I move:
That Dáil Éireann notes the report of the investigation into the affairs of Siúicre Éireann cpt and related companies.
There are four main points I wish to make in this debate. First, events that took place in the Sugar Company as revealed in the inspectors' report are deplorable. However, even the most careful ongoing scrutiny by Ministers and Departments of the company at the time these events occurred or when the company were floated would not reveal them, such was the care that was taken to conceal them from the board, not to mention from Departments and Ministers. Even now after exhaustive investigations experts do not agree on one key matter, the ownership of Talmino.
Second, once there was evidence suggesting that there had been improper activities in the company the Government took immediate action. We instituted the High Court inspectors' report and the report of Mr. Maurice Curran, and we gave these people 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 scrupulously avoided any action or suggestion that might influence the nature of their conclusions because it was in the public interest that the full facts should be made known. The only step we took, and it was a proper one, was to seek to have the inspectors' report completed in due time consistent with a full investigation into the matters at issue and at an acceptable cost. The Minister, Deputy O'Malley, has already reviewed mechanisms with a view to minimising costs in future inspections. Finally, we have acted to avert a recurrence of this case by adopting guidelines for relations between Ministers and State bodies for the conduct of such bodies.
The Government were quick to respond 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 informed 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 Irish Sugar Limited for £9.53 million, prior to the flotation of Greencore plc. These allegations were put to Mr. Comerford by an officer in my Department and he denied them. An article containing those allegations appeared in the Sunday Independent of 1 September 1991. It was further alleged in this article that Mr. Comerford had received payments of £40,000 in consultancy fees from Gladebrook, these moneys being paid to another Jersey registered company, Delante, ostensibly owned by Mr. Comerford also.
A meeting of the board of Greencore was called for Tuesday, 3 September at which 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 December, to authorise the Minister for Finance and the Minster for Agriculture and Food, to seek a full report on all aspects of the matter from the board of Greencore, and, on September 9 this report was furnished to those Ministers by the board, and presented to Government next day.
In the letter covering the board's report, the chairman stated that the board had endeavoured to address all the points raised, on the basis of information available to them at that time. However, in order to make sure that the fullest information possible was available, the board had appointed Arthur Andersen to carry out a full review of the Sugar Distributors/Gladebrook transactions. As I said the report was presented to Government on Tuesday, 10 September 1991. 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.
The Government decided that (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 Sugar Distributors Holdings Limited, Gladebrook and other recent acquisitions of Irish Sugar plc. 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.
The Government further decided (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;
The Government decided (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.
The Government further decided (e) that 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.
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. On the same day, 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. As a result of affidavits sworn in the High Court by officers of the Departments of Industry and Commerce and Finance, Mr. Ciaran Foley, SC and Mr. Aidan Barry, accountant, were appointed, 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 their members, and that these members had not been given all the information relating to their 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 — 18 September — seeking to extend the investigation to 34 other companies because they considered them 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 EGM of Greencore, as requested by the Minister for Finance, 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 concentrated on the relationships between Siúicre Éireann cpt and Sugar Distributors (Holdings) Ltd. (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 Siúicre Éireann. The chairman's report concentrated more on the role of Mr. Comerford, the former Chief Executive of Siúicre Éireann and Greencore, in these events and his eventual resignation and severance package. Both reports were careful to state: first, that matters referred to in them were sub judice; secondly, that they were unable to take evidence under oath, and that they were therefore dependent on examination and discussion for the evidence; thirdly, that the eventual reports of court and other inspectors might have a crucial bearing on their own reports; and, finally, that 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 Siúicre Éireann for not examining other options available. The Andersen report also concluded that a fair price was paid eventually by Siúicre Éireann 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 Siúicre Éireann for Gladebrook, which compares favourably with quoted food stocks at the time, at about 10.2. The board, nevertheless, being conscious of the possibility of Mr. Comerford's involvement on both sides of the deal, decided, pending the reports of the High 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. 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 or not his termination agreement would be honoured. In the event, 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 it had instituted legal proceedings against Mr. Comerford, Mr. Tully, Mr. Keleghan, Mr. Lyons and Mr. 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 Siúicre Éireann 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 has to be said that they acted correctly and decisively once the possible conflict of interest become known to them.
The inspectors' appointed under section 8 of the Companies Act, 1990, returned to the High Court on Monday, 11 November with a further interim report and 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.
The publication of the final court inspectors' report entitled "Investigation into the Affairs of Siúicre Éireann CPT and Related Companies", dated 25 February 1992, has been 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 its part, referred the report to the Director of Public Prosecutions for consideration and consequent action where it is determined that there may have been breaches of criminal law. 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, which investigation 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 233 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 Sugar Company procedures on a number of occasions for being lax, 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 purchase the management buy-out by Gladebrook had they had full knowledge of all the matters involved. It does conclude that the board of Greencore should have dismissed Mr. Comerford following their meeting with him on 3 September. The report does concede 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 investigtions by the authorities to which I have already referred, the Government will not flinch from taking all necessary action.
It is acknowledged that on one very important issue the High Court inspectors' 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 Ltd., one of the shareholders in Gladebrook, in respect of which a loan note was issued 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 on the purpose for which the Jersey-registered company, Delante Limited, was used. This company was in the hands of Mr. 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 inspectors' 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 Section 8 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 Ltd., 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 but for the courts to determine which report is correct in this matter. As the Minister for Industry and Commerce pointed out in replying to private notice questions in the House on 3 March last, 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 Sugar Distributors (Holdings) Ltd. In the lead-up to the flotation of Irish Sugar, in 1989, the company's adviser — 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. In turn, SDHL owned Sugar Distributors Ltd., which controlled the distribution of sugar in Ireland. A price of £9.53 million was eventually paid by Irish Sugar for the 49 per cent of Sugar Distributors Holdings Ltd.
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 acquisition. The Arthur Andersen report concluded that the price eventually 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 view is that Irish Sugar probably paid 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, the purchase itself was a beneficial one for the company when it was floated in April 1991, in that it gave it complete ownership and control of its 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 instead of Gladebrook? The shareholders' 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 Ltd. and Punch and Co. Ltd. — decided to sell their holdings in 1988 it appears that the other minority shareholders would not allow Irish Sugar to purchase those holdings. Instead, agreement was reached whereby a management buy-out took place. In my opinion, however, the management had less rights in the matter than Siúicre Éireann who already owned all of the `B' ordinary shares and would have been the next tier in the offer round.
It must be remembered that all of the sellers of SDHL sold willingly and considered that they had got a fair price. Why, then, should two of those same sellers be given precedence over Irish Sugar as part of the management buy-out team? My belief 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 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 management buy-out? 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 to which I have just referred and the conclusion of the inspectors that a more prudent purchaser — than Siúicre Éireann — might have taken a more critical view of the figures which underpinned the asking price for Gladebrook.
A 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. However, it is clear 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 unhappiness with some of the actions of the Greencore board and, prior to that, some of the actions of the Irish Sugar Board. Those 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 expressed also 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 inspector's 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 that it was taken for granted that his actions were for the good of the company. With hindsight, the board failed to be as vigilant as it might have been. In any business relationship a degree of trust is necessary, especially trust between a board and a chief executive. Sometimes that trust is misplaced. Happily that is rare in the case of 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 is it right to conclude that nothing should be taken for granted, that there are adequate checks and balances in the system which should be availed of by those whose responsibility it is to exercise control.
In this context, the announcement I made on Wednesday of this week regarding guidelines for the Semi-state sector are pertinent. The guidelines set out procedures to be observed and followed by all State bodies. 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 their 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 interest. 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 these 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 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 the annual reports of those bodies, that Government guidelines in this regard are being complied with. The Chairman 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 would stress that the aims of the guidelines are to ensure efficient management of State bodies, and to secure effective, through 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 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 board and chairman of Greencore. This view was upheld by other shareholders when, at the recent AGM of Greencore, the chairman and board were returned by a large majority, a majority which was not dependent on the Government's shareholding.
It is also fair to say that institutional investors support 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. Despite all that has transpired the share price remains substantially above the issue price. I have every confidence that the company have potential for further growth in the future.
