I’ve been leafing through the company accounts of several interesting Anglo subsidiaries. The numbers would make you ill.

Anglo Irish Asset Finance PLC stands out (AIAF for short). The company directors have changed somewhat, but for most of the relevant period the directors were:

Brian Linehan (Not the Minister for Finance)
Gordon Parker (FG Parker)
J Brydie (Jim/James Brydie)
TP Walsh (Thomas Walsh)

AIAF, under cashflows, in the 12 months to September 30, 2008, had losses before tax of £116,805,450.That was before the bank guarantee.

In the 15 month period between September 30, 2008 and December 31, 2009, the company had losses before tax of £1,197,670,982, or almost £1.2 billion. (In an interim management report in March 2009, the company reported a loss of £972m, including £613m on a Yen deal that went badly wrong). The majority of the £1.2bn loss was from UK investments, £88m was from Mainland Europe. The company had £5.34bn in liabilities up to the end of 2009. Interest and similar income fell from £399m in the 2008 period, to £290m in the 2009 period. Trading losses would make your brain melt. In the 2008 fiscal year it lost £99m in “trading losses”, in the 2009 fiscal year it lost £613m. Provisions for impairment went from £124m to £974m in the 2008 to 2009 period.

Now for derivatives – and as far as I can tell, the taxpayer still holds these.

As of December 31, 2009, AIAF held £2,148,360,000 total derivative financial instruments, of which £1.74bn was interest rate swaps.

AIAF held £3.16bn in loans classified for sale to NAMA at year end 2009. Less provisions for impairment this is £2.3bn. But it was the £3.16bn that was designated on December 31.

Share capital was increased from 300,000,000 shares in 2008 to 3,300,000,000 in 2009. On November 18, 2008, 1,000,000,000 ordinary were issued at par for a consideration of £1 billion and subscnbed by CDB (U K ) Limited, the parent company, thereby increasing ordinary share capital by £1,000,000,000 to £1,220,000,000. Note 28 states:

In order to further strengthen the capital position of the Company, on 18th November 2008, the issued ordinary share capital of the Company was increased by £1,000,000,000. In addition AIBC agreed to the irrevocable write off of £200m of the intercompany loan between AIBC and the Company which has further increased the capital of the Company through the creation of a capital reserve of £200m.

Note 29 is on NAMA (in relation to AIAF’s parent in Dublin):

The transfer of assets to NAMA is a fundamental aspect of AlBC’s restructunng process. AIBC estimates that NAMA will acquire land and development loans and certain associated loans with a value of approximately £3,166m on a gross loan basis (i e before taking account of £864m of loan loss provisions) from the Company. AIBC and the Company have no control over the quantity of eligible assets that NAMA will acquire or over the valuation NAMA will place on those assets. NAMA has not confirmed to AIBC or the Company the total value of eligible assets it expects to purchase or the consideration it will pay in respect to those assets.

NAMA appear to have applied the following (Note 29):

Total assets as classified for sale, neither impaired or past due: £451m
Past due but not impaired: £176m
Impaired: £2.538bn

So let’s put it this way. NAMA have said that 80% of the loans are impaired as of December 2009. And 87% of all loans (either impaired or not) are related to just three sectors, retail (10%), residential development (37) and commercial development (40%).

Press release from the Green Party today to capitalise on the Creighton-O’Flynn-Anglo Ten donations-Fine Gael issue. Opening line;

The Green Party Leader and Environment Minister John Gormley has said that he intends to change the way politics is funded…

A quick look back into The Irish Times archive for their coverage of the announcement of John Gormley’s selection as environment minister. July 7 2007;

The newly elected leader of the Green Party, Minister for the Environment John Gormley, said yesterday he wants changes in the ways political parties are funded.

That was 1,103 days ago. Or 157 weeks. 26,472 hours. 95,299,200 seconds.

Tick-tock tick-tock.

For several weeks starting in late September Rody Molloy’s pension led news reports. I wish to return to it as I’ve some new questions to raise following weeks of fairly frustrating research.

This is a lengthy post. The next series of paragraphs are all context to the whole Rody Molloy pension issue. You may find being reminded of the details useful, if so, read on. If not scroll down and click ‘Continued’ and it’ll bring right into the main subject…

Readers may remember Mr Molloy finished in his role at Fás in strange circumstances following a prolonged period where various questions regarding his excessive expenses, his handling of internal procedures and his general management abilities, were raised.

For a period in September 2009 there was confusion about whether he resigned or had been removed from his position. This would later become important as it would have effected his pension entitlements.

On September 24 the Public Accounts Committee was told he had received a generous pension enhancement valued at more than €1m. Peter McCloone and Sean Gorman spoke of how they brokered deal on behalf of Fás with Mr Molloy, part of which involved him agreeing to resign. Questions were immediately asked about how the deal was negotiated. “There was no question of pals or anything like that”, Gorman told the PAC. They admitted no legal advice had been taken.

As the media pounded on the stunning admission that no legal advice had been sought, ministers desperately attempted to pass the buck. It became clear that both the minister for enterprise, then Mary Coughlan, and minister for finance, Brian Lenihan would have been required to sign-off on the deal. The Green Party quickly distanced themselves from the story, obviously uncomfortable with the deal and how it came about. Mary Coughlan ordered a review into the circumstances surrounding the deal.

Two days after the PAC meeting An Taoiseach Brian Cowen was pushed on the issue. He admitted that Mr Molloy did not threaten legal action during discussions. He said Mr Molloy acted “honourably” by resigning and claimed the enhanced pension fell within departmental guidelines. Prior to this ,in an attempt to excuse the the cost of the deal, ministers had insinuated that Mr Molloy would have initiated a lengthy legal action which would have cost the taxpayer far more than the €1m golden handshake. Nobody (me included) bar one letter writer, seemed to notice that even if this had been the case Fas could seemingly have used the Employment Appeals Tribunal or Rights Commissioner, both of which are inexpensive as they require no legal teams. Even if Mr Molloy had won his case there the maximum award would have been two years salary – about €440,000 – much less than the million euro deal signed-off by Government.

We were the first to question whether Mr Molloy’s pension did in fact fall within the guidelines cited by An Taoiseach when we published them in full on this website. It wasn’t until two weeks later that the print media returned to this element. Several more reports in various media outlets continued to state unchallenged that the deal was within departmental guidelines. Some two weeks later Shane Phelan of The Irish Independent destroyed that myth with a frontpage story about how even senior civil servants in the department didn’t believe the enhanced pension fell within the guidelines. The enhancements should only have been available as part of a contract termination by the Government but Mr Molloy had resigned, as we’d noted earlier on this website.

The new revelations, contained in emails and correspondence seen by the Irish Independent, will come as a major embarrassment to Taoiseach Brian Cowen.

He insisted just weeks ago that all proper guidelines had been followed.

[...] The memos show at least three different Department of Finance officials warned prior to the deal being approved that it fell outside of what was allowed in the guidelines.

In comments made on September 25, he also said formal cabinet approval was not needed for the deal, even though it is now known there was clear advice from within the department that the matter should be referred to the Government.

When asked about the issue three days after the Taoiseach’s comments, Tanaiste Mary Coughlan made no reference to the department guidelines and instead said the legal basis for the deal was covered by the Labour Services Act.

However, none of the extensive departmental correspondence seen by the Irish Independent refers to this act. In fact, notes from negotiations show that those involved were only concerned about two main issues — the terms of Mr Molloy’s contract and what was allowable under the department guidelines.

Guidelines are essentially plain-English versions of legislation.

As part of the review initiated by Mary Coughlan legal advice was sought from the attorney general and thereafter no alteration was made to the pension deal.

Continued…

The Irish Times leader is on ethics and standards in public life today. Good piece. Ending paragraph;

It is not just Fianna Fáil that has behaved badly over ethical legislation and transparency. Because political donations below a certain limit do not have to be disclosed to the standards commission, many donations were set below the limit.. The commission also suspects that large donations may be split up into small amounts to avoid disclosure. Last year, when local, European and byelections were held, not a single donation was publicly recorded by Fianna Fáil, Fine Gael or the Labour Party. This is a disgrace. Ethical standards and political funding mechanisms require fundamental reform.

Interesting bit in bold there.

Parties use various methods to effectively bypass the donations system. We’ve written about this pretty extensively in the past. Two pieces maybe worth re-reading if you’re interested in the topic. This one on a prior Times leader on funding reform which I disagreed with…

One oddity of the current system for donations to individuals is related to declaration thresholds. Despite being obliged to open an account once they receive a donation exceeding €126.97, politicians don’t have to declare full details of any donations less than €643.97 to the Standards in Public Office Commission. This means the bank account, for the purposes of transparency, is effectively useless unless a donation exceeding €643.97 is made. Reducing the declaration threshold from €643.97 to €126.97 while ensuring all transactions below the lower figure are on record anonymously would be beneficial to the transparency of the funding process. This would mean the public could inspect the credit and debit side of the donations account upon declaration and see if there were excessive amounts of donations made for more than, say, €100. If this was the case and SIPO suspected several of these may have come from one individual, SIPO should have the right to inspect the account in detail.

Of course a significant increase in the level penalties imposed against those who breach the above would also be warranted also. That almost goes without saying.

And one of the first posts on this site from way-back-when, when I tended to adopt a more cynical radical tone; Want to bypass our donations system? No problem.

The dreamer in me has been telling for while not the write this post. “Don’t tell the good politicians how the bold ones work the system”, it screamed. The other 99% of me said, “fuck it, they all know about this anyway, it’s whether they chose to work it or not is the question”. So here, dear reader, I tell you how I understand our public representatives can work the donations system…

Pretty much a how-to, that one, but perhaps insightful.

The Standards in Public Office Commission’s 8th annual report is out today. More hugely important, considered and implementable recommendations which will almost certainly be ignored, again.

I’m averse to publishing press releases in full but in this case I think there’s merit in seeing it straight from the horses mouth… Continued…