Adjournment Matters

Pilot Training Colleges

I think the Minister is familiar with this matter. It concerns the pilot training college that went into liquidation. There are still many students who have huge bank loans which they cannot afford to pay. Some had to give up their training; some had to borrow again to retrain. They thought that as the Government was involved in granting the licence to the training college it should take some responsibility to establish if there is any way to work this through to the satisfaction of the students and their parents. Through no fault of their own some had to come back from America, which involved extra flights and expense. We have seen what can be done and was rightly done for those who suffered from having pyrite in their homes, through no fault of their own.

I would like the Minister to look sympathetically on this case. It was raised at the Oireachtas Joint Committee on Transport and Communications, but as I am not a member of that committee I am not aware of what happened. At the time the committee stated it would conduct a forensic examination of what happened, why, who was responsible and what could be done. I do not think, however, that the committee carried out that examination. I do not know why. The Minister may not know either, but I would like to know if the committee did proceed with that examination and publish its findings. I look forward to hearing the Minister’s response and what he can do about this matter.

I thank the Senator for raising this issue. The situation that arose with regard to the Pilot Training College, PTC, Waterford, in July 2012 was most regrettable and came about from the failure of the PTC, a privately-owned and operated flight training school, that reneged on its contractual obligations to its client students in respect of the completion of their training in Florida. I met some of the representatives of the students on 20 July 2012 and fully appreciate the frustration felt by the students involved and their families. I sympathise with their plight. Unfortunately, in the current economic climate, many businesses have failed, leaving their suppliers, etc., out of pocket, including businesses where a State body has a regulatory role.

It is important, however, that the role of the Irish Aviation Authority, IAA, with regard to the oversight of pilot training colleges is properly understood. The IAA appeared before the Oireachtas joint committee on 24 October 2012 to discuss the issue of the PTC among other topics and the committee received a very full account from the IAA of its role and the actions it had taken in so far as its statutory responsibilities were concerned. The IAA has responsibility for approving and overseeing flight training organisations in Ireland. The authority's primary functions in this regard are the oversight of the safety, quality and standard of the training being delivered, the conduct of examinations and flight tests. It considers whether the company has sufficient resources to safely provide the training required to the internationally determined standards. It has no involvement in, or responsibility for, the contractual arrangements between the PTC and its students or for overseeing the financial viability of the company. The IAA's role in the approval and oversight of flight training organisations is based on European rules. Unfortunately, the PTC is not an isolated example. There have been examples of failures of similar organisations in other countries in the past decade as well, for example, in the United Kingdom where the UK Civil Aviation Authority approves the operation of flight training organisations, a number of flying schools ceased operations with students suffering losses.

The question has been raised as to whether such companies should be bonded. This is not common practice in other jurisdictions and to introduce such a scheme in Ireland would be likely to result in schools leaving this jurisdiction to set up elsewhere where there are no bonding requirements. That is, however, still under consideration. When it appeared before the committee in October, 2012, the IAA outlined the very significant steps it had taken in an attempt to help the students involved.

When the IAA was notified on 26 June 2012 that the Florida Institute of Technology was ceasing all training activities due to non-payment for services delivered, including room and board and that the matter had been referred to the institute’s attorneys, the IAA immediately sent a representative to Florida to liaise with the students and offer assistance where possible. The IAA secured the training records of all the students and all flight and ground training carried out in California up to then was credited towards the students’ final qualifications where possible. The IAA also worked successfully with other flight training centres to explore how the students involved might complete their training elsewhere at as reasonable a cost as possible. Furthermore, with my agreement, the IAA funded the flight costs of those self-financing students in Florida who had an existing contract with the PTC and who wished to leave the United States of America. The offer was made as a gesture of goodwill and without prejudice. I understand some 65 students availed of this flight home at the time.

The IAA completed several audits of the PTC in 2011 and 2012. During these various inspections it was clear that the PTC complied with all EU and international requirements as a flight training organisation. There was no indication of any deficiencies. Those EU and international requirements state clearly that the financial evaluation carried out as part of the approval and oversight process is not intended to be a consumer protection provision. It focuses purely on safety resources requirements that staff are suitably qualified and the proper internationally determined standards of training are being delivered. The PTC’s accounts were signed off on 29 August 2011 by professional auditors and were not qualified in any way. The accountants were satisfied that the group, including the PTC, would continue as a going concern.

Regrettably, as I said to the representative group on 20 July, neither the Government nor the IAA will be able to compensate them for moneys lost and we have no liability in this regard. While we have great sympathy for the students and their families, it was not possible to isolate them from other PTC creditors, foreign or Irish, nor to offer compensation funded by taxpayers to such a group. In July 2012 the High Court appointed an examiner to handle the affairs of the PTC. The IAA worked with the examiner in assessing the options available but on 28 September 2012 the examiner advised the High Court that the final potential investor had withdrawn and the court authorised the liquidation of the PTC

The IAA revoked the approval of PTC Florida on 20 August 2012 and the approval of PTC Waterford when the company was being wound up. I understand the liquidation of the PTC is ongoing in accordance with company law. Any alleged breach of company law is a matter for the Office of the Director of Corporate Enforcement.

I thank the Minister. I suppose he means that there is nothing he can do. The matter of the liquidation of the company has been referred to the Office of the Director of Corporate Enforcement. I do not know what will happen in that regard. It has also been referred to the Garda Bureau of Fraud Investigation. If an arm of the State is licensing any educational body or a private company in particular, the Department should make careful inquiries. I do not mean to infer that this body was set up as a money-collecting machine, but it can happen where money is collected from students and then the company is liquidated after two years, leaving students stranded. There will need to be safeguards. I believe the company was taking bookings from students in the knowledge that it was not viable. I look forward to the report of the Director of Corporate Enforcement. I ask the Minister to consider my suggestion.

The difficulty in this case was the amount of money lost by the students. Many of them paid their fees up front and lost a significant amount of money. It is the case that businesses fail. For example, driving schools are licensed by the State and if they fail we do not compensate everyone who did not receive the lessons they paid for. Shops, restaurants, hotels, are all licensed by the State and people are not compensated when these go out of business, nor do they seek compensation. What is different in this case is the amount of money. Even if the IAA determined at a certain point that PTC was financially unsound, all it could have done would be to shut it down. The students would still have lost their money. The only solution in the long term is either an insurance or a bonding scheme or what is now much more the practice whereby people pay fees monthly or quarterly. Very few schools, if any, demand fees up front.

NAMA Operations

I welcome the Minister for Finance, Deputy Michael Noonan.

I thank the Minister for his attendance to discuss and debate the very serious revelations which have emerged in the past few days about the activities at NAMA. The allegations of unsavoury practices engaged in by some servants and-or agents of the agency is most worrying to the taxpayers of Ireland. Last May and June I raised issues pertaining to NAMA and employment contracts and the need for non-compete clauses to be included in them. I also raised the fact there was evidence of data protection breaches, contrary to the Act, and indeed the possibility of employees having breached section 221 of the Act which forbids lobbying by third parties. These are all very serious matters. However, this matter arose during the course of this week with complaints to An Garda Síochána, a court action and now a former employee turned whistleblower coming forward to disclose wrongdoing in the agency. I understand the matter is now with the Garda fraud squad. I look forward to learning the outcome of these investigations in the near future.

In early summer this year I warned that these communications could leave the State and the taxpayer exposed to a potential claim for damages of millions of euro in circumstances where it was quite clear to me that NAMA, its servants and-or agents had not acted in the best interest of its customers and indirectly, the taxpayer. That NAMA has been leaking confidential information is clearly placing the interests of personal gain ahead of the best interests of the taxpayer. It is clear to me that much of what appears to have been happening was facilitated by the veil of secrecy surrounding the agency's operations. The previous Fianna Fáil Government created NAMA, at a cost of billions of euro to the taxpayer, yet there is no transparency or accountability required from the agency. This is baffling in a modern democracy. We are in a legislative headlock because the legislation governing the agency, the NAMA Act, is severely limited in scope. This has helped to create these recent problems and revelations which are contrary to the public interest.

We do not know what deals are being done nor do we know the identity of those buying property from the agency. It is not right to put private sector assets into a body which could be subject to influence because of the lack of accountability. In the past I have referred in this House to an individual who left NAMA and immediately became partner of another property company in the United Kingdom, all made possible because there is no non-compete clause of significant duration existing in employee contracts. No regard is being given to the sensitive information on valuations, loan amounts and the amount NAMA would be willing to accept for properties. This is information which was known to this individual. At a time when property prices are on the rise - Dublin property prices have risen by 16% - this issue is of great concern. Today's whistleblower admitted that he has had communication with third parties, with other employees of NAMA, in respect of a customer's loans. This was and is highly prejudicial to the NAMA customer in question and will undoubtedly lead to copious legal cases being taken against the agency.

Suspect behaviour seems to be tolerated in NAMA. An Internet search showed that in August 2012 the Irish Independent reported how an existing employee had made himself a preferential creditor in dubious circumstances while working with the Irish Nationwide Building Society, a bank which is now within the remit and ownership of NAMA. He was an employee of the debtor's sister company before taking up employment with Irish Nationwide Buildidng Society. I ask if NAMA investigated Peter Malbasha at this time-----

The Senator is out of order for mentioning individuals by name under privilege in the House.

This man nearly earns the same salary as the Taoiseach, yet there is no oversight when it comes to his activities. It is in the public record in a national newspaper.

It does not matter if it is recorded in the public record.

What is happening is very worrying.

The Senator is speaking under privilege.

NAMA has a critical role to play in Ireland's economic recovery and we urgently need to restore confidence in the agency. We need to start by reviewing the draconian powers of the agency and to consider amending the NAMA Act to make it more accountable and transparent in order that what happened this week will not be repeated. We cannot allow unsavoury practices to continue and we must strive for better standards. For that reason, I request the Minister to liaise with the Minister for Justice and Equality to consider tabling amendments to the NAMA Act to allow for accountability, otherwise we will have learned nothing from recent events.

I will make an important preliminary point. This Adjournment matter refers to revelations. A number of allegations have been made which are the subject of two Garda investigations. It cannot be said yet whether there will be revelations. The NAMA board and I are taking these matters very seriously. The chairman, Mr. Frank Daly, has informed me that the NAMA board met this morning on the allegations. It indicated to the Committee of Public Accounts that it is anxious to be afforded a public opportunity to address these claims.

The Committee of Public Accounts has extended an invitation and the chairman and chief executive of NAMA will attend a meeting of the committee at 11 a.m. tomorrow morning. NAMA issued a statement earlier today welcoming the opportunity afforded to it by the Committee of Public Accounts to address allegations made against the agency in recent days, stating it considers the Committee of Public Accounts to be the most appropriate forum to address these matters.

As has been highlighted in recent days if any individual has information which suggests wrongdoing has occurred, he or she should bring such information to the immediate attention of An Garda Síochána, as legally obliged under section 19 of the Criminal Justice Act 2011. It is a matter for An Garda Síochána to investigate any wrongdoing.

I am informed that NAMA has referred two complaints about former employees of the agency to An Garda Síochána, pursuant to section 202 of the NAMA Act, which deals with unauthorised disclosure of information. Contrary to some reports, the second referral occurred in the first quarter of this year, not in recent days. Given that these matters are under active investigation by An Garda Síochána, I cannot make further comment on the specific details of these cases.

I am also informed that NAMA has not been provided with any detail relating to recent statements made in the Seanad about alleged impropriety by NAMA staff. It may be that these recent statements refer to a case that has already been referred by NAMA to An Garda Síochána but NAMA does not have enough information to confirm this.

With regard to the level of political and administrative oversight, NAMA is subject to a high level of public accountability compared with other commercial semi-State bodies. This is reflective of its function in managing a significant financial exposure on behalf of the taxpayer. The National Asset Management Agency Act 2009 makes the agency accountable in a number of ways, including by laying its annual report and audited financial statements before the Houses of the Oireachtas. The chairman and chief executive officer are accountable to the Committee of Public Accounts and other Oireachtas committees and give evidence to those committees whenever required to do so. In addition to its annual accounts, NAMA is required to submit to me an annual statement setting out its proposed objectives for the following year, the scope of activities to be undertaken, its strategies and policies, and its proposed use of resources. The agency is also required to report to me on a quarterly basis giving detailed information on its loans, financing arrangements and income and expenditure. In turn, I am obliged to lay all such reports before the Oireachtas.

I am advised that NAMA's accounts are comprehensively audited by the Comptroller and Auditor General who has a permanent team of officers based in the agency with unrestricted access to all its records and files. In addition to conducting annual financial audits of NAMA's accounts, the Comptroller and Auditor General's office has produced special reports regarding NAMA's acquisition of bank assets and management of loans. The process of loan valuation and acquisition is also being audited by the European Commission. An overarching review of NAMA is subject to a special report of the Comptroller and Auditor General which will be published early in 2014. As provided under the Act, I may also request ad hoc reports in such form as I require.

It is clear, therefore, that NAMA is subject to a very high level of accountability, both in legislation and in practice. I confirm that the oversight arrangements are continually kept under review to ensure the agency acts in the best interests of the taxpayer. I will fully consider the outcome of the Garda investigations and the views of the Committee of Public Accounts in seeking to protect the taxpayer. The outcomes of these matters, as well as the reports of the Comptroller and Auditor General, will be considered in the NAMA review my Department is undertaking next year, as required under the 2009 Act.

I thank the Minister for his response. The decision to bring NAMA representatives before the Committee of Public Accounts tomorrow is welcome. It is regrettable, however, that they did not make a full public statement earlier this week regarding the issues that have emerged.

I take the opportunity to confirm that I have given evidence of wrongdoing to An Garda Síochána. In respect of any dealings with the individual I named in the course of my submission today, I ask that NAMA be mindful of sections 43(2) and 43(3)(d) of the Act. I will give the Minister a copy of the newspaper report on this issue immediately following the debate. I welcome his undertaking to consider the outcome of the Garda investigation and the views of the Committee of Public Accounts. I remain of the view, however, that an amendment is required to the legislation to take account of these issues.

I thank the Senator for her supplementary information and will be glad to receive the newspaper cutting to which she referred. It is helpful that she has outlined her action in making reports to An Garda Síochána on the issue she raised in the House earlier this year.

The Seanad adjourned at 3.45 p.m. until 10 a.m. on Friday, 20 December 2013.