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Seanad Éireann debate -
Wednesday, 28 Nov 2001

Vol. 168 No. 16

Eircom Flotation: Motion.

I move:

That Seanad Éireann condemns the Government for its gross mismanagement of the flotation of Eircom which resulted in financial hardship for hundreds of thousands of small investors who were misled by the Government's statements and exhortations.

I move this motion not from the point of view of condemning the commercial activity of Eircom or running down the company in its current format, but to highlight the Government's performance in this episode. Small shareholders, many of whom had never dealt in stocks and shares, have lost most of their savings in this flotation. The public relations people, spin doctors and consultants essentially cajoled them out of their money.

September of this year will go down in the annals of history for the one cataclysmic event that occurred on 11 September. The dreams of many thousands of people ended forever in New York and Washington on that day, but at 3 p.m. on Friday, 28 September, the financial dreams and hopes of hundreds of thousands of Irish investors ended with the announcement that Valentia had gained more than the 80% acceptance level needed to gain control of Eircom. The statement added that the offer was unconditional and represented 1,868,132,494 of the Eircom shares sold to the public. The chairman of Valentia went on to say that he looked forward to being able to pay the accepting Eircom shareholders their money. That was cold, clinical language for the chief mourners at this corporate funeral, namely, the thousands of Eircom shareholders, some of whom lost their life savings while others lost substantial sums of money as a result of the outrageous marketing ploys the Government undertook to encourage the unsuspecting public to part with their money at the height of a bull market.

A few wise guys who got out early made money in the flotation, but the majority of small investors waited and held on to their shares, to their own misfortune. The majority of shareholders were cajoled by the spin doctors and the PR people to part with their money. In return for the great job they did in the flotation, those PR gurus received the handsome figure of £74 million. The image they manufactured was of a gold-mine for sale, Ireland's own national gold-mine going for a song, as the Minister for Public Enterprise, Deputy O'Rourke, described it. Unfortunately, for the majority of shareholders, the national gold-mine turned out to be nothing more than corporate quicksand in which they got bogged down and badly burned. Many investors will never return to the stock market and, consequently, they will miss out on many genuine opportunities to make some real money in stocks and shares.

The Government has to take responsibility for the debacle of the Eircom flotation. It cajoled small investors to part with their money through a massive publicity campaign. The Minister for Finance should make some restitution in the forthcoming budget and Finance Bill whereby those small investors can offset their losses against income tax. Currently those losses can only be offset against capital gains tax, but, unfortunately, many small investors affected never held shares previously and, as a result, will not be able to offset their losses against capital gains tax. I call on the Minister for Finance to consider these investors when presenting his budget this day week and make some allowance whereby those who have lost substantial sums of money can offset that loss against their income tax.

It behoves the Government to make some amends for what happened in this flotation. Many people have suffered major financial hardship as a result of the publicity that surrounded it. The Government and the marketing gurus interfered with the market and created a false market which did not exist previously. Instead of letting the banks and institutions get burnt if the market fell, they inveigled small shareholders into the market. It is very doubtful if the banks, had the flotation been underwritten entirely or to a large extent by the financial institutions, would have accumulated the type of losses small investors suffered.

This motion has nothing to do with the commercial viability of this company or its current commercial operation. I am not impressed by the fact that this private company is now owned by a consortium of American venture capitalists who will relaunch the company on the stock exchange in a few years, having sold many of its valuable assets and properties. In my home town, Ballina, a new building which was constructed by Eircom in the past few years at a cost of millions of pounds is now lying idle. I am sure it will appear in the property pages of the national press in the next six months. This is only one small example of what will happen with the company.

On 28 September the chairman of Valentia announced that the group had received more than 80% of the acceptance level it needed. He did not say anything about the people who did not accept the offer or did not return their forms, many of whom are sitting on their shares in the mistaken belief that they possess a valuable asset which will, at some stage, increase in value if they hold to it. They need to be told that, even if they hold on to their certificates for the next 99 years, the value will not increase by one penny. The Government shows no urgency to inform these investors of the position. There is an ongoing argument about whether Valentia can acquire these shares compulsorily. I have been informed it can.

That this company is now owned by a consortium with no public service obligation to this country, whose sole interest is commercial and which will require the company to make substantial profits in the years ahead, makes me extremely worried about peripheral rural areas such as north Mayo where it will it not be economically viable to roll out broadband and other facilities needed in the telecommunications business.

Let us not forget that telecommunications is a vital cog in a modern economy. It is expanding from year to year and its value to an expanding economy cannot be underestimated. In the past ten years alone our telecommunications system has been brought to a remarkable point. We all remember when one had to phone the local post office for a connection to America and half the village knew what one had talked about by the end of the night. That is not so long ago. There is much for which to be thankful in terms of our telecommunications system.

This House deplores the fact that the Government got it badly wrong with this flotation. It should take responsibility for its error and make amends with the small investor for the shortfall.

Order, please, applause is not allowed.

It is always good to have the Minister of State at the Department of Public Enterprise, Deputy Jacob, in the House. He is very generous with his time. However, while I welcome him, I regret we do not have the Minister responsible for the Eircom debacle before us. It is unfortunate, though I am sure there is a good reason for it.

The Minister has sent her regrets. She cannot be here because she has a very important meeting this evening about the future of Aer Lingus.

I am sure the Minister of State will deliver to her the message we wish to send and I hope she listens. The Minister, who is still essentially the Minster responsible for monopolies, has presided, in Eircom, over a saga with disastrous choreography from beginning to end.

We have moved from State ownership to public ownership and now to private ownership. Unfortunately, the Minister has lost control of Eircom at the most crucial juncture in our economic development. The economy is moving from loss making assembly and production manufacturing to high added value jobs in the knowledge industry. To support these jobs the country needs high quality telecoms and affordable access to the Internet.

We have arrived at a most unfortunate and peculiar position with Eircom, in which nothing new has been developed. Despite the progress that has been made, there has been a marked slowdown with regard to new lines. ISDN lines are not available in 20% of the country, delivery of leased lines, especially to competitors, is slow and there is no delivery of affordable Internet access. We are using the same tired old 1891 service based on a price per minute charge which is monopolistic in that no revenue is shared with other providers. Given that Eircom has basically cut its margin to get all the business, we have a monopoly and no competition.

Eircom has delayed the introduction of affordable access to the Internet both for residential and business users. In contrast, Deutsche Telekom has an always on service via ISDN lines for only DM10 per month which is about €5, and in the UK flat rate access services are widely available over the normal dial-up network for between £20 and £40 per month.

Eircom will not tolerate a reduction in current revenues for dial up 1891 services and for expensive leased line circuits, both of which would be immediately reduced if flat rate services were introduced. It has also delayed the introduction of ADSL for three years because it would suffer a loss of leased line revenue, which deprives homes and businesses of an always on high speed service which can piggyback on the ordinary phone line. Why is it delaying these new services?

ADSL is a new technology which offers up to two megabytes per second speeds on an ordinary phone line. It has been tested successfully by Eircom for over two years, yet there is no sign of its being introduced. It is offered in many countries across Europe for around £40 per month. Eircom is now arguing with the regulator to get approval for a price of £108 per month which does not include phone line rental of some £14. This is absolutely ridiculous.

The company's approach to strangling competition is directly analogous to another of the Minister's monopolies, Aer Lingus, which for years refused to allow competition on the Dublin-Lon don line. We all know what competition achieved after Ryanair entered the market – an increase in overall traffic and a significant reduction in prices for the travelling public. We desperately need the same in telecoms.

Since Eircom currently provides 96% of the leased lines in the country and 92% of the phone lines, we are now stuck with Sir Anthony's notion of when to offer affordable services to the citizen. This all comes back to the Minister. She is responsible for this debacle. It is arguable that the significant cost to the State is not just the huge loss suffered by the army of small investors who were suckered into investing in Eircom by the Minister but the loss to the economy arising from the Minister's allowing our most significant national asset to fall into private hands. It is a double whammy as far as I am concerned. The State cannot now influence the introduction of necessary services to support e-business and the Minister's delay in bringing about the communications Bill is compounding her disastrous handling of this brief.

We need a stronger influence over the telecommunications providers in this country, and especially over Eircom. What stage of production has the communications Bill reached? Why has it not yet left the Department and where do we stand in relation to Eircom? We are stuck in the hands of venture capital companies who will sweat the Eircom business to remunerate their investments. The likely consequence is that Eircom will not introduce new cheaper technologies when it can keep the current profitable monopoly going. This is utterly scandalous.

What is even more scandalous, and we have included a further amendment to our motion to condemn it, is that the board of Eircom has paid itself large bonuses despite the massive losses of small shareholders. It was incredible to read of the directors awarding themselves such enormous bonuses. There is nothing illegal in that but it was morally wrong for them to do this on foot of the extensive losses suffered by mainly small shareholders. The investments of small shareholders might not amount to much but those who, for example, invested their pensions into the company must suffer great pain to see the people who presided over this debacle take enormous sums of money from it while they are left at a considerable loss. At the very least they should see that it is morally wrong. It is a disgrace and they should be ashamed of themselves.

The Minister has presided over a debacle and I hope that there is some way we can compensate the small investors in the near future.

I move amendment No. 2:

To delete all words after "That" and substitute the following:

"Seanad Éireann notes that all legal requirements associated with the flotation of Telecom Éireann stock were met in full by the Government and its advisers in the offer and that the price of the shares represented the market value of the company at the time, was within the range recommended by the Government's advisers and, most importantly, represented fair value for the taxpayer in the transaction."

When I read this motion, three concepts came to mind – insight, foresight and hindsight. Insight is a much desired commodity, foresight is a valued prize but hindsight is a commonly held commodity and not too highly valued in serious economic debate.

When we read the Opposition motion we initially felt we should perhaps be overcome with guilt at our failure to have the insight and the foresight that the Opposition presumes was there at the time. We were green with envy that those gifts were denied us when they seemed to be flourishing in the Opposition. They are wonderful gifts. If we had them we would have played our part shoulder to shoulder with the Opposition in cautioning and restraining what would seem to have been a gullible and naive public from being swept away by the rush to buy shares in Telecom, now Eircom.

The general mood around the country at the time was described by some scribes as "Ireland's answer to the Klondike gold rush". I do not say that to be cynical or sarcastic regarding the hundreds of thousands of investors who now find themselves at a loss. I assure the House that we on the Government side are equally concerned and can empathise fully with the feelings, anxieties and grief of the shareholders who find themselves with their shares halved in value. Many invested their life savings while others borrowed money. They are all at a loss.

If I were a betting man I would wager that every Member of this House and of the Dáil took an investment in this company. Sorry – all but one. Deputy Spring did not because he could not afford it, poor Deputy.

Nor did I.

Apart from that, why did all the Members so enthusiastically embrace the opportunity to participate in the flotation of Eircom? That raises a number of questions.

There is no doubt that recent experiences have chastened the ardour and enthusiasm of the public to participate in future ventures. I agree with the Opposition there. The Government, the Minister and their consultants were deemed to be the pilots who guided the process through to privatisation and, given that situation, it is politically expedient that the Opposition should come looking for a scapegoat to demonstrate its empathy publicly with the sense of grievance and loss experienced by the hundreds of thousands of small investors.

The Minister of State at the Department of Public Enterprise, Deputy Jacob, will demonstrate clearly, from the history of what happened over that period, that the Government acted responsibly at each juncture in carefully managing and guiding the process from the beginning to privatisation. We support the amendment tabled by the Government because it represents a true and accurate position in the context of the economic climate at the time, the then state of the telecommunications industry globally and decisions in the national interest given EU competition laws. None of these factors has been addressed by the Opposition. The Minister and the Government were determined to ensure that the maximum number of people possible would have the right and the opportunity to participate in the flotation. Most importantly, they tried to ensure that the taxpayer and the public would not be sold short and there would be a fair return to the public purse and through the public purse to the public at large from the sale of the shares.

I have a question fundamental to this whole issue. Is there anybody who can cite an example from recent decades of a company offering a gilt-edged guarantee to all potential investors that their money is safe and sound?

Banco Ambrosiano.

Order, please.

The Senator asked the question.

If there is, then let the example be cited and we will all rush to become millionaires. If there is not, we must ask what is the real motive of the motion proposed by the Opposition. Is it accusing the Government of gross mismanagement because the price was wrong or the timing was wrong? Were the wrong investors enabled to participate? Was there inadequate or inappropriate consultation or were the consultants wrong?

We will not get answers because there is nobody there.

Senator Fitzgerald without interruption.

The Opposition, individually or collectively, seems fortunate to be blessed with the wonderful insight and foresight implicit in the motion.

Alternatively, was it simply a monstrous deception foisted on the public by the Minister and the Government? It has to be one of these. I cannot think of other questions but these questions spring to mind when pondering on the motive for the tabling of this motion. Mindful of the sensitivity required towards members of the public who suffered financial loss as a result of investing all or part of their life savings, I dug out from the media of the time these nuggets of knowledge and foresight. I found not so much nuggets as carrots, which I did not expect to find. The main Opposition party was mostly concerned that the Minister be fair in facilitating the maximum number of people to avail of the opportunity to participate in the process. Deputy Yates, Fine Gael's spokesman, on radio with Richard Crowley, challenged the Minister to ensure that this would be so. He did not want the "big boys" of the financial world to scoop up the shares and make a quick killing. The Minister assured him that she would go further in addressing his concerns and she did.

Labour exercised its conscience in public, as it is wont to do, and on 11 July 1999, in The Irish Times, its spokesman expressed—

Nuggets or carrots.

—the thought that the whole process was managed admirably by the Government. He said that things were never so good and he depicted the Minister going down Moore St. with a barrow selling off the shares so as to capture all the people's votes.

Definitely carrots.

He was overwhelming in his admiration.

I do not always share Senator Ross's views, but he had foresight. As business editor of The Sunday Independent, he wrote in an article that he was as satisfied as one could reasonably be with the whole process, but he added, profoundly, that the market would decide. I rest my case there. The market has decided for good or ill.

This is a more complicated issue than the way the Opposition put it, which is why I and Senator Norris have proposed an amendment. While the Eircom saga has been an unmitigated disaster for the small investors in particular, I regret that there is an effort to make political capital out of it. There are sorry lessons to be learned from the story but to attribute the blame exclusively to the Government is disingenuous

Senator Caffrey wants to see, in next week's budget, restitution to the small shareholders for their losses. I declare an interest as one of those small shareholders – I wish I were a smaller one – but the idea that the Minister for Finance should put money back into the pockets of those who suffered losses on the Stock Exchange is barmy. I can understand its case against anyone in this saga. However, to suggest that it is the Government's duty to bail out people who lost money in a public company is out of the question.

Is this Fine Gael policy? Will that party come into power with a Minister for Finance who will say that he will return money to anyone who lost it on the Stock Exchange? This is too serious a subject to be treated in this way. It is wrong for anyone in this House to give the impression to small shareholders that any party would do that. It cannot and will not happen. Restitution for those who risked their own money in a public company, whatever the circumstances, is not the way the market economy works. That is the kind of semi-State mentality from which we are trying to escape.

I do not blame the Government. Senator Caffrey spoke of false markets, but I see no false markets. The blame for this debacle rests with the board and the management. We should point the finger at them, which is what public companies are about. The real problem is not the share price but that the board and the top executives made so much money while the small shareholders were being bled dry. Anything else, such as blaming the Government, is a red herring. Losses would be acceptable if salt were not rubbed daily into our wounds. Bonuses of up to £1 million were paid to chief executives when the share price was in free fall and some people were losing their life savings, perhaps having irresponsibly borrowed money or been seduced by the blandishments of the sale. We cannot sell a public company without blandishments. Nevertheless, success bonuses were paid out to top executives. People were rewarded for failure, not success. It was an appalling case of the unacceptable face of capitalism and of the market economy going wrong.

If those of us who had shares are honest we must admit that we could have taken our money out at a profit for many months after the sale. Not only did I not sell mine, I bought more. I made a fool of myself, but I did not know that the board was helping itself to money, albeit legally, and that they were about to propose that they get outrageous options at the AGM. I also did not know that it was making extraordinary decisions about the company's future which would land us in more trouble. The company never left the semi-State sanatorium even after it became a public company. The markets began to realise it, took fright and started to sell it. At the same time the board and management were getting incredibly well paid.

The big problem was one that cannot be blamed on the Government. An amazing deal was done whereby the best possible asset in the company, Eircell, was sold in the worst possible circumstances. If there is anything on which it should be judged it is that deal. It agreed the sale of Eircell with Vodafone when Vodafone shares stood at £2.40. Today they stand at £1.90. So confident was it about it, it said if they went below £2.20, it could walk away. It never expected it to happen. They went way below £2.20 long before the deal was consummated and it did not walk away. It landed us in the most appalling trouble and with devalued shares. That is an awful indictment on the board and management of that company.

The final indictment on that board was that not one of them bought a significant number of shares. We know the case of the former Tánaiste, who did not buy any. That was bad enough. Even up to the top, including the managing director, they only bought a few thousand, which represents a couple of weeks' salary or less than a week's salary in some cases. They showed no confidence in the company which they – not the Government – were promoting for so long. When we saw that these very rich men were prepared to pay themselves vast sums out of the company but put nothing into it, we should have realised.

I want to move the amendment.

You may not move the amendment.

Did Senator Fitzgerald move it?

Yes. There is one amendment before the House and there cannot be more than one amendment before the House at any time.

I cannot recall Senator Fitzgerald moving it.

He was invited to move it, but he did not formally move it at the start of his speech.

Senator Fitzgerald moved amendment No. 2 and amendment No. 2 is before the House, so Senator Ross may not move his amendment.

I accept that.

I thank the Senators for giving me the opportunity of speaking here this evening on the issue of the management of the flotation of Eircom by the Government. The flotation was a uniquely complex and extensive financial transaction in the history of the Irish public sector. It has continued to generate comment, both positive and negative, from the public and media over the past two years. The company, which has just passed out of public ownership, continues to have an important role in the future of Irish telecommunications and the economy generally.

Much of the criticism of the Government in the period since flotation has been based on the myth that the State can offer a one-way bet on privatisation to the public. Of course, nobody in any country can make a commitment that the shares of a floated company will not drop in price, and no such commitment was made at the time of the Eircom float. The opposition motion seeks to censure the Government on the grounds of alleged mismanagement of the Eircom flotation.

Eircom has been a private company for almost two and a half years. Senators will know in that period the Government has had no responsibility in relation to either its commercial operations or its capital structure. Senators will be aware there have been major changes in the sector in this period. There has been a major global downturn in the sector. Jobs have been lost internationally. Companies have failed. Share prices, particularly those with exposure to the dotcom operations, have tumbled.

Senators will also know that, in the initial nine months after its flotation, the Eircom share traded at or above its flotation price on all but 12 out of 194 trading days. The motion is an opportunistic exercise driven by current weakness in the sector globally almost two and a half years after the offering. The motion is driven by the absurd logic that the Government is somehow responsible for share price weakness after flotation or that it could have reasonably foreseen it taking place and failed to warn potential shareholders of its likelihood.

It is difficult to find a single independent observer outside this House who can support this ludicrous proposition. The prospectus in connection with the sale contained all information relevant to the share transaction. The mini-prospectus was distributed to all the 1.2 million people who registered their interest in purchasing shares.

The offer documentation set out fairly the risks associated with investment in the Eircom stock. The mini-prospectus contained the following statement, addressed to all potential investors in the company:

You should carefully consider the risks described below and information in the prospectus before purchasing shares. The value of your shares may be adversely affected by general market conditions and/or the possibility of further stock market offerings of the shares by, among others, KPN Telecom and Telia. Furthermore, there can be no assurance that the shares will trade in the stock market subsequent to the offers at or above the price at which those shares are sold in the offers by the Ministers. In addition, if any of the risks summarised below actually occurs, the company's business, financial condition or results of operations could be materially adversely affected and the trading price of its shares could decline.

The mini-prospectus goes on to set out these risks as follows.

Increasing competition in the fixed line services market is likely to result in material share loss and declining tariffs.

The entrance of a third mobile operator will increase competition in the mobile communications services market and is likely to result in market share loss and declining mobile tariffs.

The company's changing regulatory environment could limit its business opportunities and profitability.

If the company does not successfully implement its transformation programme its ability to compete effectively in a liberalised market may be impaired.

Rapidly changing technologies could require the company to make substantial additional investments and could increase competition.

The company's revenues, profitability and growth rate could decline if growth in the Irish telecommunications market slows.

The company's investments in new business areas and markets could require substantial capital investments and resources and may not succeed.

The company's computer systems and the systems of third parties upon whom it relies may malfunction and interrupt its operations and services if they do not achieve year 2000 readiness.

The company needs to hire and retain skilled personnel to remain competitive and implement its growth strategies.

The company may be influenced by significant shareholders whose interests may not be aligned with yours.

An adverse decision in legal proceedings could require the company to pay damages or fines or change its business practices.

The company is dependent on its continuing good relationship with its employees and their trade unions.

Actual or perceived health risks or other problems relating to mobile handsets or transmission masts could lead to litigation or decreased mobile communications usage.

This is a comprehensive and sober list of risk factors associated with investing in Eircom. It demolishes the implications of the motion regarding lack of disclosure by the selling shareholder. It must also be recognised that all publicity material issued in connection with the sale stated that share values could go down as well as up.

The prospectus dealing with the sale of shares in Eircom was cleared by the New York, London and Dublin stock exchanges in advance of the issue of the document in mid-June 1999. This involved an arduous process of clearance of texts lasting over a period of months. All the exchanges involved have testing standards in terms of the representation of all material relevant to a company being floated.

The price range, which was set prior to the flotation, was agreed by both Government and the company. The final price of £3.07 was within this price range and just above the mid-point of the range. Let us be quite clear about this. The prospectus is in its totality the responsibility of the board. The prospectus contained a price range and that price range was approved by the board.

The balance sheet of the company at the time of the flotation was strong. The price set by the Government for Eircom at the flotation date was set on the basis of what the market was prepared to pay and based on the advice of expert advisers. The pricing of the shares in July 1999 involved balancing the need for a fair price for taxpayers and the need for a fair return for retail and institutional investors. Criticism was expressed in the immediate aftermath of the flotation from certain quarters that the price of the Eircom shares was set too low by the Government. It is worth remembering that the institutional offer was no less than 16 times oversubscribed even at the top of the price range. The views of these commentators, many of whom are the most respected and reputable journalists in the State, are best expressed by the following quotation from the press immediately after flotation: "The obligation of the State as owner – since the State is the guardian of the public finances – was to sell Telecom at the highest price the market would bear."

The Government could have chosen to float the company at a higher price than it did, but chose not to do so. It received advice from one of the joint global co-ordinators to the offering, Merrill Lynch, to float the shares at £3.27. As the House knows, the launch price was £3.07. In the immediate aftermath of the flotation, the shares rose in price by 20%. The share traded well above flotation price for most of the initial year after the flotation. In the first three months of 2000, for example, the share price was not below the issue price and reached a high of £3.78 on a number of occasions in that period, a premium of 23% on the flotation price. In addition, bonus shares equivalent to 4% of their original investment were paid to investors who retained their shares up to 7 July 2000 and interim and final dividends have also been paid.

This motion is not about the fundamentals underlying the Eircom flotation. It is seeking to use market conditions which developed well after the flotation for cynical ends. When the Government floated the company, it did so acting in the interests of all parties to the offer. There was a full and fair disclosure of information.

I welcome the Minister of State to the House, although someone else should be in the firing line. It is not fair to the Minister of State, who was not involved, that he has to come into the House to make such a case which will bring little comfort to the people who have lost a lot of money in the past couple of years.

There is only one net issue in this debate tonight, namely, the accountability of the Mini ster, Deputy O'Rourke, and of the Government for the unmitigated debacle which has cost many people a lot of money. No one who buys stocks or shares has a guarantee or a right to a guarantee. They have no more guarantee or right to be rewarded than the punter who puts his shirt on the 3.30 race at Navan. When 340,000 small shareholders, which is probably one out of every three or four households in the country, lost money on Eircom shares, why were they different? Why did they have a sense of grievance? Why had they a right to feel safe? The answer is simple. The Government told them they would be safe. Governments do not normally tell citizens to gamble with their hard earned money or, worse still, to borrow money with which to gamble.

Through all the hype and oversell we experienced at that time, people were told this was an offer too good to be missed. They were told they could not afford to be left out. People queued up and vied with their neighbours because they did not want to be the ones who were not part of what they were told was the greatest national opportunity of all time. This was the time when three Ministers, the Taoiseach, the Minister for Finance and the Minister for Public Enterprise, Deputy O'Rourke, vied with each other to bring the largesse to the people. They presented themselves at different times as the sole architects, the lords and lady bountiful who, out of their own largesse, would make us all rich capitalists. Who remembers the balloons, the hype, the champagne and the crass oversell?

What made this different was that it was a Government promotion. In the past Governments urged people to invest in national bonds, national loans and prize bonds which were rock solid and were seen to be in the national interest. However, sadly for themselves, more than 380,000 people believed the brouhaha and propaganda floated. Good luck to some people who made money because they sold quickly and took their profits. Perhaps more of us wish we had been among them. However, the bulk of the people took the Government's advice and stayed in for what they believed would be the long haul.

Was it a safe investment? The Minister's words answer that. When questioned in the other House on 18 February 1999 about whether this investment would sustain the difficulties ahead, she said:

The power of telecommunications shares to withstand even the most volatile of market environments was evident recently. . . . . . I know my advisers are following the market trends closely so that we have the best advice available at the time when the price range needs to be set.

Later on, she said:

It is a personal objective of mine . . . . . that the Irish people should be a significant beneficiary of this flotation. It is, after all, they who have contributed so much to the company's development and success over the years.

If that point was not enough, she continued, "The main benefit, as I see it, is the opportunity for the public to be part of the future of the company, to be able to share in its successes." Some future and some success. How sour and hollow those words are in a few short years.

The people who borrowed money and, in some cases invested their redundancy payments, believed this was a guarantee of their children's education or of their security in the years ahead. There were such people on every street in every village and town in this country. Where now are the promises that they would be part of the future of the company and that they would be able to share in its success? Those words ring hollow, particularly in recent weeks when people's shares were compulsorily acquired by Valentia in a smash and grab raid virtually unequalled in our history.

It was not as if the Minister was not aware that privatisations could go wrong and that there were perils in the process. In a speech in this House on 31 March 1999 she said:

It is not because of a blind desire to follow current international trends. There were highly misguided and misdirected privatisations within the UK in the 1980s, especially in the early 1980s, which did not result in better services to consumers but resulted in big fat cat salaries for groups of people at the top of such companies.

That prophecy was borne out by the eloquent and powerful contribution of Senator Ross earlier this evening. The Minister knew what could happen because she was warned in advance. Yet she helped to create exactly the type of hype she had warned against. She could not forgo the appeal of the bountiful Mary, the populist. She also said on that occasion:

People have slightly more money now – perhaps not enough – and I would like to think that ordinary people, perhaps in their kitchen at night, while talking about their children, their lives and so on would say there is a lot going on about Telecom shares and think about purchasing a share or two. . . . . . There is a mystique about shares. . . . . . Many speakers said we came late to all the processes. The fact that we came late is good because it enables us to learn from the mistakes of others and we can decide to do it in a more beneficial way.

Some learning process. Perhaps it might have been better if the mystique had remained or if the Minister had not set out to persuade people that their investment was safe, that Eircom was a Government scheme which could not fail and that the only losers would be those who did not take part. However, that is exactly what the Minister did not do.

Is it the case that all those who invested in Eircom are losers? Far from it. There were some winners. There were those who sold early and took their profits – good luck to them. There are some Eircom employees, who will eventually be part of the new Valentia company, who will be winners, but there will be very many other employees of Eircom who will be without jobs when that time comes and who will not necessarily see themselves as winners.

Sir Anthony O'Reilly is a winner. He and his backers have got a stranglehold on the Irish telecommunications industry and a company which had enormous potential for the public and which will now be a rich cash cow for the few in the years ahead. Good for them. The top managers of Eircom were winners, getting huge bonuses for losing so much of their investors' money. Some of them like Mr. Kane are now getting golden handshakes for having failed disastrously to meet already modest targets. The board of Eircom was a winner, as Senator Ross pointed out, as were the advisers. Some £78 million was spent on advice on how to get the flotation right – some advice. That is an enormous sum of money.

The losers were the plain people of Ireland who believed the Minister and borrowed money on which they are now paying back interest. They are the people who invested because they believed that the Government told them the truth. They invested in the hope of securing their future or looking after the education of their children, or simply because they were told that this was a good investment because the Government said so and they could not lose. They did lose, however, and I can tell the Minister that they are waiting out there in the long grass and for many the election cannot come quick enough.

I compliment the speakers from the Fine Gael Party. I was particularly impressed with the performances, if not the content of the contributions. I watched with interest as Senator Caffrey and subsequently Senator Manning made their contributions. I know that my party has been sending us to Carr Communications for courses, but obviously Deputy Noonan is sending Fine Gael Senators to the Abbey Theatre.

I want to go back to the time of the launch. I happen to have with me a transcript of the debate on "Morning Ireland" on Thursday, 22 July 1999. Mr. Richard Crowley was in the chair and said:

Spokesman Ivan Yates says it's politically unacceptable that, as he puts it, wealthy institutional investors will make a windfall profit ahead of Irish citizens. Ivan Yates is with us now. Good morning.

Deputy Yates said "Good morning, Richard" and later added:

Now, what I am calling for in very simple terms is that everyone who registers should be guaranteed up to £3,000 worth of shares. Now if they only want £500, that's fine and only after that should we decide what the institutions get. This is not Sherry Fitzgerald or Norwich Union we're selling, this is already a public asset.

Mr. Crowley asked, "Where did you get the £3,000 figure from?" and Deputy Yates replied:

The £3,000 figure, according to brokers that I've spoken to, that is a reasonable figure . . . I asked yesterday, if you sign up what are you entitled to? You're entitled to absolutely nothing only preference to those who don't register, so you might only get £200 worth of shares.

Mr. Crowley asked, "That's all a lot of people will want though, isn't it?" and Deputy Yates replied:

No, I disagree. This is not a risky investment, this is a sure bet. The price at which it's selling is actually going to be, when it starts trading, this happened in the UK, you see huge windfall profits. You sell at one price, we'll say £1.60 and they suddenly, once they start trading at £2, there's already a built in mark up of 17%. I'm telling people this is money for old rope and in fact to help Telecom.

Does the Senator believe a bookie?

There was the spokesman for the main Opposition party at the time telling the people of Ireland on "Morning Ireland" this was money for old rope. However, two and a half years later I regret I did not have the wisdom then that I have now because, like Senator Ross, I must declare a certain interest. In fact, if the motion had condemned Senator Ross, I might well have supported it given that I sometimes read his column and perhaps was induced to gamble a little more money on it. There is a serious side to this also, however, that is, that it did present an opportunity for wider share ownership and at a time when people in Ireland are more affluent than at any stage in our history, the manner in which the shares declined mitigates against this.

It was not just the spokesman for the main Opposition party who held such views. The spokesperson for the Labour Party, Deputy Rabbitte, wrote an article in The Irish Times at the time which was basically along the same lines, accusing the Government of unrivalled populism in pitching the price too low.

The editorials in many of the newspapers did likewise. The Irish Times, in July 1999, stated “By any objective criteria, the floatation of Telecom has been an outstanding success” and “The Government appears to have pitched the flotation price . . . at precisely the right level; any thing less and it would have been vulnerable to the charge that the company was being sold off too cheaply.” At the same time, in The Sunday Tribune, Matt Cooper wrote in similar terms, “If they had been priced at 30p cheaper than the 307p level chosen, they still would have reached Thursday's closing price.” He went on to say that it would have been a dereliction of duty by the Government if, in fact, it had done so.

If we want to be realistic and reasonable about this, we must accept that, while one invests in the stock market in the hope that one will gain, there is an equal risk of losing. The stock market is the one area where traditionally there have been higher returns than in other financial sectors. The reason the returns are higher is the risks are higher.

In this case, as Senator Ross rightly pointed out, there was an issue for management and some of the ire must be directed in that quarter. There were initiatives which could have been taken. The disposal of Eircell was highly questionable. It was undoubtedly the largest asset of the company and it seems that in time it will prove to be a good investment by the purchasers. Once sold, it left the rest of the company open to a decline in the share price.

In addition, the technology sector suffered a significant downturn and decline on a global scale during 2000. As has been said, many, myself included, were sitting on very handsome profits for almost 12 months, but I suppose the temptation was to look at these as long-term investments. Unfortunately the sale of Eircell and then the sale of the company did not allow people to recoup their losses.

Senator Caffrey made a suggestion. While I might not subscribe to it, it is important to encourage people to participate in investing in the stock market with small amounts of money. It is interesting that many in the United States became extremely well off in the last decade through investing in the mutual funds in operation there. If we want to promote economic development and participation on a national basis in wealth creation, it behoves us to create a climate which encourages people to invest. Perhaps one way of dealing with this might be that instead of people being subject to capital gains tax on profits or carrying forward losses to off-set against future capital gains, up to a certain level there might well be a benefit in allowing them declare for income tax rather than capital gains tax. That is a two way process. It would mean that losses could be off-set against normal income tax and other earned income, but equally profits would be subject to income tax, which could be charged at a higher rate than capital gains tax.

The exercise should be looked at to encourage people to participate more in the development of the financial sector. We saw, through the issue of the shares in Eircom, that a significant portion of the population was willing to pursue that line. It would be a pity if this exercise mitigates against that in the future. Our making light of it or our making a political issue of it here does not help that process. That is one regret I have with regard to the debate tonight.

I second Senator Ross's amendment to the motion in which he criticises the board of Eircom for paying large bonuses to the directors despite massive losses for those with small shareholdings. The principal point I have to make is that my colleague on the Fianna Fáil side has referred to the matter of people being allowed to write off losses on tax and I—

An Leas-Chathaoirleach

I have been informed that even though the Senator's amendment was tabled first, it comes after the Government amendment. I allow you to continue.

I will give you a ruling on that. As you rightly point out, our amendment was tabled first, therefore, we should have been called first. I do not see why the Government should always wade in.

An Leas-Chathaoirleach

I did not create Standing Orders. I have sympathy with the Senator, but I ask him to continue with his contribution.

You are very kind. My understanding is that if you make a loss on the sale of shares you can write it off against tax. I have been so advised, but it could have been misinformation. There are a lot of misnomers flying around. Surely it is a misnomer to call the Eircom mess a flotation. The one thing the company did not do was float. It sank fairly dramatically and fairly rapidly, even though in the beginning there was a dazzling increase in the value of shares of 23%.

That is the nature of the stock market. It is a kind of gamble and it is foolish to borrow large sums of money if you do not have the necessary wherewithal to punt it on what is essentially a gamble. If you are in the stock market you have to learn the psychology of when to buy and when to sell. If you want to make money you have to sell as high as possible and buy at the lowest. People are too greedy and they hold on to shares. They miss the correct point at which it is most advantageous for them to sell, but that is a matter of their judgment. The Government should not be required to compensate people for poor financial judgment. I regret their losses and I am not criticising the people. I feel deeply sorry for them, but it is a question of judgment and there was an opportunity for people to reap the profit and exit from the shareholding. Had I held shares, that is precisely what I would have done. I correct Senator Fitzgerald's contention that every single Member of both Houses bought shares. I did not. There was a time when I regretted it and I was rather jealous of those who had them.

It was good judgment.

It was a total lack of judgment, which is my usual form, I am sorry to say. I defend Deputy Yates. It has been put on the record that he said the flotation was money for old rope. Was he not right? That is precisely what it was. People paid in good money and all they got was a lot of old, useless rope. It was a very ropy deal indeed and the Deputy is to be congratulated on his foresight in pointing that out.

My colleagues, Senators Ross and Manning, referred to one of the most significant abuses of the saga. One of them used the phrase "rub salt in the wounds" to refer to the extraction of very large sums of money by the directors from the company in direct receipts and bonuses. I do not understand the financial world and I do not understand how people can get rewarded for making a bags of things, but it seems to happen. It does not just happen here. One need only look at Marconi, which has gone down the tubes dramatically. Jobs have been lost there, yet the head of the company walked off with a million or two as well as a golden handshake to get rid of him. I simply do not understand it. Employees lose their jobs, investors lose their money, yet the people at the top of the pile keep creaming it off. There is something morally unappealing about that.

I address the following to the House generally, not to one particular side – Senator Manning referred briefly to it. Persons were compelled to sell their shares to Valentia once their value got up to 80%. I do not see why that should be the case. I have only just started getting into this area as I have just inherited a small portfolio of shares. I never had them before. I went to see the stockbroker and we discussed the whole question. With my usual luck, having had to wait 18 months for the portfolio to be wormed out of the probate, my shares arrived just at the moment when the stock market had gone through the floor. I was comforted by the broker who told me that is how the stock market goes, but it will come back. At a time like this it is all a question of holding on. That is the advice of a professional stockbroker. However, in this case the small investors were not permitted to stay in the game to see if they could recoup their losses. They were compelled to sell to Valentia, thereby creating a monopoly, and that is wrong. It is unfair.

I do not see why somebody should not be allowed to hold on and I wonder if what happened is constitutional. There are very significant protections for property under the Constitution. They are so significant that they have been used to bolster the rights of certain people in very unfair circumstances. A holding of shares constitutes property, therefore, what happened should not be legal. It may be that some amendment to the legislation is necessary and I call on the Government to look into that to see if something can be done to ensure that the merchant princes, financial tsars and overlords in the financial world cannot abuse their positions in these circumstances as they habitually do.

Mention was made of restitution. That is absurd because you cannot provide restitution to those who lose money as a result of bad judgment. You cannot provide it to an individual, though seemingly you can to a bank. There have been several instances in recent history of banks making disastrous financial moves and the taxpayer has had to rescue them. However, it is not the kind of thing any Government should get into. Advice and warnings were given. Health warnings are put on packets of cigarettes and people like me still go out and buy them. They just hope they will not get cancer. There is no doubt that a legally adequate warning was attached to these shares. The Minister put it on the record and the words "You should carefully consider the risks described below" appeared on the prospectus. A list of all the things that could go wrong followed. People did not really believe them and perhaps there was a certain amount of hype, but you are hardly going to begin an attempt to float a company by saying, "I really would not touch these shares with a barge pole, because I think they are absolutely rotten; we all know that the management is incompetent and there is going to be a decline in all technology stocks."

Nobody will do that, but there is a legal and a moral requirement to give a warning, and it was there in black and white. Those who have ears, let them hear; those who have eyes, let them read. People read it and they heard it, but they did not take it in. I feel a great deal of sympathy with those who lost money in this investment. It is sad, particularly for those who invested parts of pensions and money they could ill afford, money they were holding for their future. It is sad, but it is a tough old world. The one thing we can do is look at the law to see if it can be amended to ensure that in future the small investor is not bullied and penalised by large corporations and forced to sell shares against his or her will. Surely, this is the most undemocratic thing that can be done, yet it comes from sources that are always talking about the free market and the liberalisation of the global economy. That is all very well unless you are a small investor. If you are, alas, you are vulnerable and in trouble.

I welcome the Minister of State, Deputy Jacob, to the House. It is time he told the Minister, Deputy O'Rourke, that he is not available for these rather testy debates in the Seanad. She seems to be repeatedly missing when there are awkward issues to be dealt with. I compliment the Minister of State on attending but it is time for the Minister to attend and take some flak from the House.

I thought there would be a speaker from the Government side, either another Fianna Fáil Member or a Progressive Democrats Member.

Who are the Progressive Democrats?

Where are they? I do not know. Two Opposition Members have spoken consecutively. I compliment Senator Walsh on rallying valiantly—

I am not an Opposition Member. I am an Independent Member.

The Senator is on the Opposition benches.

I am not. I am on the backbenches.

He is not on the Government benches. He should recognise his status in the Chamber. He is on the Opposition benches.

No, I am not.

I compliment Senator Walsh on rallying valiantly to the cause.

The case has been made by Senator Ross and Members from the Government side that this was a straightforward case of investing in the stock market. It was anything but. It was the first time a State-owned company was floated and the public got an opportunity to invest. People who never spoke about shares and had never had shares in any other company began for the first time to speak about them. Why did they do so? Why was there such curiosity and interest? This was because the company was State owned and there was almost a State guarantee.

In addition, the Government engaged in a major promotional and public relations exercise. There were advertisements on television and in the national media. This major promotion was repeated consistently and people were exhorted, coaxed and cajoled to invest because it was a sound and good investment. That is the reality. More than £78 million was spent by the Minister on PR companies and advisers to get innocent people to invest.

That should be compared with a normal company floated on the stock market. What other listed company would engage in such major promotion to get people to invest in it? That does not happen; it is not normal practice. The normal rules of engagement did not apply when it came to investing in Eircom. That is why it is different. People were exhorted and coaxed to invest and they did so. Unfortunately, a large number lost heavily.

I understand the case put forward by Senator Walsh that it would be wise to offset losses against income tax. Unfortunately, many of these investors do not have a taxable income. Many of them are retired people, pensioners or people with young families who hoped to gain a little money to put aside to educate their children. Many people invested hoping to make a few pounds to extend their houses or invest in their small farms. The result for many of them was that they were seriously let down and suffered a serious loss which is a major hardship for a number of them. I know this and Senator Walsh and the Minister know and recognise it. There would be many more Fianna Fáil and Progressive Democrats Members on the Government benches if this had been a success. The fact that so few of them are present is evidence that it was a downright disaster.

Some 20% of people still hold out who do not want to sell to Valentia. They have no choice but to sell at the going rate and lose a great deal of money in the process. These people should have a right to choose whether to sell their shares at this stage but they have no choice. They are being forced to sell at a certain price and suffer major losses. As was said previously, they may wish to hold out for a future opportunity where they could make a profit, but they are not even left that choice. That is unacceptable and is an issue which should and must be addressed in a democracy because it does not equate with fair play and practice. Will the Minister examine that?

We witnessed the various annual general meetings of Eircom where small shareholders turned up and created a considerable degree of noise. We also witnessed the board of the company and its senior executives being very smooth and being well able to manage the crowd. Only a few people had major investments and they made the decisions. The majority of shareholders did not receive a hearing. At the same time, the board and the senior executives have been paid massive salaries for mismanaging the company. All the board members and the people at the top did extraordinarily well at a time when investors were losing dramatically.

Hear, hear.

That is constitutionally unacceptable where a State company is concerned. A publicly quoted company on the stock market is different from a State company. For the State and the Government to preside over this scenario is unacceptable. How can the Minister justify giving Mr. Kane a large salary and a handsome pay-off to vacate his position? How could the Government have allowed the board to be so handsomely compensated on the one hand, while at the same time allowing the ordinary, plain people to suffer what was to them a dramatic loss? The proportions might be small, relatively speaking, but the reality is that it has created huge hardship. There is a fundamental issue of natural justice which the Government needs to address for future flotations.

The Minister, Deputy O'Rourke, is very adept at flitting between the crises which arise in her Department. While we love to see the Minister of State, Deputy Jacob, present, it is time the Minister came to the House and became accountable to it. I hope we will not see the Minister of State tomorrow when I hope to raise a matter on the Adjournment. I hope the Minister, Deputy O'Rourke, deals with it and that I do not see the Minister of State's nice face. It is unacceptable that she should consistently avoid coming to the House when matters become a little tetchy.

It was interesting to hear Senator Ross's contribution. He may have forgotten, but if he checks the various contributions he wrote as financial editor in the business section of the Sunday Independent, he will see that he can be thrown in with the other outfits which actively, consistently and strongly encouraged investment.

Including Deputy Yates.

He spoke this evening in such a haughty way as if to say that he could not understand the tenor and tone of the Fine Gael motion. He is one of the people at whom the finger can be pointed for actively encouraging ordinary people to invest. I hope he will draw a comparison between normal stock market flotations and this one. This was unique. It stood apart in every aspect from anything else. People who did not normally involve themselves in any type of investment or stocks suddenly became interested.

I am sure all of us as public representatives had people approach us asking what we thought. I advised them to forget about it or to be very careful. The reality is that people who did not have a clue invested on the word of the Minister and the almost certain guarantee of the Department and the State. It was seen as an absolutely guaranteed asset. Unfortunately, the bottom has fallen out of that. These people deserve to have their case stated and to have a hearing. The Government has a responsibility to address the fundamental issues of natural justice which have been contravened in this case.

I welcome the Minister to the House and feel sorry for him that he must listen to this debate when the Minister for Public Enterprise, Deputy O'Rourke, should do it. We have been given the reason she is not present, which is that she is at a very important meeting. The Minister must have many important meetings to attend because she has not faced up to this matter. She will shortly have to face up to it, however, because the people will be waiting in the long grass for the Government following this flotation debacle. Senator Norris said it could not be called a flotation because the whole thing sank, and we all agree with that.

I feel sorry for private individuals who have lost a fortune in this affair. They were misled by the Government and the banks. They were invited in by bank managers who assured them that this flotation was the best thing since the sliced pan and that they could not lose on it. The majority borrowed a fortune on the strength of those assurances and now they have to repay the loans. In a couple of weeks' time when they have sold their shares they will receive a note informing them of how much they owe the bank manager. That is the reality.

Senator Caffrey is right to propose that some form of restitution should be made through tax relief or some other method. Those people were led up the garden path and they have lost a fortune. I have no sympathy for the institutions who invested in Telecom shares, but I have great sympathy for private individuals who invested their life savings and others who borrowed on the strength of making a few pounds. They now find that the whole lot has gone down the Swanee.

Senator Cregan said that this House allowed an extra 5% of the shares to be made available to Telecom workers at the time of the flotation. Company employees got 15% of the shares which they were able to sell in a block, thus making it easier for Valentia to take control of the company. It was a disaster for private individuals and small investors who lost their savings.

The Minister, Deputy O'Rourke, has much to answer for. She has responsibility for Aer Lingus, Luas, the ESB and all the public utilities, none of which is working out. They are all in a disastrous position at present. We should have a debate on the sale of State assets. This was the first flotation of a semi-State company and it looks like being the last. If the rest of them are privatised on the same basis as Telecom, it will be a total disaster. If one asks them, ordinary people say that the Minister, Deputy O'Rourke, has been a disaster regarding this matter. The truth is that she is afraid to come into this House and is even afraid to answer for her deeds in the Lower House.

Earlier, in his speech, the Minister of State said:

The price range, which was set prior to the flotation, was agreed by both Government and the company. The final price of £3.07 was within this price range and just above the mid-point of the range. Let us be quite clear about this. The prospectus is in its totality the responsibility of the board. The prospectus contained a price range and that price range was approved by the board.

The Minister of State is right to say that the board is responsible for the prospectus but the Government should also accept the blame. As previous speakers pointed out, the company's board members made a fortune from bonuses but, as Senator Ross said, very few of them bought shares in the company. None of them showed confidence in the company. One would think that people earning large sums of money from Telecom would have shown some confidence in the company by investing in it, but they did not. The Government and the board members got it completely wrong and the ordinary person who borrowed heavily to buy Telcom shares must now pay the piper. Some of them put up their houses and other property to purchase shares. In some cases, those houses will have to be sold to pay debts arising from the bad judgment of the Government and the banks.

Banks are partly to blame for what happened because money was made too freely available to people to buy those shares. The banks, Merrill Lynch and the Government were in collusion in advertising the shares. I agree with Senator Caffrey's call for some form of restitution for those who lost heavily on the Telecom shares deal. The public will be waiting in the long grass for the Government when it goes to the country in the coming months. There is no doubt about that.

I admire the Minister of State, Deputy Jacob, for his guts and commitment in being here tonight, unlike the senior Minister who has once again funked the issue. I am delighted, however, to see her two trusty lieutenants, Senator Walsh and Senator Liam Fitzgerald. The latter is normally here when the Minister, Deputy O'Rourke, attends the House. I am disappointed the Leader of the House is not here because he hopes to enter the Dáil on the Minister's coat-tails. Given his close relationship with the Minister in the Westmeath constituency, I would have thought he would be here.

It is not usual to refer to Members in their absence.

I hope that before the night is out, Senator Cassidy will attend the House to support the Minister who is unfortunately absent. We are not sure what type of meeting she is attending. Recently, however, she was prominent during a promotion for the shortest-running Luas in history, outside the front gates of Leinster House. The Minister is rarely shy of photocall opportunities but she has allowed the Minister of State to attend the House on her behalf. Perhaps she is sheltering in one of the Minister of State's bunkers. It is not proper, particularly given the fanfare of the promotion, that she has neither the honesty nor respect for the House to attend it.

I believe the Minister, Deputy O'Rourke, made formal contact with the Cathaoirleach to explain her unavoidable absence from the House tonight.

I am unaware of that.

The Cathaoirleach announced that earlier. I beg the Senator's pardon but I just wanted to make that point.

Acting Chairman

Senator Cosgrave, without interruption.

I am not aware of that.

Acting Chairman

I am not aware of it either. The Senator may continue.

The record will show that.

Acting Chairman

Senator Cosgrave, without interruption.

Given the history of what has occurred, this issue warrants close scrutiny. It has involved financial hardship for many thousands who, it is fair to say, were misled by the Government's statements, promises, exhortations and projections in regard to what was going to happen. I appeal to the Minister, on behalf of the many, particularly pensioners who probably invested some of their hard earned savings on the basis of getting an extra return over and above interest rates, that they be looked at favourably in regard to whatever relief can be granted. That is all we are asking. We are not appealing on behalf of institutional investors.

I would be happy to support amendment No. 1 in the names of Senators Ross and Norris who referred to the many officials who claimed large bonuses, extra remuneration and who possibly sold off at the right time. I suggest that some of the people concerned and some aspects of this debacle be looked at because there is no doubt many have lost a large amount. Some invested their savings, others invested lump sums while others borrowed. It is a valid criticism that no more than borrowing money to gamble on the Stock Exchange or any form of sport, it is not advised. For our part, I hope some restitution can be made, in particular, to the small shareholder. In supporting the motion I ask the Minister when matters are being looked at that some compassion be shown to these shareholders.

I want to be associated with previous speakers. I express strong views in regard to the sale of Telecom. While there is a Government amendment to the motion, few have spoken on it. Are they embarrassed or is there a question of whether it is wrong? It states:

Seanad Éireann notes that all legal requirements associated with the flotation of Telecom Éireann stock were met in full by the Government and its advisers in the offer and that the price of the shares represented the market value of the company at the time, was within the range recommended by the Government's advisers and, most importantly, represented fair value for the taxpayer in the transaction.

In theory, that is a fine reply and a good amendment. However, what we are talking about is realism, money spent by every second household in the country. We allowed this to happen, yet we do not apologise for it.

This is the first time any of our semi-State companies was sold off and it will certainly be the last. Irrespective of what will happen, nobody except those who know they will benefit, such as management and middle management in the particular companies concerned, will make for many of our companies. I always believed we should not have sold Telecom. We pushed very hard here to ensure the workers of Telecom would get a fair share for the contribution they made to the company. The Government of the day – Govern ments from all sides were involved – proposed a 9.9% shareholding for the individual employees.

I am of the strong view that employees should get a proper share of a company if they are seen to have improved it. An example in the private sector would be a Cork company, Musgraves, which was the first to suggest the idea of an employee shareholding for its employees. It is an excellent idea. I never thought I would see the day when employees, as a share group, could sell off a company to eliminate other employees. That is not the idea behind a shareholding. The idea is that an individual employee could use it for his or her benefit for future days. One cannot do this in the private sector and it should not have been allowed in the public sector.

We had a situation where the employees as a group who held 14.9% shares were allowed to dictate. That should never have been allowed to happen. That was not what was intended when Senators tried to ensure employees would get a shareholding. If that was the position, 51% of a group of employees could tell the other 49% they want to sell. That is exactly what happened with Sir Anthony. The Valentia Group was buying because it had control of the employees. The Government should not have allowed this to happen. No Government should have allowed it to happen, yet the Government amendment states that everything is above board and correct. Everthing is not above board and correct. It is not above board and correct that even mothers and fathers of employees who worked in Telecom lost money and that those, to whom we, as legislators, gave a shareholding were responsible for selling it off to those who would make massive amounts of money. How can the Minister say that with an amendment like this and yet make no apology to the people?

I understand what stocks and shares are about, one can have losses and gains. We never thought it would move to such an extent. It was probably set up in that way by management in Telecom. It could easily have been done in that way in order that the people concerned would make more money. Management was paid and we are not even given an apology. Management is getting and has got massive increases, even when the stocks were dropping. No apology was made by the Government or for that matter by this or the other House. An apology should be made. We should apologise and say we got it wrong. We should not be afraid to say so.

As a transport union member, I readily admit I am one of those who got it wrong when I said we should give shares to individuals. Little did I think the shares would be given to a group of employees. Some 14.9% of the total structure of the company was able to set up and nobody could get inside Sir Anthony, because it was done on the first day with the help of the Government. The Government should not have tabled an amendment. We should be broadminded enough to stand up and say we got it wrong. Not alone did we get it wrong, once we said shares could be sold by the employees as a group it meant 51% of the employees in the company could sell off shares to the Valentia Group to eliminate more workers. That is not the idea in giving shares. The idea is to ensure the company is improved and enhanced and that everybody gains accordingly. That is what happens in the private sector. In Musgraves, for example, the shares started 22 or 23 years ago and every year there is an enhancement. One can imagine how Musgraves has progressed since the shareholdings were given to workers. It is the opposite in this case. Let us ensure the same does not happen in Aer Lingus where the workers might get a share and act as a group and sell it off. That would present a problem for us.

We have no objection to employees as individuals getting shares, but they were certainly set up in such a way that Sir Anthony would do well. We blew it and there should be no amendment stating that everything is above board. Everything is not above aboard. A public apology should be made by the relevant Minister to those who were wronged. I am not saying they were bought at an excessive price. The advice was well set by the so-called great advisers, but the fact is that there were ten or 12, as other speakers have said.

It is dreadful that I, as a trades unionist, have to stand up and say in this House that the fault lies with the 14.9% of the shareholders who did not sell their shares or give anybody else an option. No group, other than the Valentia Group, got an option on the sale of Eircom. No other group who tried hard to offer a price, irrespective of whether it was Denis O'Brien's group or any other group, got an option on the sale. I do not know who they were nor do I want to, but it should have been an open market and under no circumstances should any group have control over the workforce. That is exactly what they had. It is a shame.

Due to unforeseen circumstances, I apologise for not being able to be here for the entire debate, as I would have liked to have heard all the contributions. I forgot to welcome the Minister of State earlier and to sympathise with him for having to sit through this debate, given he was not one of those initially responsible for what has turned out to be a disaster for many shareholders.

The central point I tried to make in my contribution seems to have been overlooked or ignored. The Minister of State said:

The balance sheet of the company at the time of the flotation was very strong. The price set by the Government for Eircom at the flotation date was set on the basis of what the market was prepared to pay and based on the advice of expert advisers.

The central tenet of my argument is that the Government created an artificial market with the use of £74 million worth of public money to entice people to buy shares. There was no question of whether the shares were priced at the correct level. If the Government had not embarked on that PR exercise and media hype that allowed a false image to be created, the public would have looked more realistically at what was before them. They would view the prospectus, as they would any other prospectus published in the national newspapers, on the basis of what they see in front of them, but they relied on the Government's assessment of this flotation. Its official assessment was that this was a share to buy. That is the central point of my argument. It is not that the share price was set too low or too high, but given the state of the market at the time it was probably set too high.

In relation to the privatisation philosophy, this flotation was probably the death knell of privatisation. I am glad the Government did not sell Aer Lingus because if it did, Oscar Wilde's famous saying, "To lose one parent . . . may be regarded as a misfortune; to lose both looks like carelessness," would be very apt. That is what would have happened in that situation. I am glad people were not cajoled into buying shares in Aer Lingus. Luckily or unluckily things went the wrong way.

The Government owes it to the small investors to make recompense for the fact that it was on its assessment of the value of this share that they bought in the first place. If the Government had kept its hands out of this, the public would probably have left it to the banks and other institutions to underwrite the flotation. It did not do that because it thought the flotation might have collapsed. Senator Norris referred to it sinking rather than floating. That is what happened. The Government and the Minister, who is not here to take the flak for this, must accept responsibility for their involvement in this exercise.

As Senator Burke said, the public will be waiting to give their response to this when the general election is called. Let us not forget that 500,000 plus investors invested in this company. Fortunately I was not one of them. That has all to be reckoned with.

I met a lady on the stairs on the way up to this Chamber half an hour ago who showed me a cheque for €465 that she got this morning for her £1,000 investment plus a few Vodafone shares thrown in for luck. That is the reality. That is what small investors are facing. The Government must acknowledge its contribution in this exercise.

Amendment put.

Bohan, Eddie.Bonner, Enda.Chambers, Frank.Cox, Margaret.Cregan, JohnDardis, John.Farrell, Willie.Fitzgerald, Liam.Fitzgerald, Tom.Fitzpatrick, Dermot.Gibbons, Jim.Glennon, Jim.Glynn, Camillus.Kett, Tony.

Kiely, Daniel.Kiely, Rory.Leonard, Ann.Lydon, Don.Moylan, Pat.Norris, David.O'Brien, Francis.Ó Fearghail, Seán.Ó Murchú, Labhrás.Ormonde, Ann.Quill, Máirín.Ross, Shane.Walsh, Jim.

Níl

Burke, Paddy.Caffrey, Ernie.Coghlan, Paul.Connor, John.Cosgrave, Liam T.Cregan, Denis (Dino).Doyle, Joe.

Henry, Mary.Keogh, Helen.McDonagh, Jarlath.Manning, Maurice.O'Dowd, Fergus.Ridge, Thérèse.Taylor-Quinn, Madeleine.

Tellers: Tá, Senators T. Fitzgerald and Gibbons; Níl, Senators Burke and Caffrey.
Amendment declared carried.
Amendment No. 1 not moved.
Question, "That the motion, as amended, be agreed to," put and declared carried.

When is it proposed to to sit again?

Tomorrow at 10.30 a.m.

The Seanad adjourned at 8.05 p.m. until 10.30 a.m. on Thursday, 29 November 2001.

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