March 30, 2010

Galway Tent Honest Accident

IN the midst of the chaotic furore over Bertie Ahern's financial affairs during the last general election, a senior Fianna Fail spindoctor privately conceded the most cringe-inducing headline was: "Bertiegate: Haughey tax man helped Ahern."

The Irish Independent simply reported that Ahern had turned to Charlie Haughey's former tax adviser to help prepare his financial records for the Mahon Tribunal.
Nothing wrong with that and the accountant concerned, Des Peelo, is widely respected in financial circles.

But the association in public minds between Ahern and Haughey and their 'unique' personal finances was what concerned the handler.
Ahern brazened it out and fought through the general election, although the tribunal probe into his finances ultimately caused his downfall.

His successor, Taoiseach Brian Cowen, is proving to be far less resilient than the Teflon Taoiseach in terms of evading the punches.
Cowen has resembled a heavyweight stuck on the ropes, taking blow after blow.

Aside from his own party's backbenchers sniping at his leadership, Cowen is also taking flak over his role in sanctioning the Dublin Docklands Development Authority's borrowing for its part in the purchase of the Irish Glass Bottle Site.

As Minister for Finance back in 2006, his approval was required for the State agency to borrow money, as prescribed under legislation.
The Taoiseach is robustly defending his handling of the DDDA request.

He insisted he acted on the recommendation of two Government departments when he was Finance Minister and he did not extend borrowing limits.

"The issue was the limit of €100m set back in 1998; the issue that came before the Department of Finance was that they be allowed borrow up to their existing limits. I didn't extend any limits. And the decision was in line with recommendations from both departments -- the Department of the Environment and the Department of Finance.

"It was an order to authorise them to continue to borrow up to existing limits. I didn't extend any new limits.
"I had no other involvement other than that, where the consent of the Minister for Finance is required for that to happen," he said last weekend.
Simple as that.

Except the timing makes it a tad more awkward for Cowen.

Today, the Financial Regulator will determine what level of capital the banks will need and NAMA will confirm the write-down on the first tranche of loans to be transferred to it.

Finance Minister Brian Lenihan will announce the banking strategy, setting out what the Government believes needs to be done to get the banking system steady again.

Also this week, Anglo Irish Bank is expected to announce losses of €14bn -- the largest ever for an Irish company. Anglo plays a central role in the Irish Glass Bottle site affair as its directors, Sean FitzPatrick and Lar Bradshaw, were on the board of the DDDA and the bank provided the loans for the purchase.

At the same time as another Government bailout of the banking sector, NAMA transferring properties and Anglo announces its losses, Cowen's fingerprints are being attached to the biggest white elephant property deal of the Celtic Tiger -- a €400m site, which is now worth a small fraction of this price.
The complicity of a State agency, supposedly under the supervision of two Government departments, merely makes matters worse.

Cowen says only his consent was required for the borrowing and he simply approved the loan on foot of the recommendation of his officials.

The lack of questions being asked about the deal at the time by Cowen and the Department of Finance shows how they bought into the ideology of the time.

When land was being sold for €50m an acre, the IGB site sale was part of a trend.
However, the price paid assumed a continued demand for multi-storey blocks of apartment being sold at ever increasing prices.
Stuck in the mindset of a never-ending property bubble in late 2006, nobody shouted stop and Cowen was as guilty as anybody.

The DDDA didn't even fall under his remit as its activities are supervised by the Department of Finance.
But as Finance Minister from 2004 to 2008, he was responsible for the tax regime most believe was responsible for fuelling the boom.

Cowen's opponents are now trying -- with some degree of success -- to draw a direct link between a decision taken by the Taoiseach, the State sponsoring the excesses of the property bubble and the worst offending bank of the financial collapse.

Fine Gael doesn't have any magic bullet which shows Cowen was directly responsible for the site purchase.
It doesn't need one.

"You've got Anglo, Sean FitzPatrick, bad planning and the Taoiseach all in one sentence -- that is quite legitimate," a party source said yesterday.

Paints quite the picture and this week when Cowen is putting a further tranche of taxpayers' money into a dead bank, Fine Gael can just keep on repeating it.

It's like shooting fish in a barrel.
Fairness doesn't come into the equation.
All the party has to do is put the perception in the public mind.
Cowen's own personal toxic debt will continue to cost him for some time to come.
- Fionnan Sheahan

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