First published in the Irish Mail on Sunday on 08/03/2009
By: Michael O’Farrell, Niamh Walsh
MINISTER Noel Dempsey changed the law to allow building society bosses to keep many of their directors’ loans secret, the Irish Mail on Sunday can reveal.
The amendment – which was tacked on to the bottom of a completely unrelated piece of legislation and never publicised – allowed executives such as Irish Nationwide chief Michael Fingleton to keep many loans out of the public view for years.
Shortly after the law change, Mr Fingleton gave mortgages to his wife and son that did not have to be publicly disclosed.
Mr Dempsey’s intervention – made in his final days as environment minister before the 2002 general election – flatly contradicts his barnstorming ard fheis speech last week in which he aggressively denied his party had approved of loans to directors.
The minister, who accused bankers of doing more damage to Ireland than Cromwell, said his party had never known that directors were giving themselves massive loans.
‘I don’t know about you, but I’ve had it up to here with cheap-shot assumptions about members of this party,’ he said. ‘I categorically refute the unsupported rumours that Fianna Fáil approved of bank directors giving themselves huge loans or breaking any rules.
‘The smear that “if we had known, we’d have approved of such practices” is precisely that. A smear. We didn’t. We wouldn’t. We never will..
‘Ireland has been swamped by a global disaster that has been greatly complicated … by economic treason.
There’s no nicer way to describe what’s come out of one of the banks. It was economic treason.
No more. No less.’ But despite such claims, the MoS can reveal that the Government went out of its way to make it easier for loans to be kept out of the public eye. Until 2002, all loans to directors of building societies and family members had to be reported and publicly listed in a file to be submitted to the Central Bank.
For reasons of transparency and accountability, the Building Society Act of 1989 specifies that the file must be made available to members of the public who wish to see it.
But after a dozen years of the original Act, Mr Dempsey moved quietly to abandon this exercise in transparency by amending the original Act to allow many loans to be kept secret.
In a paragraph tacked onto the otherwise unrelated Housing (miscellaneous) Act 2002, Mr Dempsey allowed for all loans to family members and all loans against a director’s family home to be kept secret.
The MoS was unable to find any record of the change having been publicly debated in the Dáil or in any other forum..
There was no press release issued to announce the change.
Instead, debates on the legislation were largely confined to the fact that it enabled gardaà to forcibly evict travellers from illegal halting sites.
Last night, the Government refused to say why it had made the change or whether it had been lobbied to do so.
But as a direct result, details of many loans to building society directors such as Mr Fingleton are no longer reported.
Two loans that would have had to be reported had it not been for the law change, were mortgages from Irish Nationwide to Mrs Fingleton and Michael Fingleton Jr on December 2, 2003. These mortgages are only noted in the registry of deeds and were only discovered after an exhaustive search by this paper.
The trawl of mortgage deeds also reveals that Mr Fingleton received a directors’ loan from his own building society on January 29 this year.
The loan, for an unknown amount, is in the name of Mr Fingleton and his wife, Eileen, and is registered as a ‘further charge and consolidated loan’ against the couple’s family home. There are already several Irish Nationwide loans registered against the same property.
At the time of the latest loan, the banking controversy, sparked by directors’ loans to Anglo Irish chairman Seán FitzPatrick, had reached a crescendo, threatening to destabilise the entire economy and topple several financial institutions.
Mr Fingleton’s bank helped Mr Fitz- Patrick cover up the extent of his Anglo loans by temporarily allowing them to be transferred to Irish Nationwide at the end of each financial year.
This behaviour is now one of the strands of an ongoing investigation by the Financial Regulator whose staff raided the Irish Nationwide HQ last week.
A spokesman for the Financial Regulator would not comment on individual loans last night. But it is understood that the regulator is investigating all loans to all directors of financial institutions as part of its inquiries into the financial sector.
From this week, the Regulator is introducing new requirements that will force all financial institutions to disclose far more information on directors’ loans – an effective reversal of Fianna Fáil’s law change of 2002.
Irish Nationwide’s file in the Central Bank reveals that, until the reporting laws were changed in 2002, Mr Fingleton had far more directors’ loans from his own society than any of his fellow board members.
He is recorded as having borrowed E1.5m in the 10 years between 1991 and 2001. Other smaller loans amounting to several thousand each were also afforded to family members throughout this period.
The largest loan received by Mr Fingleton – for just under E1m – was granted in 1999 and is listed as having been for a seven-year term.
Other Irish Nationwide loans to Mr Fingleton ranged from E50,000 in November 1998 to just under E140,000 in December 1992.
Both the Environment Department and the Transport Department – where Mr Dempsey is now the lead minister – declined to comment on Friday, either to say why the change had been brought in or whether Mr Dempsey had been lobbied.
