any reason. Will we then have a situation where the price of cattle will be fixed by the dominant player in the market? How is this supposed to be in the interests of Irish farmers? Given the vulnerability of Irish farmers to this arrangement which has now got the approval of the Minister for Enterprise and Employment, I am astonished that the Minister for Agriculture, Food and Forestry saw fit to make a statement towards the end of last week in which he was quoted as welcoming this new arrangement. Does the Minister for Agriculture, Food and Forestry not realise, given the track record of the individual concerned and the findings of the beef tribunal, just how insecure the position of Irish farmers may well become so far as the purchase of their cattle is concerned?

Farmers are unwise to take a short term view of a matter like this. Have we any guarantee that the serious malpractices in the various meat plants of this group, which came to light in the beef tribunal, will not be continued in the future? I greatly welcome the fact that there are additional investors as well as Mr. Goodman in this new arrangement. So far as I can see none of them has experience in the meat business which means that effective control is likely to be exercised by Mr. Goodman.

It seems extraordinary that somebody whose companies have been found to have engaged in a wide variety of serious malpractices and who has, as a matter of company and group policy, deliberately set out to evade paying very substantial sums of tax, should now be facilitated quietly and privately in this manner.

It should be remembered that the former Goodman Group would have got away with all these things were it not for the beef tribunal. The manner in which all this has been quietly facilitated gives rise for concern about how strenuously the State will seek to defend a claim against it for a sum which could approach £200 million by the same group, arising out of the extreme foolishness of the then Minister in the export credit insurance field in 1987 and 1988.

Minister for Enterprise and Employment (Mr. R. Bruton)

As Deputy O'Malley has indicated on 29 November 1994 I received a notification under the Mergers, Takeovers and Monopolies (Control) Acts, 1978 and 1987, as amended by the Competition Act, 1991, concerning the proposed refinancing and restructuring of the Goodman Group operations and involving the acquisition of the cattle and beef slaughtering and beef processing business and assets of the Goodman Group by Oppiac Limited. On 15 February 1995, I decided not to refer the proposal to the Competition Authority for further examination and, consequently, decided not to make an order under section 9 of the 1978 Act in relation to the proposal.

Under the notified proposal, control over the assets and businesses of the Goodman Group would change from the then owners, comprising the bank syndicate which owned 60 per cent of the group and Mr. Larry Goodman who owned the remaining 40 per cent, to a new investors group comprising Oppiac Limited as the investment vehicle. The composition and ownership of Oppiac Limited as notified was as follows: Larry Goodman — 40.91 per cent; Morgens, Waterfall, Vintiadis and Company, a US based financial institution — 22.72 per cent; the McCann family — 13.64 per cent; John and Frank Gleeson who control an international commodities trading company called Glibro Holdings Limited — 13.64 per cent; and McDonald Holdings Limited which is involved in the electrical business owning 9.09 per cent. Subsequent to my approval under the mergers legislation I have been advised that Monaghan Nominees Limited was given an option in return for loan stock which can be exchanged for share capital to acquire 9.09 per cent in Oppiac Limited the effect of which, if exercised, would be to reduce both Mr. Goodman's and Morgen's shareholdings by 4.55 per cent.

Ireland and the UK were to be hived down to three wholly-owned subsidiaries. Phase one was not notifiable under the mergers legislation as it entailed an internal group reorganisation with no change in ultimate control. Under the notifiable phase two proposal, the shares of the three newly created "hive-down" companies were to be acquired by the new investors group. This proposal was examined by my Department with reference to the usual mergers criteria, including competition and employment issues and the 1990 prohibition orders relating to the Goodman Group.

The Goodman Group's share of cattle slaughterings and beef processing for the export market — the relevant market for the purposes of competition assessment — which is currently 25 per cent remained unaffected by the notifiable proposal. This market share was confirmed by the Department of Agriculture, Food and Forestry. No immediate or significant change in the operations of the businesses of the Goodman Group was anticipated as a result of the notifiable phase two proposal. Employment of all existing employees of the group would transfer to the hived down companies on the same terms and conditions as currently apply. The proposal appeared to raise no concerns regarding competition as it did not give rise to any concentration in the relevant market or concerns with respect to any other matter under mergers. On its own merits, therefore, it did not appear to warrant referral to the Competition Authority for further examination under the mergers legislation.

The two 1990 prohibition orders relating to the Goodman Group sought to prevent the group from increasing its then share of the relevant market of cattle slaughterings and beef processing for the export market from 31.4 per cent to 41.7 per cent resulting from its control of the Master Meat plants in Freshford, Bandon and Clonmel. The orders effectively permitted the Goodman Group to increase its then market share from 31.4 per cent to 38.2 per cent by allowing it to retain the Bandon and Donegal plants. This compares with a current market share of 25 per cent. In this context, the question of whether the phase two proposal should have been referred to the Competition Authority in order to seek to establish beyond reasonable doubt that the terms and conditions of the 1990 order relating to the change in control of the Master Meats companies were fully satisfied required consideration.

I received further confirmation from the solicitors acting on behalf of all the parties to the current restructuring proposals that the Goodman Group had complied with the terms of the orders within the time periods specified in them and that the purchasers of the four Master Meat Packers at Clonmel, Kilkenny, Longford and Omagh are independent of the Goodman Group as required by the orders. Under the mergers legislation any false or misleading information given by notifying parties would have the effect of invalidating a notification.

On balance I did not consider it necessary or appropriate to refer the matter to the Competition Authority having regard to the following considerations: (i) the existing powers and proposed new regulatory controls in the Competition (Amendment) Bill and (ii) the fact that neither the Department of Agriculture, Food and Forestry nor the Department of Tourism and Trade, who were consulted, raised any objections to the proposal.

Under existing competition legislation and with regard to any future concerns resulting from any increase in market shares which the Goodman Group may be able to achieve, it is open to me as the Minister concerned, should the circumstances warrant it, (i) where I am of the opinion that there is an abuse of a dominant position, to ask the Competition Authority to carry out an investigation of any abuse of a dominant position under section 14 of the Competition Act, 1991, and (ii) to make a sectoral order under section 2 of the Mergers Take-overs and Monopolies (Control) Act, 1978, as amended, similar to the newspaper order which would require all mergers and take-overs affecting the beef sector to be notified irrespective of the thresholds.

In addition, the proposed new enforcement powers of the Competition Authority under the Competition (Amendment) Bill, which provides for investigations and action by the authority on its own initiative, could lead to sanctions for anti-competitive activity. It is my intention to have this Bill enacted at an early stage. While they do not normally discuss individual taxpayer's liability, I have been advised that the Revenue Commissioners position in relation to the tax liabilities of the Goodman Group has not been disimproved by last week's restructuring.

Mr. O'Malley

Can they get paid?