Giving Back To The Few

at

90356452

Sierra-LogoWater meter (top) supplied by Sierra (above), a subsidiary of Siteserv

 

The siteserv transaction.

Everything you wanted to know about the government’s priorities.

Dr Julien Mercille writes:

A lot of attention has been paid to the ongoing Siteserv controversy—but the implications for progressive politics have largely been missed in media commentary.

To begin, let’s recap some basic facts.

Siteserv is a construction services company that borrowed a lot from Anglo Irish Bank between 2006 and 2008 and accumulated a debt of €150 million. When the economic crisis struck, the government took over Anglo Irish and changed its name to IBRC.

The government (i.e., taxpayers) was thus made responsible for Siteserv’s debts and tried to get whatever it could out of those bad loans.

But instead of appointing a receiver to Siteserv to recoup those monies, IBRC let Siteserv handle the process themselves… and in 2012, Siteserv was sold to a company controlled by Denis O’Brien for €45 million.

A number of issues have been reported about the deal (although a full investigation has yet to be conducted).

First, Siteserv shareholders received €5 million from the sale. This is important because normally, shareholders, especially when they invested in a company that couldn’t even pay its debts back, are supposed to be wiped out before the creditors (in this case, IBRC). But here, taxpayers absorbed the losses.

Second, the result from the sale are as follows: shareholders got €5 million; state-owned IBRC got €40 million; and IBRC wrote off €110 million of debt it was owed by Siteserv—so the taxpayer took a hit of €110 million.

Third, it has been reported that there were other, more lucrative offers on the table for Siteserv that were rejected.

Fourth, Davy Stockbrokers and Arthur Cox solicitors acted for both sides of the transaction (Siteserv and Denis O’Brien’s company), which is not a transparent practice as it is difficult to obtain the best deal for the government when those overseeing the process simultaneously work for the buyer and the seller.

Fifth, the Central Bank of Ireland reviewed the deal just after it was finalised, but did nothing. The Irish Stock Exchange was also asked recently about a reported spike in Siteserv shares trading just before IBRC received bids from parties interested in buying Siteserv.

The Stock Exchange refused to comment, saying it was precluded from doing so on such matters.

Sixth, the government now wants to review the 2012 sale of Siteserv by using the audit firm KPMG. That is, even if KPMG was involved in the sale. In fact, so far, KPMG has been paid more than €70 million for its services in the liquidation of IBRC.

So asking KPMG to review itself is not exactly an instance of accountability. Indeed, Transparency International Ireland urged the government to remove KPMG from the review.

But our Minister of Finance, Michael Noonan, appointed a former judge to supervise KPMG in the review process. So, the plan is that a judge-reviewer will review the KPMG reviewer. It seems to be difficult to find an objective and neutral reviewer.

Seventh, in 2013, a year after it was bought by Denis O’Brien, Siteserv won several contracts to install water meters in Ireland (through its subsidiary GMC/Sierra). It was bad enough that taxpayers absorbed losses in the sale as stated above, but now Siteserv is benefiting again from the water charges.

A couple of points may be made about all this.

First, there have been accusations that the whole thing shows once again that the government is incompetent, mismanages everything and doesn’t learn from the mistakes of the past.

For example, Shaun Connoly wrote in the Examiner an article entitled “Incompetent Government will Bury the Controversy” in which he wonders if Enda Kenny “really not understands the laws of this country”? He also complains that we are faced with a “rotten system where nothing gets done properly and no lessons are ever learned”.

But the problem with this view is that it assumes that the government is actually trying to manage things properly for the common good, and that if only it could be more competent at doing so, things would improve.

However, in fact, the nature of the state is not to serve the people and to govern for the population as a whole.  This should be clear after a €64 billion bank bailout, a blanket guarantee making ordinary people responsible for €365 billion of bank liabilities, and six years of harsh austerity directed at the general population and the more vulnerable that has pushed the deprivation rate from 11.8% of the population in 2007 to 30.5% in 2013.

So by that standard government performance in the Siteserv deal is not too bad at all.

Siteserv shareholders have benefited. Denis O’Brien has benefited. Firms that have been paid fees to oversee the process have benefited. Taxpayers absorbed losses instead of private interests and bondholders, thanks to the socialisation of Anglo Irish debts.

And everything was kept quiet for about three years until one TD, Catherine Murphy, asked sustained questions—that’s not too bad, although in an ideal world, the deal would have been kept quiet forever.

Second, and related, how can we make sure this won’t happen again? UCD Professor of Politics David Farrell writes in the Irish Times that the controversy highlights “two major weaknesses in our political system”: first is “a Government that is not held adequately into account by parliament” and second is “a mindset that privileges secrecy over openness”.

Farrell’s solution is thus that “there needs to be a culture shift”, meaning that Ministers and civil servants “need to appreciate the principles that underline Freedom of Information—namely, to provide citizens with the information they deserve to know”.

Therefore, “instead of waiting behind closed doors” for information requests, the government should “simply put the information out there as a matter of course”.

The problem with this approach is that again, it assumes that if we could only convince those politicians to be more aware of the need for openness and transparency, things would get better.

It’s not incorrect per se, but the problem is that those politicians know very well that secrecy benefits them and those in power—that’s why they’re keeping things secret! Therefore, hoping they will change on their own won’t work.

So what are we left with? The way to change things is by redistributing economic and political power in society—that’s how you keep the powerful accountable, and in fact, that’s how you make sure nobody is too powerful relative to others.

If ordinary people had the same economic and political power as elites, there simply wouldn’t be too many elites around, by definition. A minority would not make decisions that affect everybody else’s lives.

Power would be decentralized, not concentrated in the hands of a few. In short, what we need is a drastic reorganization of power in society.

@JulienMercille is lecturer at UCD and the author of The Political Economy and Media Coverage of the European Economic Crisis: The Case of Ireland (2015, Routledge). His new book, Europe’s Treasure Ireland (Palgrave), will be out in July 2015.

25 thoughts on “Giving Back To The Few

  1. Unreconstructed

    I wouldn’t disagree with any of that analysis. However, it is one thing to say we need a “drastic reorganization of power in society” and another to bring it about. How would this be done?

    1. Lilly

      How indeed. It seems that every general election brings a fresh batch of wannabe politicians promising change, accountability, and transparency, but once elected they prove to be the same sleveens as the last shower.

    2. Anon

      Prof Philip Pettit’s book ‘Just Freedom:A moral compass for a complex world’ is an excellent analysis of deficiencies of representative democracy and particularly relevant to Ireland He identifies 3 problems with rep.democracy- sticky minorities,party allegiance & vested interests; See a youtube video here on these 3 problems- https://www.youtube.com/watch?v=xSTz1OAZAW8

  2. Jonotti

    We need to realise that the Labour Party is a rightwing party intent on privitising everything. Part of the power restructuring is for the centre-left to stop voting for Labour.

  3. JollyRoger

    The only problem with any sort of reorganization is if the government is involved it only seems to benefit the wrong people

  4. Brendan

    He does a pretty good job of collecting some of the issues, but for me everything starts to fall apart in his editorialising. He uses the phrase “in fact…” twice referring to his own opinions rather than actual facts. There’s a lot of sweeping statements that he doesn’t bother backing up at all. Take “in fact, the nature of the state is not to serve the people and to govern for the population as a whole”, or last week “The most significant consequence of the anti-water charge protests is that they are democratising the country. This is why elites are worried and have reacted hysterically: they want this popular movement repressed, and quickly.” I think he expects us to take a lot at face value.

    1. Jt

      I switched off once I read the words “borrowed a lot”. Oh Tuesday’s child is indeed fair of face but has far to go.

  5. manolo

    tl;dr our democracy is broken, needs revamping.

    Yes, I agree, and probably many more do. But there is no credible leadership in this country, any attempt is undermined via infiltration and demoralizing propaganda, and big societal and political changes are always taken over by the rich and powerful once the hard work is done – i.e. French revolution, Egyptian uprising, and so on.

    The ‘people’ are just not smart enough together.

  6. David

    This is a short summation of the SiteServ controversy, along with the same points he has made in previous weeks.

  7. Ferret McGruber

    Things omitted from the article above:

    Why is Denis O’Brien not sharing a cell somewhere with Michael Lowry?

    Why was Noonan not sacked for misleading the Dáil?

    Why are KPMG, auditors to bust banks, still in business?

    1. Frilly Keane

      ‘Cause Deloittes checked them out and said they were OK
      EY (Ernst Young) double checked and said Deloittes were right about KPMG
      PWC rocked up to the trough and checked out EYs report on Deloittes, and then double dipped with an agreed service extension to check out EYs testing on KPMG again.

      Then a KPMG Chinese Walled in entity checked them all out
      And reported back to

      KPMG

  8. Chack

    And not to forget, that the Irish Stock Exchange, which won’t even comment on whether or not it has EVER investigated insider trading, is owned by the largest stock brokers in Ireland. Expecting any kind of investigation from them is fruitless.

    1. Ferret McGruber

      This from Facebook:

      ITS A RAT TRAP AND YOU’VE BEEN CAUGHT!

      It was reported that Minister Noonan and the Central Bank suggested that Catherine Murphy TD contact the Irish Stock Exchange in order to make a complaint regarding alleged insider trading in the now infamous Siteserv get rich quick scheme.”

      It seems that both Minister Noonan and the Central Bank management team are either very confused considering the battering that they have received over the last few weeks or that they don’t know what the Irish Stock Exchange is and who the beneficial owners are.

      The Irish Stock Exchange, contrary to common perception is not a government run organisation but a public limited company (with other limited liability companies in the mix) and run by the very same stockbroking firm that is up to its neck in mud with the Siteserv insider trading allegation.

      Davy Stockbrokers are the majority shareholders in the Irish Stock Exchange and were also the advisers hired by the Denis O’Brien’s offshore company,Millington and the IBRC at the same time resulting in a momentous decision that is coming back to haunt all of the parties involved.

      What Minister Noonan and the Central Bank are effectively telling Catherine Murphy to do is to put her head inside the rat trap and wait for the snap. But there will be no snap other than the door being rapidly snapped closed while Davy Stockbrokers start the process of digging deeper into their lair hoping that they will be left alone now that the media hounds are after them.

      The big question is however… How can the Irish Stock Exchange investigate their majority shareholder (Davy Stockbrokers) and say that any investigation was impartial?

      You also know something is seriously wrong, especially when RTE begin to turn on the Finance Minister, because they also smell a big rat in the Siteserv sale.

      Running out of options yet, Minister?

      https://www.facebook.com/liam.deegan2/posts/845691042134165

  9. Tim

    “Decentralisation of power”? “emancipatory change”? “Redistributing economic and social power” ? Absolute word salad! What does any of that actually mean? Can someone give me a detailed explanation? Not more word salads. The people have elected right wing governments throughout the history of the state. Even in the last election which was the left’s best chance! Do you guys not respect democracy?

Comments are closed.