Galway oil cartel 'enforcer' was prime mover

Local cartel was meeting to set prices every time global oil prices changed, writes Arthur Beesley.

JP Lambe took his hands from the pockets of his coat as he stepped forward in court to be sentenced for the central part he played in a conspiracy to fix the price of home-heating oil in Galway city and county.

Aged 69 and suffering from a heart condition, Lambe (pictured right) might have expected something other than a criminal conviction at the very end of his long career in the oil business. Yet there he was in the Four Courts, awaiting sentence last Monday as drug dealers and tracksuited thieves not half his age came before Dublin Circuit Criminal Court.

When his time came, Judge Katherine Delahunt imposed a €15,000 fine on Lambe and gave him a six-month suspended sentence over his involvement in a cartel orchestrated by the Connacht Oil Promotion Federation, which he chaired. The implication was that he was a prime mover in the conspiracy to distort the market for gas, oil and kerosene. The judge said this could not have been achieved "at any significant level" without his talent, acumen and knowledge of the business.

According to one witness in a related case, Lambe cited similar price-fixing in Mayo and Donegal at a meeting of the Connacht federation. Lambe's conviction and related proceedings against 23 other individuals and companies stem from an inquiry by the Competition Authority, which started as long ago as 2001. Lambe is among nine individuals and companies that have pleaded guilty over their role in the affair.

In addition, a former distributor from Loughrea, Michael Flanagan, was convicted by a jury in Galway Circuit Criminal Court of entering into an agreement to fix prices.

Many of the cases have not yet been heard in open court so there is little that can be said here about the specific claims made in respect of some alleged cartel members. But the picture that emerged in court last week was of a well-organised effort to manipulate the market.

Witnesses claimed that some of the smaller oil distribution firms in Galway were intimidated and bullied by the bigger players to take part in the scheme. Those that broke the agreement were reined in by Lambe, who was described as "enforcer" of the cartel.

What is striking about the Galway case is that it centres on local companies run by local business people who make routine transactions with local customers.

In addition, the evidence of one witness suggested that domestic customers were targeted while competition was maintained in the market to supply commercial customers.

Oil distribution may be as banal a business as they come, but it is an essential service for ordinary people who have to heat their homes. Just as the expenditure is not discretionary, customers should expect the market to operate fairly.

Evidence heard in court suggests that the market in Galway was anything but fair. At consumers' expense, there was big money to be made from price-fixing.

The solicitor who led the authority's investigation, David McFadden, suggested in court that the cartel might have increased the price of home-oil by 10 per cent, or a total of €4.4 million in a year. While the investigation centred on "the great bulk" of oil distributors in the period to February 2002 from January 2001, McFadden suggested that the price-fixing arrangement might have continued throughout the 1990s and up to 2002.

Few if any customers would have known that a local cartel was meeting to set prices every time the price of oil changed on the global market.

According to McFadden, who referred to the surveillance of meetings, the federation met 18 times during the period of the investigation to agree tiered pricing structures based on the size of a delivery.

Progress in the court proceedings has been slow, severely delayed on one occasion for a reason that seems difficult to explain. In Dublin Circuit Criminal Court last November, the case against one company and two of its directors was adjourned until next October because no court room was available.

But in Galway Circuit Criminal Court eight days ago, the investigation yielded the State's first conviction on indictment for price-fixing when Flanagan was fined €3,500 for his part in the affair.

At his two-day trial Flanagan admitted attending five meetings of the federation at which prices were fixed. However, he claimed he did not take part in price-fixing himself and said he did not adhere to the prices that were set at the meeting.

A small player in the scheme in which bigger companies stood to gain the most, Flanagan was described by Judge Raymond Groarke as a "minnow" among "sharks". Those alleged to have been bigger players in the scheme cannot be named while their cases are outstanding.

Flaherty's conviction was something of a coup for the Competition Authority, whose record in tracking down cartels was criticised in 2002 as "next to dire" by the London-based Law Business Research group.

His case and Lambe's appearance this week on foot of a guilty plea last October will be followed by the sentencing in the Galway court today of another eight individuals and companies who have pleaded guilty in respect of their role in the affair.

They include businessman Con Muldoon and his former company Muldoon Oil who entered guilty pleas in the Galway court last week. Six more guilty pleas were entered when the case came before the court again yesterday. Those making the pleas were: Seán Hester and his former company All Star Oil; Mor Oil; Kevin Cunniffe and his company Hi-Way Oil; and Matt Geraghty Oil Ltd.

From Claremorris in Co Mayo, Lambe pleaded guilty to two counts of assisting a named oil company in its illegal efforts to fix the sale price of gas, oil and kerosene. He knew the oil business well. After starting work as a driver, he later acquired his own company. His barrister, Roderick O'Hanlon SC, said he was a family man and a former treasurer of the Mayo GAA county board. Such was his reputation that the parish priest in his locality attested to his good character in a reference for the judge.

While O'Hanlon said that Lambe faced embarrassment over the conviction and had suffered deteriorating health since it began, he said he had not gained financially from the arrangement. He was reimbursed for his expenses, but worked without pay for the federation. Nevertheless, Lambe emerged as a powerful figure in the cartel in the evidence presented by State witnesses in the Flaherty case.

John Connell, who once ran a small company called Connell Oil, indicated in evidence that Lambe was an "enforcer" whose role was to ensure that every distributor charged the same price for a given quantity of oil and to pressurise companies not in the scheme to join it.

Connell said that Lambe, or "Mr L" as he called him, along with Con Muldoon and another named person, contacted him in May 2001 to ask that he join the federation. He was told membership would benefit him financially and that Lambe would call to his office unannounced to check his dockets to ensure he was adhering to agreed prices. "I was self-employed and I didn't want anybody telling me what to do."

Another State witness, Joe Mulcair, said that he was asked by the named oil distributor and alleged cartel member that he worked for to attend a meetings of the federation. Small operators such as Flaherty were bullied and intimidated to attend such meetings and were being forced to join the scheme or face financial ruin, he said. "They [ the larger companies] were forcing the likes of Michael Flanagan to attend these meetings. It was a case of 'come along to these meetings Flanagan or we will cut the price of oil in your area'."

Mulcair attended five meetings. He said Lambe told the first meeting that other distributors in Mayo and Donegal were fixing the price of oil and were quite successful because they were charging the same price. According to Mulcair, Lambesaid that the time had come to start doing the same in Galway. Mulcair said Lambe would ask: "Is that OK with ye lads?" after prices were fixed. "The people selling the most oil would benefit the most from this price fixing," he said in court.

One of his then colleagues, Deirdre Devaney, told the court that she had objected to using a price list provided by Mulcair as it was not the list provided by the wholesale oil supplier. But a director of the company they worked for told her to use the price list, which concerned the price of home-heating oil. The list from the wholesaler was used only for commercial users.

If the most well-known anti-trust cases centre on business giants such as large John D Rockefeller's Standard Oil and Bill Gates's Microsoft, the Galway case shows that corporate greed can distort markets close to home too. In one estimate, cartels might cost Irish consumers as much as €635 million per year. Even if that was only half true, the Galway case would be but a small beginning. The cases against the "sharks" continue.

Additional reporting by Ann Healy in Galway