The Kite Runner

at

Newstalkinm

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From top: Newstalk and INM logo; Tony Groves

You have to ask yourself that if I wanted to sell something to myself, for more than it’s worth, in order to pay myself from the over-inflated price, would that be okay with the Companies Act?

Tony Groves writes:

Back in the Halcyon Days of the Celtic Tiger, I remember coming across a particularly complex (and not a little brilliant) version of the common practise of Cheque Kiting.

Cheque Kiting, for those of you unfamiliar, is where an individual has two (or more) accounts in different banks. He writes a cheque to himself (this first cheque is called the kite) from Bank A and lodges it into Bank B.

The following day (taking advantage of Bank B’s lax clearing system) writes a cheque to himself from Bank B and lodges it to Bank A.

These artificial funds are then lodged; allowing the first cheque to clear. The cycle then repeats, typically escalating the amounts until he is either caught, cleans out the accounts and runs, or lodges legitimate funds to cover the Kite.

The case I came across was based on the circular kite model, but due to the involvement of several individuals (over 10) and spread across every retail bank in the country at that time it was not easily discovered.

The seemingly reasonable monies involved in the cheques, the various clearing cycles of the banks and the fact that there was several people involved made detection next to impossible for any one bank. It really was well constructed and went on for months.

When the fraud was eventually spotted (due to address irregularities) and the kites crashed to earth, the Banks had been taken for several thousand euro. It really was a significant amount of money and I’m not sure any of the participants were ever brought to justice.

I recall seeing the last transactions on one accounts involved; it was a Laser Card purchase in Dublin Airport. So long, farewell, auf Wiedersehen, adieu…

When I read earlier how Independent News and Media Chief Executive Robert Pitt had made a Protected Disclosure regarding Denis O’Brien’s attempts to sell a company he owns (Newstalk, part of his Communicorp empire) to a Company (Independent News & Media) where he is the major shareholder, I had a flashback.

We know very little about the deal. But I suspect a Protected Disclosure wasn’t made lightly.

Whatever was in the Disclosure seems to have triggered the Office of the Director of Corporate Enforcement’s involvement.

It is also well known that the two parties could not agree on the price, with INM wanting to pay less than Communicorp are asking for.

We also understand from reports that if the higher price had been be agreed, Denis O’Brien stood to receive a “significant payout”.

I don’t want to go into the individuals involved and their links with Mr O’Brien, they are available here.

But I do wonder about company law, specifically the laws around conflicts of interest and the Fitness & Probity Standards.

You have to ask yourself that if I wanted to sell something to myself, for more than it’s worth, in order to pay myself from the over-inflated price, would that be okay with the Companies Act?

Even if it is legal, are the conflicts of interest not such that it would call into question individual’s fitness to operate public broadcasting licences?  I don’t know. Nobody is really saying what did or did not nearly happen.

We know there was a falling out. We hear rumours of resignations. None of it looks good from a Corporate Responsibility viewpoint. Particularly given Denis O’Brien’s ability to have a “chilling effect” on democracy.

There are many kites floating out in the air here. Like all complex kites the cords become tangled and it’s difficult to know who caused the entire thing to crash to earth. I still laugh at the audacity of the Cheque Kite I was caught out by.

I look regularly agog at the audacity of Denis O’Brien, none more so than in his attempt to sell his company to his other company. What has all this got to do with Cheque Kiting? Maybe nothing; it just makes you think, doesn’t it…

Tony Groves is a full-time financial consultant and part-time commentator. With over 18 years experience in the financial industry and a keen interest in politics, history and “being ornery”, he has published one book and writes regularly at Trickstersworld

24 thoughts on “The Kite Runner

  1. Owen C

    “But I do wonder about company law, specifically the laws around conflicts of interest and the Fitness & Probity Standards.”

    Pretty sure the Fitness and Probity standards are only relevant to regulated financial services companies. Hence the reason the link is to a document on the Central Bank of Ireland website. Don’t think its relevant to this issue. There was almost certainly some rinky dink involved in this case, but the post above is really just a bit of kite flying to be honest (pun intended).

    1. MKG985

      Yes, no surprise at a dodgy deal and White Collar Crime doesn’t have any real checks and balances in Ireland when compared internationally.

    2. Tony Groves

      Thanks Eoin,
      The ODCE is looking into this. Your hang up on F&P has little to same. I’m only asking whether if the same regulations were applied fairly would an individual be deemed F&P.

  2. rotide

    What has all this got to do with Cheque Kiting?

    Nothing apart from a desperate need to crowbar in any possible analogy into every article.

    1. bertie blenkinsop

      I was really enjoying the book until the part when the kid got attacked, that was very upsetting.

  3. Brother Barnabas

    not sure that picture does you justice, Tony – doesn’t really capture your look of youthful exuberance

  4. nellyb

    Tony, do you think we have enough people with proverbials to take on that? This has been going on for donkeys years now, I remember reading about this lodgement/withdrawal ping/pong back in 2008/9. Now it’s 2017 and we’re still flapping our lips. I mean, WTF?

      1. dav

        I’ve learnt that the civilwarshirts will always look after the rich and will screw over the rest of the nation..

  5. Louislefronde

    Ah the ODCE…. do they have any accountants working in that office, not so long ago – they didn’t!

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