I move:
That Seanad Éireann notes the Report of the investigation into the affairs of Siúicre Éireann cpt and related companies."
Siúicre Éireann and Related Companies Report: Motion.
Initially I would like to summarise the four main points which I will be making in this debate.
First, the events that took place in the Sugar Company, as revealed in the court inspectors' report, are lamentable. However, even the most careful ongoing scrutiny by Ministers or Departments of the company at the time these events occurred or when the company was floated would not have revealed them, such was the care that was taken to conceal them from the board not to mention from Departments and Ministers. Even now, following exhaustive investigations, experts still do not agree on one key issue, the ownership of Talmino.
Second, once there was evidence suggesting that there had been improper activities in the company, the Government took prompt action. We instituted the High Court inspectors' report and the report of Mr. Maurice Curran and we gave them the fullest co-operation in their inquiries. As a result of these inquiries, action will be pursued by the appropriate legal means.
Third, the Government gave the inspectors and Mr. Maurice Curran a completely free hand. We meticulously avoided any action or suggestion that might influence the nature of their conclusions as it was in the public interest that the full facts should be made known. The only step we took, and which was a proper one, was to seek to have the inspectors' report completed in due time consistent with a full investigation of the matters at issue and at acceptable cost. The Minister for Industry and Commerce, Deputy O'Malley, is already reviewing mechanisms with a view to minimising costs in future inspections.
Finally, we have acted to avert a repetition of this case by adopting guidelines for relations between Ministers and State bodies and for the conduct of such bodies.
I would like to proceed now to outline in greater detail the matters which I feel are pertinent to this debate. The Government responded quickly when allegations concerning the affairs of Irish Sugar plc first broke in late August of last year. On 29 and 30 August the Government Information Service told the Department of Finance that Mr. Sam Smyth of the Sunday Independent was alleging that Mr. Chris Comerford, Managing Director of Greencore plc, was the beneficial owner of Talmino, a Jersey registered company which had a 24 per cent interest in Gladebrook. Gladebrook, in turn, owned 49 per cent of Sugar Distributors Holdings Limited — SDHL — which had been acquired by Siúicre Éireann cpt — SE — for £9.53 million, prior to the flotation of Greencore plc. These allegations were put to Mr. Comerford by an officer in my Department. He denied them. An article containing the allegations appeared in the Sunday Independent of 1 September 1991. The article also contained further allegations to the effect that Mr. Comerford had received payments of £40,000 in consultancy fees from Gladebrook which were paid to another Jersey registered company, Delante, ostensibly owned by Mr. Comerford.
At a meeting of the board of Greencore on Tuesday, 3 September, Mr. Comerford was asked to answer certain questions. As a result of his replies to these questions the board sought Mr. Comerford's resignation which he tendered in return for a generous severance package. Mr. Tully, the company secretary and financial controller, tendered his resignation on 6 September in similar circumstances. In the meantime, the Government had decided on 4 September to authorise the Ministers for Finance and Agriculture and Food, to seek a full report on all aspects of the matter from the board of Greencore, and on 9 September this report was furnished to those Ministers by the board and was presented to Government the following day.
The Government decided that there were outstanding questions of public interest which demanded answers and that the extensive powers conferred by the Companies Acts should be used to establish beyond question the exact nature of the facts and events involved. The Government decided that (a) the Minister for Industry and Commerce, on behalf of the Government, would apply to the High Court under section 8 of the Companies Act, 1990, to appoint one or more inspectors to inquire into the affairs of Irish Sugar plc and other relevant companies, so as to obtain all relevant information concerning responsibility for what had happened; (b) the Minister for Industry and Commerce would, also, on behalf of the Government, under section 14 of the Companies Act, 1990, investigate the ownership of SDHL, Gladebrook and other recent acquisitions of SE. The inspector as appointed would be required to determine persons either having a financial interest in, or being able to control or influence the policy of, these companies. The investigation would cover in particular any circumstances suggesting the existence of an arrangement or understanding which, though not legally binding, may have been observed in practice and which was relevant to the investigation. This investigation would establish whether there was any question of insider dealing or conflict of interest; (c) to request the Revenue Commissioners to carry out a complete investigation into all relevant matters which came within their jurisdiction; this would involve examining all relevant transactions with a view to establishing that liabilities were properly estimated and paid in respect of corporate, capital and personal taxes; (d) to request the Central Bank to examine the exchange control aspects of the matters at issue. This would involve examining all transactions involving payments outside the State with a view to establishing that exchange control procedures were not breached in any way. In addition, the Central Bank were asked to inquire whether permissions were sought from and granted by the Central Bank in relation to the establishment of the two companies, Delante and Talmino, registered in Jersey; (e) the Minister for Finance, on behalf of the Government and exercising his right as a shareholder in Greencore plc, would request the board of the company to convene an extraordinary general meeting under section 132 of the Companies Act, 1963, to report to the shareholders on the resignations of the executives of the company and the arrangements agreed with them in that context.
In addition, the board of Greencore appointed Arthur Andersen to carry out a full review of the Sugar Distributors/ Gladebrook transactions.
On 12 September the Minister for Industry and Commerce appointed Mr. Maurice Curran, solicitor, to inquire into the membership and beneficial ownership of certain companies under section 14 of the Companies Act, 1990.
In addition, Messrs. Ciaran Foley SC and Mr. Aidan Barry, Accountant, were appointed on 16 September, by order of the High Court, Inspectors under section 8 of the Companies Act, 1990, to investigate the affairs of Irish Sugar on the grounds that it was probable that the management of the company had been guilty of misfeasance or other misconduct towards the company or its members and that these members had not been given all the information relating to its affairs which they might reasonably expect. The same order also allowed the inspectors to investigate any other matters which might appear to be appropriate, having regard to facts which might come to their knowledge in the course of their investigations.
Within days the inspectors were back in the High Court, on 18 September, seeking to extend the investigation to 34 other companies which they considered relevant to the investigation of Irish Sugar.
In preliminary discussions between the Department of Finance and the inspectors, all assistance was offered to them, including the findings of the Arthur Andersen report. The inspectors, however, decided to carry out their task without such assistance.
On 7 October the inspectors presented an interim report to the High Court, a copy of which was furnished to the Minister for Industry and Commerce. The court gave the inspectors a further five weeks to report but directed that the interim report should be kept confidential.
The inspectors returned to the High Court on Monday, 11 November, with a second interim report. They indicated to the court that they would have no objection if the court wished to publish it. This was strenuously resisted by the legal representatives of Greencore on the grounds that there were allegations prejudicial to the company and other parties in it, without substantiation, and without the right of rebuttal having been afforded. In the event, the inspectors withdrew their support for publication on the grounds that the objections of Greencore would hold up their investigations. On Wednesday, 13 November, Mr. Justice Lynch accepted that the interim report should not be published and that other relevant Ministers and their advisers could see the report. A copy of the report was given to the then Minister for Finance.
On Thursday, 12 September 1991, the Minister for Finance requested an extraordinary general meeting of Greencore as a matter of urgency, seeking a report to shareholders on the resignations of executives of the company. This agenda was broadened at the request of other shareholders to cover events surrounding the SDHL/Gladebrook transactions. The EGM of Greencore took place on 30 October 1991. Both the report of the chairman of Greencore and the Arthur Andersen report referred to earlier were on the agenda.
The Andersen report, instituted by Greencore itself, concentrated on relationships between SE and SDHL and the financial and other transactions relating to the original acquisition by Gladebrook of 49 per cent of SDHL and the eventual acquisition of Gladebrook by SE. The chairman's report concentrated more on the role of Mr. Comerford, former chief executive of SE and Greencore, in these events and his eventual resignation and severance package.
Both reports were careful to state that matters referred to in them were sub judice; that they were unable to take evidence under oath, and that they were therefore dependent on examination and discussion for the evidence; that the eventual reports of court and other inspectors might have a crucial bearing on their own reports and finally it might be the courts that would decide certain matters.
The Andersen report concluded that Gladebrook may have acquired 49 per cent of SDHL at a slightly low price, but that this would not be unusual where a management buy-out was involved as opposed to a majority shareholder buy out. The report was, however, critical of the board of SE for not examining other options available.
The Andersen report also concluded that a fair price was paid eventually by SE for Gladebrook which included the original 49 per cent of SDHL, when account is taken of acquisitions in the meantime which had the effect of substantially increasing the profits over the period of Gladebrook's existence. A price earnings ratio of 8:8 was paid by SE for Gladebrook which compares favourably with quoted food stocks at the time, about 10.2.
Nevertheless, the board, being conscious of the possibility of Mr. Comerford's involvement on both sides of the deal decided, pending the reports of the court inspectors, not to redeem any of the outstanding loan notes, about £6.3 million in all, including the £2.1 million due to Talmino, issued in connection with the purchase of Gladebrook.
The board accepted that they were badly advised in the matter of the resignations and severance settlements of Mr. Comerford and Mr. Tully and that they acted precipitately under extreme pressure. On this basis, the board decided to suspend the implementation of both agreements, and that, if it were established that Mr. Comerford was the beneficial owner of Talmino, his termination agreement would be rescinded and he would be pursued for any "secret profits" he might have made. The extent of Mr. Tully's involvement and knowledge of Mr. Comerford's claimed interest in Talmino would determine whether his termination agreement would be honoured.
In the eent, as a result of an updating of the Andersen report, Greencore obtained a plenary summons from the High Court in respect of these and other matters on 29 November 1991. The board on that date said that they had instituted legal proceedings against Messrs. Comerford, Tully, Kelleghan, Lyons and Murphy alleging breach of duty, breach of trust, breach of contract, misrepresentation and negligence "in respect of events which took place during the course of their employment by, or whilst otherwise acting on behalf of, the group".
Whatever criticisms may be levelled at the original board of SE for not pursuing alternative options to the management buy out by Gladebrook and whatever criticism may be levelled at the present board of Greencore for precipitate agreement on generous severance packages, it must be said that they acted correctly and decisively once the possible conflict of interest became known to them.
The publication of the final court inspectors' report entitled "Investigation into the Affairs of Siúicre Éireann cpt and Related Companies", dated 25 February 1992, is welcomed by the Government. As the inspectors acknowledge, their conclusions constitute opinions which, in many instances, may only be adjudicated upon and finally determined in a court of law.
As a first step, however, the Government, for their part, referred the report to the Director of Public Prosecutions for consideration and consequent action where it is determined that there have been breaches of criminal law. The DPP has since, in turn, referred the report to the Garda Fraud Squad.
The Revenue Commissioners also received a copy of the report for examination in the context of the investigation being carried out by them into taxation issues arising from the affair and which is nearing conclusion. Both the Department of Finance and the Central Bank are looking at exchange control issues arising from the report to see if action is warranted in relation thereto.
As regards the conclusions of the report itself as set out on pages 221 to 223, inclusive, nine centre round the former managing director, Mr. Chris Comerford; another nine relate to other individuals including Messrs. Tully, Garavan, Kelleghan and Lyons; and four others relate to financial records and claims for company tax relief.
The report is critical of lax Sugar Company procedures on a number of occasions but does not specifically criticise the board or the chairman. In fact, the report draws the conclusion that the board would be unlikely to have approved the management buy out by Gladebrook had they had full knowledge of all the matters involved. It does, however, conclude that the board of Greencore should have dismissed Mr. Comerford following its meeting with him on 3 September while conceding that the board did act on legal advice. The main conclusions of the report indicate that there was widespread conspiracy and deception practised by Mr. Comerford and the other executives of Sugar Distributors. If all or even some of the conclusions are borne out following the investigations by the authorities to which I have already referred, the Government will take all necessary action.
It is acknowledged that on one very important issue the High Court inspector's report differs from that drawn up by Mr. Curran, appointed under section 14 of the Companies Act, 1990. The Curran report had concluded that Mr. Comerford was the beneficial owner of Talmino Limited, one of the shareholders in Gladebrook and in respect of which a loan note was issued to it by Irish Sugar. This loan note is the subject of a restricting order under section 16 of the Companies Act, 1990, imposed by the Minister for Industry and Commerce. The High Court inspectors' report, on the other hand, concluded that neither Mr. Comerford, nor any of his family had any interest, beneficial or otherwise, in the Talmino loan note.
The essential difference in the two reports on this issue centre around the purpose for which the Jersey registered company, Delante Limited, was used. This company was in the hands of John Murphy, solicitor, before he transferred beneficial ownership to Mr. Comerford on 16 December 1988. The Curran report says that when Mr. Murphy assigned Delante to Mr. Comerford on that date, it was for the purpose of holding 22 per cent of shares in Gladebrook. The High Court Inspector's report, however, suggests that Delante was transferred to Mr. Comerford with the intention that ‘consultancy payments' only would be made by Gladebrook to Delante, for the benefit of Mr. Comerford.
The High Court inspectors' report acknowledges that at one time it was proposed that a portion of the shares in Gladebrook be held by Delante but that, in the event, another company, Talmino Limited was acquired by Mr. Murphy for this purpose. The subsequent dispute that arose between Mr. Comerford on the one hand and Mr. Murphy on the other and culminated in Mr. Comerford issuing legal proceedings in the matter, concerned the ownership of Talmino and was the immediate cause of the whole affair coming to light.
It is not for me to determine which report is correct in this matter. The courts must adjudicate on this point. The matter would still remain an issue for the High Court to determine, even if both reports had come to the same conclusion as to ownership of the Talmino loan note.
One of the more pertinent questions of concern to the public interest is the price which Irish Sugar, then a semi-State company, paid for its acquisition of the 49 per cent Gladebrook shareholding in SDHL. In the lead-up to the flotation of Irish Sugar in 1989, the company's advisers — IBI Corporate Finance — had advised that Irish Sugar should be in full control of the distribution of sugar, according to the inspectors' report. This advice led to Irish Sugar entering into negotiations to purchase Gladebrook, which had a 49 per cent stake in SDHL. SDHL, in turn, owned Sugar Distributors Limited, which controlled the distribution of sugar in Ireland.
The inspectors' report states that at a meeting with Mr. Comerford, IBI's advice was to pay only £7.5 million while Mr. Comerford said that £9 million could be paid to make the purchase. The Arthur Andersen report concluded that the price actually paid was a fair one. The Foley/Barry report does not make a judgment on the matter. It would appear to me that the best procedures were not used in measuring the true value of the Gladebrook stake in SDHL. My own view is that Irish Sugar in all likelihood did pay too much because the sustained earnings were kept artificially high through the add-back of management fees and by the inclusion of the 10 per cent manufacturing corporation tax rate that would apply to Irish Sugar. However, it is fair to say that the purchase itself was a beneficial one for the company before going to the market in April 1991 in that it gave them complete ownership and control of their distribution subsidiary.
An obvious question which arises from what I have just said is, should Irish Sugar have acquired the 49 per cent share in SDHL itself instead of Gladebrook? The shareholder's agreement in relation to SDHL meant that Irish Sugar could only purchase further shares in SDHL if an existing shareholder wished to sell and one or more of the other minority shareholders who held "A" ordinary shares, that is excluding Irish Sugar, did not wish to purchase the shares being sold. When some of the shareholders — Musgrave Limited and Punch and Company Limited — decided to sell their holdings in 1988, it appears that the other minority shareholders would not permit Irish Sugar to purchase those holdings yet those other minority shareholders also sold their shares. Instead agreement was reached whereby a management buy out took place instead. It is my opinion, however, that the management had fewer rights in the matter than SE who already owned all of the "B" ordinary shares and would have been the next tier in the offer round.
It should be remembered that all the sellers of SDHL sold willingly and considered that they had got a fair price. Why was it then that two of those same sellers were given precedence over Irish Sugar as part of the management buy out team? My judgment is that they got their price and that having sold they should in fairness have stepped aside and left the field clear for Irish Sugar. Instead they were on both sides of the transactions.
In relation to the management buy out of the minority shareholding in SDHL by Gladebrook in 1988 which, of course, preceded the purchase of Gladebrook by Irish Sugar, the High Court inspectors' report concludes that had Irish Sugar been aware of all the facts — that is, that no share capital was subscribed for by the management buy out executives; that they did not undertake any personal borrowings, and that the loan to Gladebrook by a subsidiary of Irish Sugar, to facilitate the management buy out was subordinated to a bank loan then the board of Irish Sugar might not have agreed to the proposal.
Were, then, the interests of Irish Sugar protected in the context of the MBO? With hindsight, and accepting that the board of Irish Sugar acted in good faith in the matter, as the Arthur Andersen report concluded, it appears that Irish Sugar's interests could have been better served. This is implied, both in the conclusion of the report I have just referred to and in the conclusion of the inspectors that a more prudent purchaser than SE might have taken a more critical view of the figures which underpinned the asking price for Gladebrook.
A further question related to the management buy out of SDHL, and the subsequent purchase of Gladebrook by Irish Sugar, is whether acquisitions made by SDHL/Gladebrook should have been made by Irish Sugar itself. Given the relative independence of SDHL in its relationship with Irish Sugar and the fact that Gladebrook was privately owned, it is very hard to state definitively that Irish Sugar should itself have made the acquisitions which enhanced the value of Gladebrook. It is clear, however, that Budgetts was considered too dear by Siúicre Éireann in 1988, and yet was acquired by SDHL in 1989.
At the extraordinary general meeting of Greencore last October my representative raised questions which indicated my dissatisfaction with some of the actions of the Greencore board, and prior to that, some of the actions of the Irish Sugar Board. These related principally to the crucial lack of involvement of the board in relation to proposals for the management buy out of 49 per cent of SDHL by Gladebrook; the lack of professional advice in relation to the financial arrangements for this purchase; and the decision to facilitate the purchase through payment of deferred and special dividends.
My concern was also expressed at the action of the Greencore board in relation to its agreement to pay severance packages to Messrs. Comerford and Tully.
However, on reading the High Court inspectors report, as well as the Andersen report, I accept that the board acted in good faith. To a large extent, the outstanding record of Mr. Comerford in his management of Irish Sugar appears to have put him in the position within the company so that it was taken for granted that his actions were for the good of the company. With hindsight, the board failed to be as prudent as they might have been.
In any business relationship a degree of trust is, of course, necessary, especially trust between a board and a chief executive. Sometimes, however, that trust is misplaced. This is happily rare in State companies. It would be wrong if we were to conclude from this case that there should be repression of enterprise in the public sector, but it is right to conclude that nothing can be taken for granted, and as such it is important to ensure that there are adequate checks and balances in the system which are availed of by those whose responsibility it is to exercise control.
In this context, the announcement which I made on Wednesday, 11 March, regarding guidelines for the semi-State sector are relevant. The guidelines set out the underlying principles that should govern relationship between Departments of State and State bodies under their aegis. The guidelines are equally pertinent to subsidiary and associated entities of State bodies.
These guidelines are based on recommendations in a report prepared by the Secretary of the Department of Finance, Mr. Sean Cromien. The report had been requested by the Taoiseach, Deputy Albert Reynolds as Minister for Finance. Mr. Seán Dorgan, Secretary of the Department of Industry and Commerce, Mr. Frank Casey, then Managing Director of ICC plc and chairman of the Consultative Group of Chief Executives of State-sponsored bodies and Professor J. A. Bristow, Associate Professor of Economics, TCD, assisted Mr. Cromien in preparing the report.
Of particular relevance in the context of this debate is that, inter alia, the guidelines require that all State bodies should have a written code of conduct for board members and for employees. As regards board members, the requirements include the necessity to disclose, on appointment, all interests of a person's family or connected body which could involve a continuing conflict of interests. Such disclosure is also required where a conflict of interest might arise in any particular situation in the course of board membership. Where such interests are found to exist, board members will be excluded from meetings where the interests are the subject of discussion.
As regards employees, the written code of conduct will cover matters such as duty to the enterprise, avoidance of conflict of interest, limits on outside activities, acceptance of gifts, honesty in dealings and so on.
Another relevant guideline which is being implemented is that the establishment by all state bodies of subsidiaries, their participation in joint ventures or acquisition of shares should in future be subject to the approval of the relevant Ministers and the Minister for Finance.
In relation to the remuneration of chief executives chairmen of State bodies will be required to give an assurance in their annual reports of the bodies, that Government guidelines in this regard are being complied with.
The chairmen will be called on to present a comprehensive report annually to the appropriate Ministers, outlining all significant developments affecting the State bodies that have occurred.
I stress that the aims of the guidelines are to ensure efficient management of State bodies, and to secure effective though not excessively detailed arrangements, that will guarantee the accountability of boards to the responsible Ministers.
I would emphasise that the adoption of these guidelines does not in any way imply Government dissatisfaction with the overwhelming majority of those who work at board level or at staff level in State bodies. They have been, and are, universally recognised as being dedicated and public spirited in the discharge of their duties.
There is very little scope or necessity for interference by the Government at this point in relation to the position of the chairman and board of Greencore. This viewpoint was upheld by other shareholders when, at the recent AGM of Greencore, the chairman and board were returned by a large majority, which was not dependent on the Government's shareholding.
It is also fair to say that institutional investors are supportive of the current board and chairman who have succeeded in the most difficult of circumstances in driving the company forward. A new strong management team has been put in place and despite all that has transpired the share price remains substantially above the issue price. I have every confidence that the company has potential for further growth.
I thank the Minister for coming to this House to discuss this sad affair. I am very pleased to note that a new code of ethics for semi-State bodies is being drawn up which will include a requirement for a declaration of interest. There will also be a requirement that the Minister be informed of the setting up of subsidiaries by State companies. This was part of the problem created in Siúicre Éireann, now known as Greencore plc.
This is not a subject I relish. I have known the people who are central to the affair, for 30 years, particularly Mr. Comerford who was a student in University College Dublin with me and whose career I have followed with interest, although I had little or no contact with him in the intervening years and I admired his achievements. It was with great sadness that I learned of the sordid events that have taken place in Greencore. It has to be recognised that whatever he did wrong, and there is no excuse for that, he also achieved much good for the State and for the company. It is too bad for him and for the company that it should have ended like this.
The report, which is a voluminous and difficult document to read, has regrettably cost a great deal of money. The two gentleman involved were, I understand paying themselves £1,750 per day for seven days a week. At that rate they would earn a TD's annual salary in roughly 15 days or a Senator's annual salary in roughly 9.6 days or as much in six days as many of the people who are now in dispute with the banks for a rise of 6 per cent. That is inexcusable and, although it is not the Minister's fault, the blame for that must rest fairly and squarely with the Government of the day. If we compare the cost of this report with the cost of similar reports prepared by the DTI in Britain — I have the company's reports for 1989, 1990 and one other year also — we will see that this report from Inspectors Foley and Barry cost the taxpayer at least twice as much as it should have and, perhaps more. It will be worth every penny of its £1.2 million if we learn some lessons from it and make the necessary legislative changes to protect the taxpayer in future. If we ignore this report which cost more than the Book of Kells to produce, it will end up being less valuable than the Dublin Opinion.
As regards the cost of the report I question who should pay for it. Clearly where companies investigated are found to be at fault the company should foot the bill for any investigation carried out on behalf of the taxpayer. In this case, however, the company at fault no longer exists. Nevertheless, since the new company has been exonerated and the air cleared as far as the investors are concerned a benefit has accrued to the company from this report and hence the taxpayer should not be expected to bear its cost.
The report is not an easy document to digest and is not for light reading. Some extremely disturbing evidence emerges from it. From this experience it follows that we need to make some changes in our legislation. Indeed, the Minister has already referred to the code of ethics, the declaration of interest and the fact that the Government insist on a report being sent to them of any subsidiary set up by semi-State companies in future. The first thing I found alarming in this report was the extent to which offshore companies are being used to hide information or evade taxation. Privately-owned companies with registered ownership offshore are not obliged to publish accounts in this jurisdiction. Many large companies, it appears, use this mechanism including UMP and Goodman and because of this loophole over 60 per cent of our beef and sheep processing capacity collapsed without any warning of impending disaster. If we had forewarning we could have taken corrective action and jobs might have been saved and taxpayers money invested by the IDA would not have been entirely lost. In the national interest large companies operating in this economy should be compelled to publish accounts as they have to do in other jurisdictions.
Second, the fact that individuals within Siúicre Éireann who formed a company Gladebrook were facilitated in the purchase of a 49 per cent stake in Sugar Distributors Holdings Limited for a sum in the region of £3.2 million and sold that interest less than two years later to Siúicre Éireann for £9.5 million was alarming. Third, it is clear that there was no adequate explanation in this report as to why Siúicre Éireann did not buy the 49 per cent in 1988 rather than in 1990 when it subsequently did for more than £9 million.
There is no adequate explanation of how the 49 per cent stake could increase in value in 18 months from £3.2 million to the £9.5 million which Siúicre Éireann payed for Gladebrook. There is no adequate explanation of the inflation in profits of Sugar Distributors Holdings Limited immediately upon the sale of the 49 per cent stake in Gladebrook. I have my views, and suspect the Minister also has his views, as to how these profits were inflated. I suspect they were not entirely legal.
Before paying £9.5 million the board of Siúicre Éireann had no independent value put on Gladebrook. In the interim report which preceded the final report, on pages 15 and 16 the following is reported:
On the evidence to date we have established that there were no written Terms of Reference given to IBI by SE. As a result of our examination of a director of IBI, we have established that there was no formal written valuation prepared by IBI for the evaluation and consideration by SE in connection with this negotiation.
Resulting from our requisition of IBI documentation and an examination of a director of IBI, we have established as a preliminary finding that a difference of opinion arose between IBI and the management of SE with regard to IBI's viewpoint on the value of SDH and the 49 per cent interest in SDH.
Documentation obtained from IBI appears to establish that:
(a) IBI proposed an offer of IR£6.5 million be made to the then known owners of the 49 per cent interest together with an additional IR£1 million which was stated in a notation in documentation as a "sweetener".
A rather appropriate word in the sugar business.
(b) The Managing Director of SE purportedly indicated that he would be willing to pay a premium to the then known vendors of the 49 per cent interest which would have resulted in the acquisition cost escalating to IR£9.0 million.
(c) The purported reasoning of the Managing Director of SE for the offer was that he could tie in the sales and marketing end of the business of SDH into SE.
(d) It is purported that the Managing Director of SE further emphasised that it, the matter referred to in (c) above, would lead to a tidier package when going to the market.
I can accept that.
(e) A director of IBI indicated that an offer or an interest in the sum of IR£9 million would be difficult to justify.
Quite clearly the taxpayers' money was used by Siúicre Éireann to pay an excessive price for the 49 per cent interest in Sugar Distributors Holdings and we know who the beneficiaries were and who was meant to benefit.
All this raises serious doubts about the role played by the board, which contained eminent businessmen like Mr. Cahill, Mr. McGuckian of Mastoc and Mr. O'Neill of Avonmore, all heavyweights in industry; they were no mere messenger boys. Were they not aware of the IBI reservations about the price paid for Gladebrook and the inflation in value of Gladebrook? Was the largest single shareholder, the Minister for Finance, not aware or consulted about an acquisition costing more than £9 million? It would appear from this report that Mr. Comerford kept vital information from the board.
On page 103 of the report it was pointed out that all letters of comfort issued by Siúicre Éireann and any of its subsidiaries after 1985 were obtained from Arthur Cox and Company. All these documents, with the exception of two, were signed by two authorised signatures. These two letters dated 9 June 1990 to the Ulster Bank and Alliéd Irish Banks for the purpose of getting a loan for the purchase of Gladebrook, had only one signature, that of Mr. Comerford. Members of the board subsequently denied any knowledge of these two letters.
Two issues therefore arise here. First, should banks accept letters of comfort that carry only one signature? The banks should be asking themselves serious questions about this. Second, in the words of the report, page 103:
There was no formal requirement that the letters of comfort be brought to the attention of the board of directors of the company issuing such a letter. In view of the obligations imposed by such letters on the party issuing them, we feel that this constitutes a significant weakness in the procedures adopted by Siúcra Éireann at that time.
I would concur with that. It should be remembered that Irish Shipping and Aer Lingus Holidays had similar disastrous consequences from individuals taking too much decision making power upon themselves.
That brings me to the flotation of Greencore and some other disturbing aspects. Since the shares in Greencore plc were to be quoted on the exchanges in London and Dublin simultaneously, IBI Corporate Finance Limited felt obliged to engage the services of professional advisers in London. Norton Rose, Solicitors, in London were engaged. It became clear during the course of the investigation that Norton Rose gave certain advice in relation to relevant issues concerning flotation and including the prospectus of Greencore plc. On these issues they obviously had some reservations. However, and this is the serious part, when the inspectors requested the correspondence from Norton Rose to IBI the bank refused to waive privilege. I understand the bank is entitled under law to do that but in my view it is ethically wrong. The inspectors, therefore, conclude on page 199 on this issue "Consequently our legitimate concerns on this aspect of the investigation remains outstanding." Clearly investors were not provided with full information, were provided possibly with inaccurate information.
There are 24 paragraphs of conclusions covering two and a quarter pages out of a report of 223 pages. The conclusions have nothing to say about the board which is astonishing, nothing to say about why the former Taoiseach, a central figure on some issues was not interviewed; no explanation as to how Mr. Murphy got his share in Gladebrook or the ethics of how he acted in this affair, and no explanation on why this report contradicted a report of Mr. Curran which established that Mr. Comerford was the beneficial owner of Talmino. The conclusions did not address the public issues, for instance were the public getting good value for money and is the taxpayer adequately protected? Neither did the report make any comment on the organisational structure of a company with over 40 subsidiary companies, a situation I believe where it is virtually impossible for non-executive board members to know what is going on.
I am glad the Minister has now addressed the acquisition of subsidiaries and so on; it would have been very useful if the inspectors had made some recommendations on this issue. No reference was made to the ethics of solicitors and accountants who facilitated activities which they must have known were at least "shady" if not downright illegal and no comment was made on the bank's participation in facilitating some of these activities. Professional institutes for solicitors and accountants should have an in depth look at their ethics with regard to the public interest and the activities of some of their members. It was said in another House that in Ireland dog does not bite dog, but we cannot have a professional situation tolerated by professional bodies which is contrary to the national interest, possibly contrary to the law and certainly not ethical as I understand it.
Finally, we have had an unprecedented spate of scandals in both public and private companies in recent years. If this report serves as a warning to people that they can be exposed and punished, and if it serves as a guideline for amending our legislation, and if the legislators grasp that nettle, it will be worth every penny of its outrageous cost. However, if we ignore this report, which cost more to produce than the Book of Kells, it will end up being less valuable than the Dublin Opinion.
I dtosach baire fáiltím roimh an Aire go dtí an Teach. Tá sé fíor-thábhachtach go bhfuilimid ag plé na cúise seo inniu.
I would like first to address myself briefly to the question of the cost of the report. Senator Raftery pointed out that the cost was in excess of £1 million and he related it to the type of money paid to people in various other jobs. The amount paid to the people who drew up this report for one and a half day's work is equivalent to a person on the dole's annual entitlement. We need to address the fact that experts seem to be able to charge at will for services provided to the State. That is something that will only be changed by public opinion but it is a nettle we will have to grasp. It is hard to justify the right of anybody, no matter how skilled, to charge that type of money for their services.
Working with people who give of time, energy and skill, often free in the public interest, I find it hard to stomach this type of abuse of an appointment. Government should not have to lay down stricter and stricter guidelines; people should be willing for fair fees to make their services available to the State. It is a sad reflection on our society that people now see such appointments as opportunities to bleed the State to the last penny.
In this report and in what the Minister has outlined today, it is quite clear that the Government have acted properly in this affair. The minute they were made aware of what was going on in Siúicre Éireann and in what is now Greencore, they took action which has culminated in the preparation of the report in front of us. That issue has been resolved now. Grave doubts were cast last autumn and I am glad those concerned have been vindicated. I hope, as the Minister said in his speech, that as a result of these inquiries action will now be pursued by the appropriate legal means. Public confidence in our State companies procedures and in the worth of a commission report like this will not be satisfied unless legal proceedings follow the findings of this report. The niceties thereof, the conflicts in the report and in other reports relating to this, can only be resolved in the courts.
Whereas the report exonerates the board, I have serious doubts about the effectiveness — not the good faith — of a board that allowed structures to be instituted in such a way that they lost control. This is a key element emerging here and we cannot escape it. It is not good enough to sit on the board of a company and not be in control. I accept that a board can be deceived by its executives; I accept that there has to be an element of trust and that no matter what controls are laid down these can be circumvented if people have a mind to do so. However the complexity of the structures Siúicre Éireann were involved in, the number of subsidiaries and transactions involved and their complex nature, made it impossible for a board to control what was going on.
The board in the broad sense have to share some of the responsibility for allowing this situation to arise. This is not the first scandal in the affairs of Siúicre Éireann nor the first time large sums of money were involved in scandals there. When this happened previously in the seventies the structure should have been rationalised and revised in such a way that something of the magnitude of this debacle could not have been possible without the board's knowledge.
If we do not feel that the boards of our State companies know what is happening, public confidence will be lost. Similarly if legal action is not taken against alleged wrongdoers, people will find it hard to stomach that somebody involved in minor fraud of social welfare will be summarily taken to court and charged.
I would like to address myself to the question of executives of State companies. There has been in the public domain great debate about rewarding the executives of State companies and about the small salaries they receive. The phrase that is sometimes used is "If you pay peanuts you get monkeys". I have always resented this type of talk and felt it is not in the public interest. If people in the public service feel their salaries are not commensurate with their abilities and think they might do better in private industry, there is nothing to stop them transferring there. But having worked for and with people of great ability over a long number of years who have been willing in co-operative structures, semi-State and Government Departments, to work day and night and who had in old fashioned language a patriotic urge to serve their country, I think it is wrong to presume that money is the only motivation in business, particularly in public business. If that were true you would not find too many people in the Houses of this Parliament. I make no excuse on any grounds for the executive of any State company who does not feel his salary is adequate and who, other than in the normal way of negotiation, tries to increase that salary.
Executives of semi-State bodies, particularly senior executives, are in privileged positions. They have a chance to serve their country, and to develop our economy. If at times their salaries do not compare to those in private industry that can also be said, for example, of the heads of some of our agricultural cooperatives and for people in all walks of life who are willing to serve and to take as part of their payment the privilege of serving.
Concentration on company profit is not the role of the semi-State body. I concede that it must be efficient and make a profit but for profit to be the sole motivation of a semi-State body is incorrect. There are people who would say that unless it is so it cannot work. However, agricultural coops successfully manage to mix the making of profits with attention to their social role. I have had dealings with one co-operative whose annual turnover is £110,000, whose businesses are exclusively confined to the most remote regions of this country and who manages to return a profit and fulfil a social role at the same time. As a manager who has worked in that particular sphere, I realise the difficulties and the tightrope one walks, but just because it is difficult does not mean it cannot be done. If it is difficult it also requires a certain type of person to make it succeed. The person who would make a success in the broader sense of the word of the management of a State company might not necessarily be the person who would maximise profits on a profit only ticket.
We in the west know the danger of profit becoming the sole motive. We know the cost in terms of jobs and development because buying a foreign subsidiary can often be a more profitable return on capital than further investment in one of the less developed parts of this country.
Therefore, the job of the semi-State board and its executive has to be the combining of a social and profit role. I remind the House that the origins of Siúicre Éireann go back to the thirties to a private company which was not successful. It was made successful and profitable under semi-State management. It had, in its early days, a proud role of innovation, development and investment in new skills and new technology that were a pride here.
Arising from this debate and from what happened in Siúicre Éireann, we also have to decide how we will measure the benefit of State companies. Should we assess them purely in narrow company terms or should we look at the broader scope of the cost-benefit to the State? In many cases maximisation of profits within a company can mean lay-offs but the increase in profit and dividends to the State is less than the increased cost of social welfare, housing, education as a spin-off of redundancy. We have to look at that equation again, particularly in relation to the semi-State sector. When we are measuring performance we have to look at the total global performance from the State's point of view because in many cases rationalisation and increased profitability in State companies has meant shifting a burden from the semi-State body on to the Exchequer through transfers from wages over to social welfare payments accompanied by loss of revenue in tax, PRSI and so on. This issue has not been addressed sufficiently in relation to semi-State bodies and it should be addressed now in the context of the debate on this report.
I know that what happened in Siúicre Éireann, what is contained in this report and the allegations that people made vast sums of money — has left a very bitter taste in the west of Ireland, particularly in the Tuam area. The people there feel they were not given any help and, in the interest of profit, they were let down. They would have accepted this in the national interest but there is a perception abroad that while their plant, on one hand, was being closed down, people motivated by profit and greed were, allegedly, making large sums of money. That is something we must empathize with. That is what is on the minds of the people of Tuam and its hinterland which takes in Galway city, Ballyhaunis, Castlebar and so on. The pressure from certain quarters for privatisation is causing great questioning and concern in the west.
We have always seen it as the role of the semi-State body to cause an equalisation of services, a distribution of development and to do what the private sector would not do, to ensure that everybody got a fair slice of the cake. It would seem that the management of Siúicre Éireann totally departed from this principle and, in the process, were looking to privatisation and encouraging it in a way that would free them from these social obligations.
I welcome what the Minister said regarding new guidelines. Having worked with large numbers of people I found out early in my career one golden rule: for those you can trust, those who are basically motivated for the right reasons, you need no rules. For those you cannot trust, for whom the motivation is self-interest, no rules will hem them in. That is one fear I have. It is why, in any enterprise with which I was ever connected I always paid great heed to the motivation of the key players. Whether the board of a company, co-operative or other organisation, I was always more concerned with the motivation of members than with their qualifications. In my experience if the motivation was right, the work was done. If motivation for the right reasons was not present no rules would hem them in.
In the appointment of executives to State bodies and of their board members, we should ensure we have an eye to this principle in the future. I have been concerned about the trend in appointments to State bodies in general. It seems to have been the tradition in latter years to appoint people who are already involved in the industry for their technical knowledge and qualifications rather than for their patriotism. Having worked with boards of ordinary people — small farmers, workers and so on — who have controlled large sums of money and made hard decisions, I can say quite categorically that they would not have permitted the type of operation that went on here. They would have had the native savvy to query how such structures were in place that left them virtually without control. We need to look at the procedures followed regarding the appointment of board members to State companies.
I welcome a written code of conduct for employees. I also think it is incumbent on all citizens of the State to make it clear what conduct we consider acceptable, that we will not measure success in State companies simply by the profit motive and that we will not condone any incorrect behaviour merely because the bottom line of a State company is in good shape. That is the atmosphere, ethos and ambience we have to create in the public mind and reintroduce into the national psyche.
I would ask anyone who thinks you can not get such people into State companies to go up and down the country into the myriad of community enterprises, farmers co-operative, organisations of every type, sporting commercial, agricultural and industrial and see the number of people who are working, often for no fee, or has been my experience, not even getting their travel expenses, in the interests of the community. I would suggest if you are looking for people to put in high places, these are the people you would look to and this type of thing which has happened in Siúicre Éireann, and not for the first time, would not happen so easily again.
Finally I would welcome a decision by the Minister and the Government to ensure that the establishment of subsidiary participation in joint ventures or acquisition of shares should, in future, be subject to the approval of the relevant Ministers and the Minister for Finance. It is very important that proper reporting procedures are instituted, as outlined in the Minister's speech to ensure that State companies are truly responsible to the Minister. The first step would be that the board have the information and the second is that, without clogging the system with bureaucracy that would be unmanageable, the relevant information would be passed to the Minister so that he and his civil servants would have some control over the proliferation of subsidiaries, cross companies and inter-company transfers that were so much a feature of this business.
It seems strange to see semi-State companies involved in this type of transaction, in what should have been a relatively simple business. It seems strange to hear of semi-State bodies being involved in offshore companies. I am probably an innocent man from the west, but my understanding, in my innocence, was that offshore companies were normally a mechanism for avoiding tax. If that be so, it seems a total irony that here we have a semi-State company which would be, effectively using mechanisms to rob or deduct from the principal shareholder what was due to him. That is very hard to understand, it is the final irony in this sorry saga.
I am glad that what happened here has been investigated thoroughly and I hope this report will not be left to gather dust in a shelf, having cost us over £1 million. I hope that all the recommendations the Minister has outlined will be acted on forthwith. It is in the public interest that the alleged wrongdoers would be taken to a court of law because it must be seen that nobody, no matter how high an office they held in the semi-State company, or anywhere else in this State, is above the law in these matters.
Cuireadh Comhlucht Siúicre Éireann ar bun le freastal ar fheirmeóirí na hÉireann, agus tá sé an-bhrónach gur tháinig deireadh le Siúicre Éireann — sula hathraíodh go Greencore é — faoi scáil and faoi scamall mar seo. B'fhéidir go bhféadfadh leas a theacht as má táimid ar fad sásta gníomhú, má táimíd sásta breathnú arís ar na struchtúir ar fad a bhaineas leis na comhlachtaí Stáit, na daoine atá ar na boird agus atá ag obair iontu. Chomh maith leis sin, caithimid tuille plé a dhéanamh ar na cúiseanna gur cuireadh na comhlachtaí seo ar bun agus ar na cuiseanna go bhfuiltear ann fós agus na dualgais shóisialta agus eacnamaíochta atá orthu.
Senator Upton.
On a point of order, you may be acting according to the rules, but I think it is highly inappropriate that those of us who sit here can be upstaged by Members breezing in at the appropriate moment.
Acting Chairman
I am sure the Senator realises that parties are called in rotation. It is perogative of the Chair to call the next speaker. I am calling Senator Upton.
Since you are calling Senator Upton, he should have the benefit of a quorum.
Notice taken that 12 Members were not present; House counted and 12 Members being present,
Acting Chairman
As we have a quorum I will call Senator Upton.
On a point of order, we have conventions in this House, and I think it is extraordinary that these conventions have been flouted. If we are not willing to agree to the spokesmen of the parties take their turn, then this is a serious breach of the working of the Seanad.
Acting Chairman
That is not a point of order. I am insisting that the parties be called in turn. It is Labour's turn to speak as Fine Gael has spoken already. I am calling Senator Upton.
Like Senator Conroy I regret that the conventions have not been honoured. This is the second occasion in the space of a week on which we have had such an incident. I also want to say to the Chathaoirleach——
Acting Chairman
Senator, speak to the motion please.
I want to assure the House that Senator Howard is not my advertising or publicity agent and, accordingly, he will not be in receipt of fees for generating a bigger audience for me and I——
Acting Chairman
Senator Upton, that is unnecessary. Please speak to the motion.
I welcome the Minister to the House and thank him for coming in. I compliment him on the respect he has shown this House since he became Minister for Finance, as in his earlier Ministries. It is very gratifying to see his respect for the House. He has come here to all the important debates relevant to his portfolio.
As Senator Raftery said, I know some of the Comerford family. I met Mr. Chris Comerford on a few occasions and I am also familiar with members of his immediate family. For that reason the business we are talking about today is, at a personal level, one of regret for me. We all wish this had not happened, but it is particularly unpleasant when you have a peripheral knowledge of the people involved at a personal level. What happened has to be addressed however. The episode is a pitiful, lamentable and painful one.
The process dealt with in the report has been very damaging to the country in general and to the food industry in particular. The food industry is one of our great national resources. It is one of the industries which exploited to some degree our immense natural resources. The behaviour of those people in the Sugar Company has very seriously tarnished the food industry.
What conclusions, other than the worst conclusions, can be drawn about the industry arising from this report? The food industry has been beset by scandals: the Goodman Group are the subject of an inquiry; Greencore; we have seen the collapse of meat companies; low levels of technology in industry; the abysmal failure of marketing food products; and the lack of any worthwhile branded food products.
The report indicates very clearly that there is a stench of greed and sharp practice associated with what took place. The anxiety of some key players to rip the taxpayer off can only be described as very alarming and regrettable. The ultimate effect of what has happened is that we will see a failure or delay to develop the food industry and the realisation of the potential of that industry in the area of job creation will be postponed. That has to be a matter of regret. We are unable to exploit the food industry to solve the terrible unemployment problems we are now experiencing.
Before I deal with the specifics of the report, I want to mention the fees charged by the people who produced it. The fees appear to have been estimated at £1.1 million plus — the plus, I suppose, being a euphemism to describe something considerably in excess of £1.1 million. By any standards, those fees are enormous. It is difficult for ordinary people to understand why that amount would have to be paid to produce this report. The row about the Minister's, Deputy O'Malley, intervention in relation to the fees indicates a certain degree of naivety on his part.
It seems incredible that a Minister of Deputy O'Malley's experience in politics and in the wider world of business would not have cleared the cost of the investigation before he committed himself to engaging the people to produce the report. It is a pity he found it necessary, in the middle of the investigation, to intervene and get involved in arguments and differences about the amount of the fees that should be charged. A more prudent approach would certainly have removed the necessity for such an argument.
The taxpayer should not be forced to pick up the tab for this investigation. What happened here had nothing to do with the taxpayer. It arose from unacceptable business behaviour. The people and the company involved should pick up the tab for the investigation. It would be inappropriate if the taxpayer were forced to pay the £1.1 million plus for this report.
When the Sugar Company was privatised the Labour Party in both Houses strongly opposed it. I remember coming in here and arguing as vigorously as I could to postpone, defer and even prevent the privatisation of the Sugar Company. The Labour Party at that stage were especially concerned at the speed at which this privatisation was to be completed in order to meet certain deadlines. We were ignored. If people had listened to us some of those difficulties might have been alleviated. It is noteworthy that many of the evangelists of privatisation of that time are silent now, and that should be welcomed. Out of evil sometimes good comes; that was at least one desirable side effect.
I am pleased that the Minister has given a commitment to introduce guidelines on how the affairs of organisations, such as Greencore and State companies generally, will be conducted. It is absolutely essential that these guidelines should be given legal effect. Anything less than these guidelines being legally binding would be wholly inappropriate and unacceptable.
A number of conclusions could be drawn from this report. There are, of course, also a number of questions to be asked about it. How, for example, could the board of the Sugar Company lose control of the company to the extent that they did? In effect, the Sugar Company seemed to be totally under the control of the chief executive and the board seemed to be unable to be meaningfully involved in directing what was happening in the company, in keeping control of it and, I suspect, in understanding what was taking place. The board of the Sugar Company cannot simply walk away from what happened. Ultimately, the board are responsible. That is where the buck stops. It seems to be incorrect and inappropriate that the chairman of Greencore should be allowed continue in office. He was the person who presided over an organisation where all the events referred to in that report took place. It is entirely wrong that he should remain in office. Indeed, I suggest he should do the honourable and decent thing and leave. That would be in everybody's interest. Certainly, it would be in the interests of Irish business and the impression Irish business creates among Irish people and, indeed, throughout the world.
It is also difficult to understand the distinctions which seem to have been drawn in the report in relation to the conclusions which were reached about Mr. Comerford, who was blamed for most of what happened, and the other players who, to a large extent, were either ignored or exonerated. I find it difficult to understand how those two positions can be reconciled.
There are other factors which arise from the report. They relate to the way various professions conduct their business. Arising from what happened serious questions must be asked about the ethical standards of people who work in the legal, accountancy and banking professions. Alternatively, serious questions need to be asked in relation to how the ethical standards of those professions are enforced and policed. Those questions certainly merit an answer. I suggest that the fees those professions are able to charge is, to a large extent, related to the fact that the public has a certain amount of confidence in them, has a certain understanding or acceptance that they will behave themselves, or, put another way, will not engage in certain practices. Those professions need to look very carefully at what has happened and consider how it will impinge on their credibility.
I compliment Senator Ó Cuív on his contribution, much of which I would agree with. Much of what he said was old fashioned, it seemed in a way to be out of date. Nonetheless it was important. Some of the old-fashioned values, a type of patriotism that Senator Ó Cuív spoke about, are still worthwhile. There is now a certain type of culture which tends to sneer at the thinking processes which Senator Ó Cuiv gave voice to this morning. That is a pity. There are many people in this country who, for little reward, keep things going. There is another element who are very quick to demand big fees for doing relatively modest amounts of work. They give a very modest commitment to the welfare of the country.
Senator Ó Cúiv spoke about patriots. Indeed, I welcome his intervention. It was worthwhile and appropriate that his notions and ideas should be introduced. He also spoke about the origins of the Sugar Company, about the fact that the Sugar Company was established to provide a service, to provide employment and to develop an industry. It was not established primarily for the purpose of generating profits. The values which underpinned the establishment of the Sugar Company and the thinking process of many people who worked in the Sugar Company are very worthwhile. The Sugar Company provided a tremendous service to this country in their attempts to develop technology and products. Some of those attempts were simpleminded and naive but they were derived from a worthwhile belief and commitment to the welfare of this country. That commitment seems tragically to be missing from the events and the whole sorry episode we are discussing today.
There are lessons to be learned from this report. One of the questions which arises relates to the whole business of offshore companies and the way offshore companies can be used to launder money. There is a great need for a close examination of that process and a close analysis of how things can be controlled so as to prevent people avoiding paying tax, avoiding their responsibility and, in reality, ripping off the State.
I hope lessons will be learned from this report. If the report, despite its enormous cost, results in some lessons being learned and if as a result there is worthwhile tightening up of regulations in relation to business practices and ethics, then in some way it will be laying the foundation for the development of Irish industry and, in particular, the development of the food industry.
May I begin by welcoming the Minister for Finance to this House and commend him on his speech during the course of which he catalogued, as he said, a series of lamentable events. That puts it well because we have had a series of lamentable events which were catalogued by the Minister and are also catalogued in detail in the report we are considering this afternoon. It was perfectly correct to conduct this investigation. It is important that the agencies of the State uphold the standards we desire to see upheld in society. The State should ensure to the degree possible that those standards are maintained. Where there are lapses from those standards they need to be investigated and pointed out.
The report prepared by Mr. Foley and Mr. Barry is a very damning indictment on the decline in standards which has taken place within business over a period. I subscribe to what Senators Ó Cuív and Upton said in relation to matters which are assumed to be old fashioned. There is nothing old fashioned about proclaiming the need to preserve acceptable standards in public life. There is nothing old fashioned in demanding those standards from people who are in positions of authority in public and private companies. These standards should be as much a part of modern society as they were, I am confident, of the society which founded the State, the public utilities and companies like the Sugar Company, when people were inspired by a genuine sense of patriotism, a genuine sense of public service and a genuine desire to improve the lot of society as a whole and not to improve their own lot at the expense of society.
Like Senator Raftery and Senator Upton I also know Chris Comerford. I have known him for many years and it seems to be a characteristic of our country that if one circulates in a particular environment, whether an agricultural or a business environment, it is almost inevitable that one gets to know people at various levels within their community and I suppose that, in itself, says something about deficiencies in our society; because we are a small society, very small groups, or even large groups of people, get to know one another fairly well. I must say I admired what Mr. Comerford and others did in building up the Sugar Company, bringing it to a point where it could be privatised, but that does not excuse the conduct of anybody, be it Mr. Comerford or anybody else, as defined by this report and the findings of it, as the Minister outlined, are very damning.
It is unacceptable that people should be motivated, as they appear to have been motivated, by nothing other than greed. I wonder, looking back at the history of Comhlucht Siúicre Éireann, what people like General Costello would think of what has happened over the past few years. I wonder what attitude the people who founded this company, who went out into the highways and byways to get the farmers to grow the beet and who built an industry of substance, would have to this misconduct. I also had the good fortune to know the late General Costello and from my knowledge of him it would not be something he would tolerate, or even contemplate.
Here we have a tangled web. It seems that if you can complicate matters sufficiently through the establishment of subsidiary companies, holding companies, offshore companies and everything else, it is almost impossible to penetrate it and it takes work of this detail to untangle the web, to follow where money goes, to find out who are the beneficial owners and in respect of that, even after two detailed reports, there is still a conflict who the beneficial owners of various companies are.
It is quite clear that these devices are used by people to try and camouflage what they are doing, to ensure that they can fill their pockets at the expense of society through using these very intricate financial devices. In the event of these matters being legal — and it is suggested that many of them are not legal — it would be incumbent on us, as an Oireachtas, to ensure that the law does not allow these circuitous routes to be availed of just for personal, private gain.
The question of offshore companies I find distasteful in itself, but obviously we live in an open and free society and people must have rights in that open and free society, but to the degree that people abuse their position in society for their own personal advantage. I think it is incumbent on the Government, on the Oireachtas, to ensure that those matters cannot continue.
It is not right to say that economic growth is inconsistent with a just society. The two things go hand in hand but people who behave ethically, who conduct their businesses properly and honestly, should be the people who reap the rewards of that economic growth and not others.
Reference has been made to the payments made to directors of State companies. It has been said that they may not be adequately paid and that therefore, they are almost forced into a position of finding ways to get extra income. I do not subscribe to that argument. I think the State has been very well served for many years by public servants of the highest calibre who have been prepared to work within Departments of Government and for State and semi-State bodies for the rewards that are there and for no other reward, because they are working for public service and they have the public interest at heart. There are many examples we could cite of people in Departments who, if they wanted to go out into the public market place in the morning, would get salaries that are many times the salary they get in the public service but, out of their sense of service to the State, they are prepared to stay there. Those people deserve our respect and our admiration.
Reference has been made to the fact that these matters have been referred to the Director of Public Prosecutions and to the Revenue Commissioners. It is my hope that if, as I am confident is the case, there are grounds for proceedings against individuals, those proceedings will be initiated speedily and we can conclude this sorry saga.
I subscribe to the need for an inquiry like this, I subscribe to the need for an inquiry like the beef tribunal. I realise there is a feeling abroad that, because of the costs of these investigations, that means they should not be conducted. I do not subscribe to that theory. Even if the inquiries are costly, in my view they are well worthwhile if they restore the confidence of the public, the confidence of our customers abroad and the reputation of our food industry. In my view that would be money well spent, especially if it results in the re-establishment of the standards which are required of people in high office and in public places.
It is our responsibility to protect — and I stress to "protect" those people who are honest, and there are many of them in our society. There are many business people throughout the country who conduct their business honestly and well and they are the people who should be rewarded. They should not be put, as it appears they have been, at a competitive disadvantage by people who are prepared to play fast and loose.
As to the cost of the inquiry — £1.1 million — Senator Upton referred to the responsibilities of the Minister for Industry and Commerce. The Minister, when he spoke on this matter in the other House, said he had been approached by the inspectors two or three days after their appointment and he was asked who was the Secretary of the Department of Justice as he wanted to talk to the Secretary about the costs, because the people conducting the inquiry had discovered that under section 13 it was the Minister for Justice who was responsible for paying their costs and not the Minister for Industry and Commerce, although the Minister did say he thought he was the one who would be paying the costs and he was surprised that he was not. The Secretary of the Department of Industry and Commerce gave the inspector the name of the Secretary of the Department of Justice and made an appointment for the inspectors who went to see the Secretary. In regard to the costs, the Minister for Industry and Commerce referred the matter in open court on 13 December. He said it caused quite a stir at the time that he should, through counsel, question the costs and the duration of the inquiry and express his concern at the application being made by the inspectors for a further eight weeks to carry out the task because he, the Minister, had been assured the matter would be concluded in November. I believe the Minister acted quite properly in drawing the attention of the inspectors to the cost and the duration of the inquiry and that that was done in the public interest.
Certainly there are lessons to be learned in relation to the amount of money paid to professional people for conducting such a service for the State. I am sure the Government will take those lessons on board and that in future these costs, which the public have every right to believe are outrageous, can be curtailed. The point has been made as to how many days it would take an inspector to earn a Senator's or a Deputy's salary. It is just as unacceptable that people should be able to get those vast sums of money as it is unacceptable that people in the Sugar Company or elsewhere conduct themselves improperly. I share the view that the board bear some responsibility in this matter and the conclusions possibly do not go far enough in that respect. It is quite clear the board of any company should make their senior executives aware of their responsibilities, that if there are conflicts of interest the board should know these matters.
I welcome what the Minister had to say in relation to introducing measures which will make it incumbent upon people to declare their interests and to conduct themselves properly in that there will be a degree of transparency but it is the ultimate responsibility of the board to ensure that the statutory requirements of company law are met. In that regard the report catalogues a series of failures on the part of the companies to keep proper statutory books and to make the necessary public disclosures. It has to be asked whether the board of Siúicre Éireann performed satisfactorily in some of these areas, in relation to the responsibility which the board had for the activities of subsidiary companies and so on.
I share the view that the buck stops with the chairman. At the time, I was quite critical of the chairman; I expressed the opinion publicly that the chairman should consider his position and I still take that view. There is a theory that this company which is quoted on the stock market would collapse or its value decline if it were left without the people who run the company. We have many precedents to show that where senior executives drop dead or disappear or whatever the companies continue to operate quite satisfactorily. There are always other people who are prepared to take up the mantle and carry on. If we look back as far as the Staines aircrash, it was presumed at the time because we lost such a large body of very senior business executives that there would be a huge blow to the industrial life of the country. Of course it was a blow but life goes on and it is not correct to assume any person cannot be done without. They can be done without.
I made the point already about State companies, the standards required of them and the standards which we, as an Oireachtas, have a right to enforce. We have a duty to interfere where we believe it is in the public interest to so interfere. That is the responsibility of the Oireachtas. We are here as custodians of the public good and we have to take those responsibilities on board. We have to ask ourselves what sort of society we are creating. It is all right for people to aspire to bettering themselves, to aspire to a house in Ailesbury Road or wherever it happens to be. I have no difficulties about that. It is a laudable aspiration. The problem is how one gets there.
There seems to be a certain tolerance of impropriety in these matters which contrast very sharply with the intolerance which accompanies matters of personal morality in relation to sexual or other matters. I cannot see why the standards which are required in one area do not apply across the board. We have to ask ourselves fundamental questions about what sort of a society we are which allows certain things to happen and which in certain circumstances even appears to tolerate those things.
I support what Senator Ó Cuív had to say in relation to what were called "old fashioned standards". There is nothing wrong with proclaiming those old-fashioned standards. If they are right they are right and they need to be proclaimed. I have certain questions as to whether beet growers or employees in the company suffered from some of the activities which took place and which are catalogued in the report. I can recall a time when there was huge disquiet in farming circles, as there still is, about things like "ghost" beet, tare and so on. I always took the company's explanations in good faith. As a practising journalist at the time it was my responsibility to look at some of those matters. In retrospect, I wonder whether I should have relied on some of the assurances I was given as much as I did at the time.
Senator Upton made a point in relation to privatisation and said this was, in some way, an indictment of privatisation. My view is the contrary. It is questionable that without privatisation these events would have come to light at all. Would we just have carried on in a circumstance where there was more money being pushed aside, where people were making money out of selling companies and buying companies, about offshore companies and so on? The argument of privatisation is not in any way diminished. There are many lessons and I am sure they can be taken on board.
The importance of the role of the directors vis-a-vis their executives is something on which there are lessons to be learned, the fact that it is the ultimate responsibility of the board to ensure that the statutory requirements of company law are met in relation to its subidiary companies. I am sure the Government will address these matters and take them on board. I hope the conclusion of all these events will be better conduct of our State bodies and semi-State bodies and better conduct of private business. I hope there will be a better atmosphere in which private business can operate and in which those who are honest and upright fulfil their responsibilities in relation to tax and other matters, get their reward and are not put at a disadvantage compared to those who are prepared to take serious shortcuts, and in certain circumstances to break the law.
I welcome the opportunity to participate in the debate. I would like to draw to your attention and to the attention of the Minister that I, as spokesman for my party on Industry and Commerce on the Opposition side had considerable difficulty in obtaining a copy of this report. My understanding is that it was always standard practice that these reports were made available to Members of the Oireachtas. I registered a protest in the Department of Industry and Commerce because of their failure to supply me with a copy of this. I want to thank the Leader of the House, Senator Wright, for providing me later on that day with a copy. I understand that these copies were automatically available to Members of the House and if they are not I believe it is a matter that should be investigated. I ask the Minister to pay particular attention to that observation.
The Minister's speech is quite impressive for a number of reasons. In fact, it constitutes almost another report, all 20 pages of it. There are a few observations I want to make on it. It is usual that the authors of a report such as the one we are discussing today are the recipients of compliments for their thoroughness and so on.
Sitting suspended at 1 p.m. and resumed at 2 p.m.
I welcome the Minister of State to the House and wish him well in his portfolio.
Before the Adjournment I was commenting on the Minister's speech. I referred to the fact that it is usual when discussing a report of the type before us to compliment the author of the report on a job well done and so on. The Minister's speech was lacking in that regard, and if it reflects a point of view — which I think it does — it is one that I totally sympathise with. I will deal with that later in my contribution.
I would like to make one or two general comments in relation to the Minister's speech and also refer to the comments from previous speakers. Practically all of my colleagues have been highly critical of the cost of this report and I concur with that criticism. I am surprised that the Minister has been silent on that aspect. The report was poor value for the amount of money it cost to produce it. I understand the figure is £1.1 million plus and there may well be further items of cost. One aspect of the Minister's speech that disappointed me was that he seemed to accept the whitewash by the authors of the report of the board of the Sugar Company. It is a sentiment that did not find favour with previous speakers and it does so with me.
I was impressed by Senator Ó Cuív's reference to the performance of the Sugar Company in relation to solemn promises given regarding the town of Tuam in relation to the closure of the sugar factory and the very clear promises made by the company to provide an alternative industry on the site there.
It is a matter of considerable sadness and regret that we must debate this report, the events that gave rise to it and the unsavoury events and activities at the highest level of industry and business. The presence of a so-called golden circle, the presence of a "rip-off" ethos, which has also found a certain level of expression in the cost of the production of this report, and other unacceptable standards and practices are extremely damaging to the image and confidence of the industrial sector both in and outside the country.
I find the report highly unsatisfactory on a number of counts. I have already referred to the question of cost which I regard as outrageous. The report — I have read it thoroughly — is quite inconclusive on a number of major issues and some of its firm conclusions are questionable. Other issues that are central to this affair are virtually glossed over. This report conflicts with the report of Mr. Maurice Curran who was also appointed to investigate certain aspects of the affair and the Minister referred to that conflict. The conflict is between the findings of Mr. Curran and the findings of the Foley-Barry report in relation to the ownership of Talmino. It is difficult to agree with its views that responsibility for this whole affair rested with just a few people.
There is a widespread belief in business and industry that responsibility for the affairs of any business or company in the final analysis rests with the board of directors or the board of management of that body. If the situation is otherwise, then it is quite pointless having a board at all. The authors of this report do not appear to subscribe to that theory and go to considerable lengths to clear the board of the Sugar Company for what I regard as the non-performance of that board's very clear duty.
I read the report with a feeling of amazement. I am amazed that a catalogue of such extraordinary activites could continue over a timespan of three to four years without as is suggested even a hint of questionable practices reaching or being acted upon by the board of the company. Bearing in mind the number of people involved, including a number of professional people, the banks, solicitors, accountants and so on, it is unbelievable that no hint of wrongdoing ever came to the notice of a single member of the board. There must be many employees of the Sugar Company who had knowledge of these questionable activities. In fact, the fears of some of them were expressed as early as October 1988.
On page 7 of the report the concerns expressed by three employees of the Sugar Company, namely Messrs. Farrell, Hughes and Martin, first in relation to the setting up of Gladebrook and second in relation to making a loan available for the purchase of shares in Sugar Distributors are documented. In October 1988, more than three years before it became public knowledge, employees at senior level within the board expressed misgivings at what was taking place. There must have been others on the board who knew, yet it had been suggested that that would have been impossible because of how thoroughly the scam was veiled. That I cannot accept.
I do not believe the public can be expected to accept that every employee and professional person who knew what was going on maintained a vow of silence over three or four years until the Sunday Independent broke the story in September last year. That is stretching credibility beyond all limits but this, unfortunately, is what the report of Foley and Barry would have us believe. Are we to accept that there was nothing that would arouse either the slightest suspicion or lead to the simplest of questions being asked by a single board member over that period?
The most pathetic aspect of this report is the conclusion on page 191 which refers to the power and influence of the managing director on his fellow directors in the Sugar Company. There are a number of one liners from four or five of these directors that can be summarised as follows: he was a very over-powering and aggressive individual, and they seek to absolve themselves by stating that the fear generated by this powerful person prevented them discharging their clear duties. The activities of the board have been glossed over in the report and their responsibilities have been ignored. The report is a whitewash to cover the failure of the board to discharge their responsibilities.
I had the opportunity of serving on a State board, An Bord Bainne. The board were highly successful in their time. The managing director, Dr. Tony O'Reilly, was a well known achiever. He was a man of remarkable influence and achievement. That was a period of outstanding success with rapidly expanding markets. New developments were regularly taking place but every plan and proposal received the most minute examination by the board. Board members regularly received information, queries and concerns from many interested parties. Any and every piece of information would be properly examined and disposed of. From that experience, I am not prepared to accept the implications in this report that the board members were so much overpowered by the presence and authority of their remarkable managing director that they were incapable of discerning the shape of the rip-off that was taking place under their authority.
I make this point especially in view of their reported excuse that they were under the influence of this man. Regularly in the courts pleas are made on behalf of an accused that he did what he did because he was weak willed and under the influence of some more powerful person. It is always a plea for mitigation; it is never one for exoneration. In this report the power and personality of one person seems sufficient to exonerate the board members. The responsibility and duty was clearly that of the board members.
There is a lack of balance in this report. There are unresolved conflicts for example, the appointment of the advisers for the privatisation of the Sugar Company in the establishment of Greencore, the appointment of NCB as advisers for the launch of Greencore and the appointment of solicitors which aroused considerable interest in both the Dáil and here, yet Messrs. Foley and Barry do not regard it as part of their responsibilities to inquire into the circumstances of these appointments. Why was there no interview with NCB? Why was there no interview with the former Taoiseach? These questions should have been addressed by the report but were not.
I referred to the fact that during the management buy-out in October 1988 Messrs. Farrell, Hughes and Martin raised their fears and doubts as to the correctness of what was taking place. I am not prepared to accept that the fears expressed by these three executives at that point were not mentioned among a number of their colleagues. They were concerned at the nature of the buy-out; they were concerned at making available a loan of over £1 million to achieve that buy-out, and in December, 1988 Mr. Farrell expressed his reservations about this yet the report is silent on the price paid by the Sugar Company for Gladebrook when they repurchased it a year later.
In 1988 the value of the management buy-out was put at £3.2 million yet, a year later, the Sugar Company were prepared to pay £9.5 million for it. While I question the failure of the board of the Sugar Company to examine the vast difference in these two figures, I also question the failure of this report to address that particular issue.
There are many other aspects of this report that I am extremely unhappy about and I regret that I do not have time to expand on them further.
Wexford): I am delighted to have this opportunity to contribute to the debate and deal with some matters which have been raised. I thank the Senator for his good wishes and take this opportunity to thank Senators who on a previous occasion offered their good wishes to which I did not get a chance to respond.
As Senators are all no doubt aware at this stage, the Government have closely studied the inspectors' report on the investigations into the affairs of Siúicre Éireann cpt. and related companies. The report is a very detailed analysis of various complex activities and dealings which took place some time ago in the Siúicre Éireann group of companies. I feel I should refer to the main conclusions reached by the inspectors. I wish, however, to highlight the inspectors' assertion that the conclusions were their opinions only and that many of the matters could only be determined finally in a court of law.
Many of the matters raised by the report are of very serious concern. A critical matter from the public's point of view in this controversy relates to the management buy-out, MBO, of the minority shareholding in Sugar Distributors (Holdings) Ltd. and the subsequent purchase of Siúicre Éireann of this shareholding. The report does not offer any detailed views concerning the various valuations placed on the shareholding. However, it does raise doubts as to whether the normal verification procedures necessary to assess the reliability of the projected figures relating to profitability were ever carried out. It suggests that if these projections had been examined in detail, their achievability and accuracy might have been questioned.
The report is very critical of Mr. Comerford and of Sugar Distributors executives involved in the MBO. It cites many possible breaches of trust, of criminal law, of the Companies Act, cases of fraudulent misrepresentation, forgeries and deception. The report also concludes that following the explanation provided by Mr. Comerford to the board of Greencore on the night of 3 September regarding receipt of moneys from Gladebrook, he should have been dismissed forthwith.
The disputed ownership of Talmino is another important issue addressed by the report. The inspectors conclude that neither Mr. Comerford nor his family have any interest in this company. This is the opposite conclusion to that drawn in Mr. Curran's report arising from his investigation under section 14 of the Companies Act, into the ownership of various companies. Mr. Curran expressed the opinion that it was probable that Mr. Comerford was the beneficial owner of Talmino. The questions concerning the ownership of this Jersey company are at the centre of the entire affair. They will have to be definitively established in due course by litigation. Of course, it was the legal proceedings which were initiated to determine this matter which first brought the affair to public attention. In addition, according to the report it is possible that tax matters and accounts of subsidiary companies were not in order and tax liabilities misstated.
The report, therefore, cites a considerable amount of questionable, possibly criminal, behaviour by a small number of executives in a State company. The Government will have no hesitation in taking whatever measures are necessary to ensure that misdemeanours will be dealt with rigorously. Already, the Minister for Industry and Commerce has submitted the report to the Director of Public Prosecutions with a view to taking whatever action is necessary to ensure that where breaches of the law are suggested, they are effectively dealt with. Indeed, I understand that the report is at present being studied by the Garda Fraud Squad.
The Central Bank and the Revenue Commissioners are investigating the exchange control and taxation aspects of certain activities of some related companies of Siúicre Éireann. The Government are determined that any wrongdoings will be identified and that taxpayers' money will be safeguarded.
The cost of the report has been raised by a number of Senators and has given rise to much public anxiety. The Government have also been concerned by the very high cost of this investigation, which amounts to over £1 million. They are determined that taxpayers should not be responsible for such high costs arising from the activities of certain executives who, it would appear, were not acting in the public interest. The Government are, therefore, pursuing in the courts the possibility of recouping the estimated cost from Greencore and related companies. In the light of this experience, the Minister for Industry and Commerce will be looking afresh at the whole investigative modus operandi provided for under the Companies Acts with a view to finding more cost effective ways to carry out such tasks.
In addition, a restriction under section 16 of the Companies Act, has been imposed on the Talmino loan note of £2.1 million. Legal proceedings to recover all secret profits have been instituted by Greencore and the company has also frozen all Gladebrook loan notes to the value of some £6 million. The company has also frozen the severance arrangements with former Siúicre Éireann executives.
These actions demonstrate the seriousness with which the Government are treating this matter and their determination to ensure that taxpayers' money is protected. Many of the intricate and detailed issues involved such as ownership of Talmino, payment of severance packages and actions by Greencore to recover damages from executives, can only be finally decided upon by the courts. The Government will assess the outcome of these investigations and legal proceedings in due course and will then consider what further action, if any, is required.
The alleged misconduct which is the subject of the current investigation took place at a time when the responsibility for Siúicre Éireann was held by the Minister for Agriculture and Food. Up to 1980, the Minister for Finance had total responsibility for Siúicre Éireann cpt. under the Sugar Manufacture Acts, 1933-1973. In 1980, certain functions were transferred to the Minister for Agriculture and Food. The main functions transferred related to the appointment of directors to the board, approval of any changes to the Memorandum and Articles of Association of the company, appointment of auditors and the laying of the annual accounts of the company before each House of the Oireachtas. In general, the Minister for Agriculture and Food exercised these functions in consultation with the Ministers for Finance and Industry and Commerce.
However, I must put on the record of the House today that neither the Minister for Agriculture and Food, his Department nor any other Department of State were made aware at any material time of the decisions involved concerning the acquisition of the minority shareholding of Sugar Distributors (Holdings) Ltd. This was, of course, entirely consistent with normal practice in that State-sponsored bodies did not consult with or obtain the approval of Government Departments in relation to individual commercial decisions unless there were specific Exchequer or strategic implications.
In hindsight, it is obvious that the system in operation needed to be improved. Accordingly, the then Minister for Finance set up a committee under the chairmanship of the Secretary of his Department to look into the question of establishing a code of ethics for State-sponsored bodies. Recently, the Minister for Finance announced a set of guidelines for a written code of business ethics which will require (1) directors of semi-State companies to make a full disclosure of personal and family interests. Such declarations will have to be lodged with the secretary of the company, and cover employments, shareholdings, professional relationships, interests of other family members, and corporations or trusts with which they are associated; (2) that directors should not receive documents where a conflict of interest might arise; (3) each State body to have a written code of conduct for employees giving guidelines on, (a) duty to the company, (b) the avoidance of conflict of interest, (c) limits on outside activities, (d) acceptance of gifts and (e) honesty in dealings; (4) that competitive tendering be a normal procedure; (5) that chairpersons should implement Government policy in relation to the remuneration of chief executives and that the arrangements made cover total remuneration; (6) that Ministerial approval be obtained before subsidiaries are established or acquired.
This strengthening of controls and standardising of procedures will, I have no doubt, be a means of ensuring the efficient management of State bodies and the effective accountability of boards to the appropriate Minister. I should point out, however, that the adoption of these guidelines does not imply any Government dissatisfaction with the large majority of board members and staff members of State bodies who are dedicated and conscientious in the conduct of their duties.
The inspectors' report was not very critical of the actions of the board in relation to the Greencore affair. It is clear from the report that the board was not fully informed of all relevant happenings. The report says that the former chief executive should have been dismissed forthwith by the board once revelations about acceptance of money from Gladebrook emerged. The board, however, claimed that they acted on the legal advice given to them at the time and they subsequently terminated the services of this company as legal advisers to Greencore.
With the passage through the Oireachtas of the Sugar Act, 1991, Greencore, the holding company of Siúicre Éireann was set up. Greencore is no longer a State-sponsored body and the role of both the Ministers for Finance and for Agriculture and Food in relation to it has changed radically. The Minister for Finance now holds a 30 per cent stake in the shareholding of Greencore, while the board is elected by the shareholders. On that latter point, the shareholders recently reappointed the board of directors at the annual general meeting of the company. Despite the recent difficulties, the increase in the share value since flotation, from 230p to its current price of 268p, testifies to the commercial viability of the company.
The new and very important role of the Minister for Agriculture and Food in Greencore is that he holds one special share in the company which he may not dispose of. This share ensures that the State can effectively exercise certain specified controls over the sugar operations of Greencore such as the prevention of the disposal of a controlling interest in Siúicre Éireann, which is now a subsidiary of Greencore, prevention of the disposal of the sugar assets including the Irish sugar quota, and can prevent a shareholder, or group of shareholders acting together from gaining control of Greencore plc.
The Minister for Agriculture and Food of course continues to have responsibility for ensuring the correct application of EC rules relating to the sugar regime. As in relation to the other agricultural sectors, he will ensure that Ireland's interests are safeguarded in so far as sugar is concerned.
Greencore, as we all know has a very special role in the Irish agri-business and food sectors. The Government are, therefore, most anxious that this matter can be cleared up without delay also that the company can concentrate fully on its important task. We are aware of the good work it can do and the important part it can play in the Irish economy. Greencore at present employs about 2,000 people and had a turnover last year of £326 million. It is not content, however, to stand still, but will make every effort to grow and develop into a major contender in the European agri-food sector. One of the major reasons for its flotation last year was that it would be free to do this.
With the future, rather than the past, in mind, it has recruited a new senior management team, renowned for its business acumen, which will be actively seeking new opportunities to expand activities particularly in a European context. If the Greencore group is to survive the challenges of the Single Market and remain competitive, whatever the outcome of the Common Agricultural Policy and GATT negotiations, it must have established a strong and diverse base, capable of responding to any market developments. The Government are confident that the company now has the management and structure in place for it not only to survive but to expand and prosper in changing circumstances. The recent amicable settlement of the "ghost sugar" dispute lends credence to my belief that Greencore is a company which intends to work constructively with its suppliers. This can only help it achieve its task of joining the first division of European food firms and of being an Irish-based company capable of competing with the many multinationals involved in this sector.
To conclude, I take this opportunity to emphasise the Government's conviction that, following its flotation on the stock market, Greencore has the potential to overcome temporary difficulties and to achieve its ultimate aim of establishing itself as one of the premier Irish-based international food companies. The Government wish it every success in its efforts.
I commend this motion to Seanad Éireann and I thank the contributors in the Seanad today who were very constructive and orderly.
I welcome the Minister to the House and thank him for his contribution on this matter. The saga of the Greencore affair is regrettable and tragic; there is a need for a new code of ethics in business procedures. Without condoning what has happened it would be inconsistent not to acknowledge the achievements over a number of years of the former chief executive of the Sugar Company and of Greencore subsequently. Mr. Comerford contributed substantially and significantly to the building up of the Irish Sugar Company and of Greencore while he was chief executive of that body.
The chief purpose of this investigation was to ascertain beyond any shadow of doubt if the price paid by the Sugar Company for Gladebrook was correct and if shareholders, that is the taxpayer, received good value for money. It is regrettable the inspectors failed to come to a definite conclusion on that central point of their terms of reference and it creates unease among many people that that aspect was not resolved. One can only conclude from the inspectors' failure to come to a definite conclusion that the price was correct and in order and that taxpayers' money was not squandered.
There were various controversies regarding this and other unfortunate business affairs in the latter part of 1991 and in early 1992, but particularly in 1991. In both Houses, and particularly in Dáil Éireann, from time to time the appointment of NCB in the context of privatisation is raised which was a central point of the Greencore issue. I am informed on good authority that NCB was appointed after its chairman had a meeting on 26 May 1991 with the former Taoiseach, Deputy Haughey and a direction was conveyed to the then chief executive, Mr. Comerford, to appoint NCB for the purposes of privatisation. Unfortunately, this was not confirmed by the then Taoiseach and there have been denials of that remark. I pose the reasonable and logical question: why were Deputy Haughey and NCB not questioned by the inspectors on this vital issue? Mr. Foley reported that NCB were appointed before 26 May while, as I submit to this House, there is evidence to the contrary in this regard.
Other speakers have referred to the board and chairman of Greencore and the Sugar Company as beyond reproach. I do not share that view. If the board and chairman had conducted their affairs in a proper manner this unfortunate development would not have ensued. Executives of the Sugar Company, allegedly went down the wrong road with the emerging possibility that millions of pounds were lent and later converted into profit. It is hard to accept that one man, whether Mr. Comerford or anyone else could be responsible as the report suggests for what happened while the chairman, Mr. Cahill, and the board of directors are exonerated from any blame. I do not share that view. Any incorrect behaviour in this matter is serious; Mr. Comerford and Mr. Tully were dismissed, perhaps with reason but inconsistent reports breed suspicion.
The second interim report by the inspectors in November 1991 identified a failure on the part of the board to exercise any proper or effective control. Yet, the report of late February 1992 exonerates the board of directors and the chairman from any responsibility whatsoever. One wonders what caused this change of opinion between November and February.
The Government should have addressed the question of the report's cost prior to the exercise being undertaken at a cost of between £1.1 and £1.2 million. The Departments of Finance, and Agriculture and Food should have established, in broad if not precise detail the cost of this exercise. I understand that Mr. Barry and Mr. Foley while engaged on the report, were paid £1,750 per day for all days of its duration with the exception of Christmas Day and St. Stephen's Day. They received £240,000 and £250,000 respectively for that short period, an abuse of public funds, of taxpayers' money although I commend the Minister for Industry and Commerce for his efforts to keep costs as low as possible. His vigilance and diligence in this regard are to be lauded. Without some rein on this exercise the final cost figure could have been significantly higher.
There is conflicting evidence in this report from Mr. Maurice Curran about Greencore and from the inspectors appointed by the High Court, which is misleading to say the least. These reports differ significantly with regard to the ownership of Talmino. One wonders, if Mr. Comerford had no vested interest in Talmino why he should risk his good position and substantial salary? The ownership of Talmino does not appear to fall within the confines of Mr. Comerford's operations.
With reluctance I raise another disturbing feature which appeared in The Dublin Tribune dated 19 March 1992. I do not like talking about personalities but the headline there was, “Greencore man gets drive ban”. The substance of the report is that Mr. Foley on being stopped for drunken driving refused to comply with normal statutory regulations in the matter.
An Leas-Chathaoirleach
I ask the Senator to stay on the report before the House.
The only reason I reluctantly made that point was to show that a person sitting in judgment on a public issue must be beyond reproach and prepared to comply with statutory rules and regulations. I do not mean that such people must necessarily have never broken the law; practically everybody from time to time commits some misdemeanour. I am concerned about Mr. Foley's failure to comply with the statutory regulations when requested to do so.
We have had a large number of scandals over the past few months. There have been investigations, some of which are still ongoing; all results are not yet available. Without naming individuals I question whether the board and chairman of the Sugar Company should continue in office, having read all the conflicting evidence in the matter. I regard Greencore or the Sugar Company as extremely important to the Irish nation and particularly to farmers. We have approximately 5,000 beet growers in this country who derive a substantial return from the growing of beet and vegetables. It is vital that nothing jeopardises the future of the company that purchase their product and for that reason we all have an obligation to ensure that Greencore and their activities meet the ethical standards required for good business practice.
I am certain there are excellent executives in Greencore and a good team of people with them, but a team of executives can only be as good as the chairman and board that direct them.
Executives take day to day decisions but the ongoing policy and strategy are for the Minister or Ministers with responsibility for that industry and for the board of directors.
I am not satisfied that the report lays all blame on Mr. Comerford's shoulders. I question the Minister why this should happen particularly as Mr. Comerford had no interest, we are told from reports and investigations, in the ownership of Talmino.
I welcome the Minister to the House and congratulate him in his appointment. On this report which must be welcomed despite its limitations, I would like to make a few comments.
It is regrettable that the Oireachtas Joint Committee on State-Sponsored Bodies does not have the facilities or powers to act as a proper watchdog on all aspects of State-sponsored bodies. If that Oireachtas Committee is to play a proper role, it will need to be funded properly and given adequate powers to be a useful watchdog. When one compares the allocation to that Oireachtas Joint Committee and the moneys paid out to investigate the Irish Sugar Company, one realises the potential cost fall out when things go wrong, bearing in mind that that Oireachtas Joint Committee have a budget of £80,000 with the responsibility of overseeing all our semi-State bodies. In that context their allocation is farcical to say the least.
The Oireachtas Joint Committee made some recommendations about their powers earlier this year, and I will quote them because it has not been done yet in either House. The Seanad should spend more time debating the reports of Oireachtas Joint Committees. Much time, effort and expertise is invested in these reports and they are often left on the shelf which can be frustrating for the people involved. I can quote some of the better reports over the past couple of months. The Bord na Móna report had far reaching implications for that company and should have been received more attentively by the Oireachtas and by the Minister in question. The Oireachtas Joint Committee on State-Sponsored Bodies mention that the problem in Greencore was not carefully or properly investigated by the Joint Committee. I know some difficulties arose at the time. The Oireachtas Joint Committee on State-Sponsored Bodies recommendations were as follows:
It is clear that the Joint Committee as currently resourced and empowered is severely hampered from carrying out the incisive and pervasive examinations that are required. While the Joint Committee believes that the mere fact of considerable resources will not of itself guarantee 100 per cent effectiveness, nevertheless it can be argued convincingly that it is unreasonable and disingenuous to require the Joint Committee to act as an alert watchdog with only extremely limited resources. Consequently the Oireachtas Joint Committee recommends—
(i) it be given power to compel witnesses to attend or produce documents and that penalties apply for non-compliance in accordance with procedures to be determined by law;
(ii) the question of the privilege of witnesses be resolved by extending qualified privilege to witnesses before public meetings of the Joint Committee;
(iii) a formal mechanism be provided to facilitate debates on its reports;
(iv) adequate resources be provided and
(v) the review of the sub judice practice be extended as a matter of urgency.
In the absence of appropriate powers realistic resources and follow up debate or action on each report, the existence and operation of the Joint Committee will be seen or perceived to be only a token exercise in public accountability rather than the genuine monitoring body it was intended to be.
I ask the Minister to ask the Government to look at a very short report on the role of this Oireachtas Joint Committee which with appendices comes to just over 21 pages. It is important in the light of what has happened in the Sugar Company-Greencore area that the role of this body be re-examined carefully and it be given adequate powers and resources to ensure that the debacle of the Sugar Company-Greencore will not recur.
With regard to the Sugar Company report it is clear that for a considerable length of time great tension prevailed at top management level and that that tension arose primarily from the company's improved financial situation and management's desire to take a share of that success. It must have been difficult for management to accept the limitations of salary received for the excellent job being done reversing the financial decline of Irish Sugar and they looked for other ways to reward themselves. It is difficult to understand how so many difficulties should arise in Irish Sugar given the number of financial advisers and solicitors employed by the company. The report before us details many of the companies, including national and international names, such as AL Goodbody, Arthur Cox, Pannell Kerr Forster, the Investment Bank of Ireland, NCB Stockbrokers and so on. It is difficult to understand how so much information could be missing from the prospectus prior to the privatisation of Irish Sugar.
I will give some examples. The claim by the managing director of Irish Sugar that he is the beneficial owner of Talmino through a trust established for his adult children was not disclosed, nor was the acquisition by Odlums of Milford Flour Milling Company in Donegal or the letter of comfort issued on behalf of the Irish Sugar Company by the Ulster Bank in respect of this purchase. Odlums continued to give the impression of competition in the flour milling business by not disclosing this information. Also, the fact that Sugar Distributors Holdings changed their share structure prior to flotation so that 90 per cent of the company's activities could be deemed to be involved in manufacturing and the voting rights could be changed to qualify for the 10 per cent manufacturing rate of tax, backdated to the time of the sugar distributors holding takeover is not mentioned in the prospectus. This had the effect to increasing the value of the company substantially. The chairman of Irish Sugar was also chairman of Feltrim Mining and he was anxious to have a loan made available by Irish Sugar to that company. This fact did not appear on the prospectus.
How could so many financial advisers and solicitors employed by Irish Sugar for the privatisation of the company engage in a cover-up to deprive shareholders of such information, the people who were proposing to invest in the company? Institutional investors and the London Stock Exchange in particular were so concerned about the inaccurate information emanating from Irish Sugar, appearing on the documentation prior to flotation, that special considerations and conditions were sought by them in the last few days before flotation actually took place in April 1991.
The result of correspondence from M.J. Horgan & Sons, Solicitors, and A & L. Goodbody, Solicitors, concerning the fraudulent accounting practices in the Sugar Company, inaccuracies in the accounts and prospectus, details regarding the acquisition of Milford Flour Milling Company and the level of fines that were expected as a result of an EC investigation into the Irish Sugar Company which were pending in the European Commission led to the London Stock Exchange and other institutional investors insisting on a massive £180 million guarantee by the Government in respect of the liabilities arising from the privatisation of Comhlucht Siúicre Éireann Teoranta. This information was not disclosed to shareholders or taxpayers on any occasion.
It is unusual for an EC inspector to visit an Irish company on two occasions within a short period yet this is precisely what EC officials did in respect of Irish Sugar and it is anticipated that a substantial fine will be imposed by the European Commission shortly in respect of the anti-competitive practices of Irish Sugar prior to privatisation.
In my opinion, the financial advisers to the company knew everything about the transactions that were going on and about the missing pieces of information I have just outlined. In fact, the role of the financial advisers was nothing short of criminal. The fact that £1 million was borrowed by executives of a public company from a financial subsidiary of SDH — which was called ISM — and which was never disclosed in any accounts of ISM, is unacceptable. No valuation was carried out by the Investment Bank of Ireland, advisers to the Irish Sugar Company, regarding the takeover of Sugar Distributors Holdings. There was no scrutiny or value for money in respect of this proposed transaction. With reference to minutes of meetings backdated with information contained therein, that was never even discussed in respect of loan facilities being made available to executives.
In view of the fact that Mr. Comerford and Mr. Cahill worked closely together, the chairman of the company must have been aware of what was happening and, indeed, he has already issued conflicting information in the report to Mr. Comerford in respect of the appointment of financial advisers following a meeting with Deputy Haughey, the then Taoiseach, at Kinsealy. How can the chairman of a board of directors of a company still retain that position in spite of the fact that there has been a substantial investigation into the affairs of Siúicre Éireann and related companies?
The Taoiseach, when he was Minister for Finance, was arranging for the removal of Mr. Cahill from his position before he lost his own position as a Cabinet Minister but his view has obviously changed in recent times given the statement issued by the present Minister for Finance, Deputy Bertie Ahern, on the publication of the report, that he saw no reason Mr. Cahill should not continue in his position as chairman of Greencore.
The responsibility for the efficiency of Irish Sugar is a matter for the chairman, board of directors and the chief executive of the company. It is obvious from the report that there was a hidden agenda which never appeared before many of the board members of the company.
I welcome the Minister to the House. This is the first opportunity I have had to congratulate him. He has served exceptionally well in this House. His promotion is not before time. I know he will do an exceptional job and I wish him every success.
Looking at Greencore, the Sugar Company and allied companies, one can see a positive element to the extent that it has brought the practice of setting up offshore companies to the forefront and indicated the role played by members of a semi-State board in these activities. The standards which existed in Siúicre Éireann must be called into question. There were deficiencies in regulatory controls. I am glad the Minister intends to review these controls so that there will be no recurrence.
I congratulate the Government on their handling of this issue from the beginning. As they became aware of what was happening, at each step along the way, they ensured that an investigation was initiated, they put in place safeguards, they were open and above board and made every effort to ensure that the truth emerged at the end of the day.
The cost of inquiries is another important issue. We are talking about three inquiries, Greencore, Goodman and Telecom and it is important to look at what these inquiries have cost the country. They were all necessary in their own right. It is important to state that we should be open and above board when something is amiss in the public sector and it should be thoroughly investigated. Those who are appointed to inquire into these matters are performing a public service. I stress the phrase "public service".
We were all taken aback at the cost of the inquiry. The last figure we heard was £1.1 million. We heard of fees of £250,000, we heard of back-up services costing £300,000. Ordinary people are quite rightly upset at the level of fees compared to what they have to live on, whether it is social welfare if they are unemployed, a weekly wage or a monthly salary. By any standards they see their income compares very unfavourably with those fees. It is an outrage and a scandal that so much money had to be expended on the inspectors inquiring into the Greencore affair and that such charges have been inflicted on this Government, or rather on the High Court.
One positive element has emerged; the Minister for Industry and Commerce is now reviewing the mechanism by which inquiries are being set up. I welcome this. I hope he will see that a mechanism is put in place that will ensure that costs are agreed before inquiries are set up in the future. In the case of the Goodman inquiry, many people are asking if the results are worth the money paid out. Could we not have had an investigation that would have revealed as much for far less money? Perhaps the Minister could respond by indicating what the current report cost relative to the other report. My understanding is that it was one tenth of the total cost. The public regard it all as a rip-off and I agree. Those of us in the Oireachtas are subject to the terms of the Gleeson Commission; elsewhere, we would be subject to the Programme for Economic and Social Progress. Anyone who is reporting in the national interest should be subject to some regulation.
Two other matters arise from the report. The first relates to worker directors and I ask the Minister to have a look at their role. I understand that in Siúicre Éireann worker directors were appointed, but what meaningful role did they play? Were they part and parcel of the inner decision-making team? My information would suggest they were not. Rather than being totally involved in the inner sanctum, they were kept very much on the periphery. That raises the question of how effective is this policy of having worker directors. Are they trusted with the innermost secrets of a company? If they are not, that defeats the whole purpose of the exercise.
I ask the Minister to look seriously at the other State and semi-State sectors where worker directors are involved to see if they are playing the meaningful role intended for them when the whole idea of having worker directors was promoted. I believe they are kept very much on the periphery on the basis that they might leak information back to the workforce or to the unions. I think that is a disservice. It is an insult to people who have been appointed through the democratic system onto those boards. Some regulations will have to be brought in to ensure we do not have a repetition of this situation throughout the system.
The Sugar Company is an indigenous important industry which provides many jobs throughout this country. It has been a highly successful semi-State organisation. To that extent, people who are involved in it should receive our congratulations on the efforts made over the years.
The report is highly critical of Mr. Comerford. I would just like to mention the fact that Mr. Comerford had an excellent track record. I am looking at other people who are very successful in the semi-State sector. I would like to ask the Minister to tease out this question. Because of the differences in salary between comparable management posts in the public and private sectors would it be fair to say that offshore companies have been set up to ensure that executives in the public sector receive payments, consultancy fees, to keep them on a par with the private sector? Having the Gleeson report and controlling wages and salaries in the public sector is good in its own right but when it does not keep pace with the private sector there is always the danger that people will see themselves as being underpaid having regard to their expertise and management skills. I saw a man who had great expertise and great management skills, who brought this company forward and at the end of the day he appears to be the scapegoat. Perhaps he just did not receive a proper emolument for the type of work he was doing.
Greencore as it is today is an extremely important Irish company. It is indigenous, it is very successful, it is a major employer, it uses Irish raw materials. I would temper discussion on Siúicre Éireann and allied companies. By being excessively critical of what has gone on, which I am in no way condoning, are we diminishing the standing of this company, limiting where it can go and what it can mean to the Irish economy? I understand the shares of Greencore are at £2.70. Within the finance sector it is suggested that a more reasonable value would be £3.20 per share. Obviously the bad publicity that has been part and parcel of the investigations has had a dramatic effect on the value.
This is an ongoing difficulty. Wrongdoing and fraud must be investigated to the full and those people who are involved must have the full rigours of the law applied to them but perhaps there is a time when we should call a halt. This company can be good for the economy and for the farmers who are suffering throughout this land. It can be good for the suppliers. Perhaps it is time we brought an end to the bad publicity given to this industry. The danger lurks out there that with a free market we could have major imports of sugar in competition with Greencore. That would have implications for employment within the industry. It is why I would advise that we should balance what we are saying on this issue to make sure that at the end of the day we do not do excessive damage to one of the most successful enterprises this country has seen in a long time.
Question put and agreed to.
An Leas-Chathaoirleach
When is it proposed to sit again?
It is proposed to sit again at 2.30 p.m. on Wednesday, 1 April 1992.