Why Is The Irish Government Scared of Billionaire Denis O’Brien?
Fresh claims regarding suspect dealings between a state-run bank in Ireland and Denis O’Brien, the country's second wealthiest man, were made on Wednesday in the Irish Parliament by Pearse Doherty, finance spokesman of the left wing Republican party, Sinn Féin.
O' Brien's financial dealings with the Irish Bank Resolution Corporation (IBRC) can be traced back to the catastrophic banking crisis of 2008, when Ireland became known as the sick man of Europe.
Thousands emigrated, unemployment soared, and the IMF was called in to sort out the country's financial mess.
Two companies that deserve much of the blame for this economic catastrophe are Anglo Irish Bank and Irish Nationwide Building Society.
The Irish Government was forced to inject €4bn into Anglo Irish Bank in 2009 after it made the worst loss in Irish banking history.
Irish Nationwide Building Society recorded a €2.5 billion loss in 2009, requiring a €5.4 billion Government bailout a year later to stay afloat.
Both were nationalized by the Irish government, and by 2011, they amalgamated into a state-run financial institution that became known as the IBRC.
In February 2013 global auditing giant KPMG was appointed by the Irish government—under emergency legislation— as a special liquidator to IBRC. But the handover was a disaster, primarily because KPMG allegedly had specific involvements with certain transactions with IBRC that represented a conflict of interest, including a company bought by O’Brien.
Both KPMG and IBRC have therefore recently been at the center of a political hurricane that involves an independent parliamentarian, the Irish government, and billionaire O'Brien.
O'Brien is estimated by Forbes magazine to be worth nearly $7 billion.
The businessman also fancies himself as a global philanthropist. He built several schools in Haiti following the devastating earthquake there in 2010.
The Clinton Foundation has listed O’Brien as donating between $5 and $10 million in recent years.
O'Brien made his fortune in the telecommunications sector. He presently holds a 94% stake of Digicel: a mobile phone network that operates in 31 countries across the Caribbean, Central America and the South Pacific region. In June 2013 Digicel reported revenues of $2.78 billion.
O'Brien also owns Communicorp: a media holding company with a strong presence in radio across Eastern Europe and Ireland. The Dublin-born billionaire is also is a member of the Bilderberg Group.
His other business interests include the aviation leasing industry.
O'Brien has spent most of the 21st century outside of Ireland, where his businesses have been making astronomical profits in newly emerging markets.
Back in 2003, O'Brien said he had doubts about investing in his home nation again. He told the Irish Times “there was too much shite going on in Ireland,” which he said was “turning into a communist state.”
The caustic tone was hardly surprising: at the time O'Brien was allegedly being investigated by the Revenue Commissioners about his tax affairs. A court injunction prevented any of the details going public though.
But O'Brien has found it in his heart to forgive Ireland, perhaps because it's now a fantastic place to make a quick buck.
However, the entire operation hasn't gone as smoothly as planned.
On May 28th, Catherine Murphy, an independent representative of Dáil Éireann— Ireland's national parliament—began demanding answers from the Irish government about why IBRC were only charging O' Brien an interest rate of just 1.25%, when they could have been charging him 7.5% on loans amounting to €500 million.
Since the loans were operating from a state-run institution, Murphy claimed it was a matter that concerned the public interest.
In an article he wrote in the Irish Times, O'Brien accused Murphy of making “erroneous and untruthful statements” about his banking relationship with IBRC, and also claimed the information Murphy was quoting from was from stolen documents.
Before any more information could be leaked, O'Brien ensured a High Court injunction prevented the press from publishing or broadcasting any further details of his financial affairs.
O'Brien has previously injuncted or initiated defamation proceedings 24 times against 42 media outlets.
But numerous journalists and politicians branded this particular injunction as a constitutional crisis.
The Irish Constitution allows for all statements that are made in its national parliament to be protected by parliamentary privilege.
By gagging his critics, O’Brien was potentially creating a precedent in Ireland where a private individual was dictating what could and could not be reported from the national parliament to the press.
Following a consistent silence from the government— in particular from the Irish Prime Minster Enda Kenny—the state broadcaster, RTÉ, and a liberal Dublin broadsheet, the Irish Times, went back to the High Court to challenge the injunction in the name of press freedom.
Speaking to The Daily Beast, Catherine Murphy said O'Brien's injunction had “a chilling effect on media as the 4th estate.”
“That obviously has implications for a functioning democracy,” Murphy added.
By June 2nd the High Court made some redactions to its original ruling: claiming that the corporate governance of IBRC was a matter for the public interest. Thus the media were free to report. (O’Brien’s lawyers said he had never sought to gag Murphy.)
However, the court also ruled that the confidentiality between a bank and its customers must also be respected.
So what exactly were O'Brien's numerous loans for?
In 2012 O’Brien acquired for €45.4 million, Siteserv, a construction company that was buying up numerous other property companies during Ireland's short lived economic boom.
At the time of purchase, O'Brien owed IBRC, the state owned-bank, hundreds of millions of euros.
Siteserv, like many companies who went bankrupt during this financial apocalypse in Ireland, pace 2008, were previously allowed to run riot on a never ending spending spree, supported by Anglo Irish Bank.
By purchasing Siteserv, another company riddled with Anglo Irish Bank-fuelled debt, O'Brien was effectively buying from the state an asset riddled with debt--much of which he helped create through his endless buying and selling of property.
The sale of Siteserv to O'Brien also had another favorable condition: IBRC agreed to write off over €100million of Siteserv's debt. And shareholders received €5million from the sale.
The sale of the company to O'Brien therefore cost the Irish taxpayer €110 million.
An Austrian hedge fund, Anchorage Capital, and a French company, Altrad, had both offered a higher price than what O'Brien paid for Siteserv.
But, according to IBRC at the time, “elements of the offer were considered less attractive than the O'Brien bid.”
In July 2013, a subsidiary of Siteserv, GMC Sierra, was awarded a lucrative contract to install water meters all over Ireland. The privatization of water has caused outrage among the Irish population.
That the government had enabled a billionaire to profit from this process of charging for basic utilities left many Irish citizens feeling betrayed.
The Irish government has now set up a new inquiry to see whether or not there was any wrongdoing between Denis O’Brien, IBRC and KPMG.
The final details of this new inquiry have yet to be finalized by the Irish government.
Joe Higgins, a member of parliament for the Socialist Party in Dublin West, told The Daily Beast that the inquiry needs to be run by an independent body of financial experts from outside Ireland to ensure accountability.
Higgins cited how Blackstone, a multinational New York based vulture fund (a group of financial speculators that profiteers from countries in serious debt crisis by investing in debt at a discount price) were simultaneously advising IBRC, while also buying distressed assets.
“The role of advisors to IBRC, who were also buying assets from them, is a key aspect which must be looked into in this inquiry,” said Higgins. “Surely there is a conflict of interest here.”
The results of the findings of this new inquiry are expected to be made public in about six months. It's highly unlikely, however, that O'Brien will lose any sleep over the outcome.
This isn't the first time his colorful financial history has been public knowledge.
The billionaire made his fortune back in 1995: controversially being awarded a mobile phone license at the time through a consortium he set up called Esat Digifone (later to become O2 Ireland).
The Moriarty Tribunal, a public inquiry that took 14 years to conclude, found that O' Brien won the contract due to three separate payments, totaling IR£1m, he made in “clandestine circumstances” to then-communications minister, Michael Lowry.
Five years later, O'Brien then sold his stake of Esat Digifone to British Telecom, netting a profit of €317m.
O'Brien has categorically denied any wrongdoing in acquiring the Esat license. Shortly afterwards, he moved to Portugal thereby avoiding paying any capital gains tax on his profits.
Back in 2008, when it was no secret that Ireland was officially bankrupt, O'Brien declared he was going to step in and generously pay most of the wages for the national football team coach, Giovanni Trapattoni
In October 2011, when O' Brien—using his own private jet--personally flew Bill Clinton into Dublin for the Global Irish Economic Forum, most of his Fine Gael buddies were only delighted to pose for photos.
Back in 2011, the Irish Prime Minster, Enda Kenny, and leader of Fine Gael, vowed to “sever the links between politics and business once and for all.
But when your political comrades have a history of befriending billionaires, this is easier said than done
Fine Gael has long ties with O'Brien, who has donated generously to the party since the early 1990s. Michael Lowry, a former Chairman of the Fine Gael Party, granted the infamous license that made O'Brien into a modern-day Irish version of J.P. Morgan.
Alan Dukes, once the leader of Fine Gael, sat upon the board of IBRC, the financial institution at the center of this O'Brien fiasco, until it dissolved in 2013; while another Fine Gael parliamentarian, and former minister for communications, the late Jim Mitchell, was once appointed as O'Brien's “political consultant.”
Meanwhile, awkward details keep cropping up that seem to suggest a highly inappropriate relationship between certain elected representatives of the Irish government, and private individuals in the business world.
On June 3rd, the Irish Department of Finance said it had mysteriously discovered minutes of IBRC board meetings: these specifically concerned the sale of Siteserv to O'Brien in 2012. The Department had previously said it was not aware of their existence.
The minutes recorded Richard Woodhouse, who managed O’Brien’s loans with IBRC, as present at a meeting where the sale of Siteserv was discussed.
But the former chairman of IBRC, Alan Dukes, contradicted this information, saying that Woodhouse played no part in the decision-making process around the sale of Siteserv to O'Brien.
Sinn Féin has previously called for legislative action to tackle corporate criminality in Ireland, and replace this with an ethos of accountability.
Mary Lou McDonald, Vice President of Sinn Féin, told the Daily Beast that in Ireland people are regularly jailed for non-payment of trash-related charges, TV licenses and other fees, but white collar crime is an area that is seemingly impervious to prosecution.
“Two former Anglo[Irish Bank] executives [Patrick Whelan, and William McAteer] found guilty of wrongdoing were sentenced to community service," said McDonald.
“It is clear that we need to see an urgent review of legislation relating to white collar crime in this country," she added.
O' Brien is presently a resident of Malta, where the tax rates are considerably much lower than they are anywhere else in Europe.
In recent years O’Brien has begun to buy up large shares of Irish media: he currently holds a 29% stake in Independent News and Media, Ireland's largest newspaper group.
According to Village, an independent Irish political magazine, journalists who have questioned the modus operandi of the media tycoon—particularly those who have continually reported about the outcome of the Moriarty Tribunal—have mysteriously lost their jobs, received pay cuts, or been threatened with legal action.
Why is the Irish government not doing anything to stop O'Brien from closing in on the last of the democratic levers that presently exist in Ireland—the freedom of the press itself?
Is it because O'Brien now possesses so much power and capital that even the Irish government is afraid of him? (The Daily Beast contacted Denis O'Brien's official spokesperson several times, but our enquiries went unreturned.)
It remains to be seen whether there is merit in the allegations of financial impropriety between Denis O' Brien and IBRC/KPMG, and to what extent the Irish government are trying to cover up these alleged financial arrangements that, if true, have left the Irish taxpayer seriously out of pocket.