Revisiting Rody Molloy's golden handshake

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.

In recent months I’ve been attempting to find out how exactly Mr Molloy’s pension is now based in law. It hasn’t been simple.

The department claimed that the pension falls under Section 6 of the aformentioned Labour Services Act. However, on examining the legislation with the excellent help of Ms Catherine Ceitin, who was involved in breaking the original story with Shane Phelan and Daniel McConnell, I could not see any provision allowing enhanced pension packages. This indicated that there should have be a statutory instrument – an amendment – made to the legislation to allow for the enhancements.

Such instances would not be without precedent, the Government had previously written an statutory instrument for a former director general to enhance his pension entitlements on leaving Fás. John Lynch’s pension was boosted from 17 years to 40 years and he was given a lump sum payment of more than €130,000 under the “Doctor John Lynch Scheme”, a statutory instrument which can only be applied to him. This was kept quiet until Richard Oakley broke the story for The Sunday Times in October. Mr Lynch is now head of CIÉ.

On May 4 I called the Department of Enterprise, Trade and Employment about Mr Molloy’s pension and was asked, as per usual, to put my enquiry in writing. I began by asking them to confirm the Act and section under which the pension was based.

I have a brief question about Rody Molloy’s pension. Under what legislation was Mr Molloy given the add-ons (for want of a better description) to his pension? It seems to have been established that his pension does not fall within the guidelines cited. There does not appear to have been any amendment made to the Fás Superannuation Act 1998 which would allow for the add-ons under that act. Is his pension under the Labour Services Act so? If so, which section? If not, which Act?

There was no reply for a week, so I began calling. Eventually I was told responsibility for Fás had been passed over to the department of education and that they would now be handling my questions. Their response came on May 14…

This severance package for the former Director General, Rody Molloy, was granted in accordance with Section 6(3) of the Labour Services Act 1987 which states that “the Director General shall hold office on and subject to such terms and conditions (including terms and conditions relating to remuneration and superannuation) as may be determined by the Minister [for Enterprise, Trade and Employment] with the consent of the Minister for Finance”.

I replied on May 17…

The same Act (Labour Services, 1987) states in Section 8 that “No superannuation benefit shall be granted by An Foras on the resignation, retirement or death of a member of the staff of An Foras otherwise than in accordance with a scheme or schemes under this section”. Thus, as per my understanding, an amendment would be required in order for Mr Molloy to be granted benefits outside current schemes (which do not allow for enhancements like Mr Molloy received) under the Act. That would be similar to what happened with Mr Molloy’s predecessor, John Lynch, who is the sole beneficiary of the “Dr John Lynch Scheme”. The Dr John Lynch Scheme scheme amends the Act to make it legal for Mr Lynch to receive additional benefits.

Can you tell me if there has been a “Rody Molloy Scheme”, or any sort of amendment that could give Mr Molloy’s pension a legislative basis introduced (via a statutory instrument, presumably)? If so, can you supply a copy of this amendment/instrument?

And if there is not, does the department agree that Mr Molloy’s pension add-ons, for want of a better phrase, have no legal basis?

At lunchtime on Friday May 28 I received a reply…

The superannuation package, which includes the pension and lump-sum was granted with the required approvals under SI 514/1998 – An Foras Aiseanna Saothair Superannuation Scheme.

The ex-gratia payment was granted under the provisions Section 6 of the Labour Services Act, 1987.

The Labour Services Act 1987 provides that FAS shall be a body to acquire and dispose of land and any other property and accordingly the Board of FAS dealt with the matter of the car in accordance with these provisions.

Hardly a direct response.

The statutory instrument ‘SI 514/1998’ can be viewed here. It’s interesting because it only applies only to Fás staff whose employment comes under section 7 of the Labour Services Act (see parts 3.10 through 3.14). My understanding was that Mr Molloy was hired as director general, had only ever held that position, and that the director general’s employment came only under section 6 of the Act.

After taking some time off I began looking to confirm the terms of Mr Molloy’s pension and employment. In doing so I sought copies of the legal advice obtained as part of the review of his pension. I figured that if the guidelines are questioned maybe the basis of the pension itself was shaky.

July 5;

I’m wondering if it’s possible to be supplied with the legal advice received by the minister in relation to Mr. Molloy’s pension after the media interest it.

As you may remember there was initial interest in the enhanced nature of the pension, then it emerged there was no legal advice taken by the minister into whether the enhancements were required, then – and this is what I wish to confirm/clarify/obtain – the minister took legal advice in the context of a subsequent review of the matter and it was found that on the basis of the information available there was no legal basis to set aside or modify the severance package agreed with Mr Molloy. This advice, [if it was] taken in the later context, is what I wish to obtain.

Also, briefly; can the department confirm that Mr Molloy was hired under section 6 of the Labour Services Act 1987. I know his pension comes under section 6 as per previous correspondence with your office – and I’m not aware of any other section under which he could have be hired – I just wish to confirm this officially.

In a phone call on July 12 a spokeswoman for the Department of Education confirmed that Mr Molloy had only ever been employed under section 6 of the Act and again stated his pension was under this section.

On July 17 I received this response via email to my other enquiries…

Legal advice was sought from the Attorney General in the context of a review of the severance package agreed with Mr Molloy and it was found that on the basis of the information available there was no legal basis to set aside or modify the severance package agreed with Mr Molloy.

In accordance with normal practice the Minister is not in a position to release the advice of the Attorney General.

The value of preserving legal privilege and confidentiality in legal advices given by the Office of the Attorney General and the potential for damaging the State’s interests has been long recognised. Hence, it would not be in the best interests of the State to release the Attorney General’s advices.

Section 6 of the Labour Services Act 1997 provides the legal basis for the appointment of the Director General of FAS.

Yeh. And that’s where I’m at now.

You lot are smarter than me. Let me put the yarn into one paragraph and maybe a reader can figure this out; the Department say the whole thing came under section 6. I say that’d be fine for a standard pension but because there were enhancements a statutory instrument was required to give the pension a basis in law, as per John Lynch. The department appear to accept this and cite SI 514/1998… but that SI can’t apply to Mr Molloy because his pension and employment was all under section 6, while SI 514/1998 is only relevant to individuals employed under section 7.

So where is the relevant statutory instrument? And if none such exists, what’s the legal basis for the pension enhancements as signed-off on by the Tánaiste and Minister for Finance?

I’ve asked a barrister and two solicitors about this and they’re just as confused as me. Leo Varadkar also tabled a question in November last year relating to it, to which he has received no response [PDF link. Question 236]. For months two members of the public have been raising similar points with Darragh O’Brien, a Fianna Fáil TD with extensive experience in the pensions business, they too have received no reply.

If only the department would release that legal advice, it might clear some things up. Until then, unless someone can answer them through other means, the questions remain.