‘Wheels came off’ ODCE’s Anglo investigation in ‘catastrophic way’

The State’s corporate law watchdog has said his office would not be equipped to deal with another investigation of the scale of the inquiries into Anglo Irish Bank if it happened again tomorrow.

Director of Corporate Enforcement Ian Drennan told an Oireachtas committee his office’s investigation into former Anglo Irish Bank chairman Sean FitzPatrick and his loans at the bank “went wrong in a pretty catastrophic way.”

“The wheels came off,” he said.

No organisation, however big or small, would have been able to cope with the investigation into the bank that was “completely unprecedented” in terms of its scale, he said.

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“If December 2008 happened again in the morning, are we equipped for that? No. There are very few organisations in the country that would be,” Mr Drennan told the Joint Oireachtas Committee on Business, Enterprise and Innovation.

The Anglo investigation was “off the scale” requiring “massive lines of inquiry which in turn resulted in uplifting hundreds upon thousands if not millions of documents,” said Mr Drennan.

The Office of the Director of Corporate Enforcement (ODCE) had “no understanding of what it was getting into,” he said.

“Now I suppose we do know; the risks are enormous. A lot more thought would have to go into identifying those risks and mitigating in an appropriate manner such that we didn’t have repetition.”

Same risks

Asked by the committee’s chairwoman Mary Butler, Fianna Fail TD, whether the new legislation setting up the ODCE as a new white-collar crime agency, the Corporate Enforcement Authority would make his office robust enough, Mr Drennan said that it would undoubtedly help to hire staff and bring in outside expertise.

“Hindsight is 20:20,” said the director. “Anybody, if they were in that situation again without knowing what was to come, runs runs the same risks.

Mr Drennan said the Anglo investigations were “completely unprecedented” in terms of the “sheer scale of five separate strands of investigation, each of which on their own merits were enormous.”

“In reality, any organisation, irrespective of how big or small it is, if you tried to try to carry that kind of load across a relatively small number of people, that level of complexity… things go wrong and unfortunately, in this case, they went wrong in a pretty catastrophic way and the wheels came off,” he said.

Submission declined

He told the committee that he had offered to provide it with a submission detailing the ODCE’s failures and additional reasons around the collapse of FitzPatrick trial but that the committee had twice declined to accept it.

The “net effect” of refusing to accept the submission was “unfortunately, the committee is not in a possession of the necessary information to enable it to reach evidence and fact-based conclusions,” he said.

Ms Butler , said that it had agreed to take submission of Mr Drennan’s report and that the committee would be in contact with his office in the next day or two to arrange to receive it.

Mr Drennan said that he did not think the ODCE staff had “any inkling” at the time of the Anglo’s collapse of the potential scale of the investigations. He acknowledged that there were “regrettable, very serious failures” but successes too.

Very few organisations in the State would be equipped to deal with the Anglo investigation. He described the episode as a “perfect storm” given the “enormous pressure” on the Exchequer at the time of the crash.

The director told the committee that notwithstanding the failures in the FitzPatrick investigation, high quality investigative work was done but it “unfortunately came at a considerable human cost.”

Fianna Fáil senator Aidan Davitt asked Mr Drennan to elaborate on this “poignant line.”

“Human cost is a poignant term and I hope none of the individuals concerned will mind me saying so: a lot of people were very badly damaged by this experience,” the director replied, without naming any individual.

Mr Drennan said there was a “narrative in the public domain” about what had happened that was “not complete.”

“There are dots to be joined and there are bits missing. I think if and when the full story ever comes out, it will put quite a different complexion on it,” he said.

“Certain things were ventilated in court, certain things were not. In fairness to the individuals concerned -and one in particular - I don’t think it would be appropriate for me to go beyond that, other than to say I observed this first-hand, I chose those words very carefully,” he added, referring to his “human cost” line.

Last week, Mr O’Connell wrote to the committee to say that he had new information about the botched Fitzpatrick investigation that was never aired at trial and he would be willing to share it with the committee.

Explaining the ODCE’s failure in taking witness statements from Ernst & Young, now EY, Mr Drennan drew a contrast from taking a statement from a witness observing an assault in the street and from an audit partner given that the audit of a listed company was a large undertaking and a substantial number of people.

Professional firms guard their reputations and litigation risks “very jealously” so taking a statement was not the same as a witness statement in an assault. The judge’s criticisms reflected “the complexity of that,” he said.

The judge in the FitzPatrick case found that “all concerned, either completely lost sight of the fact that what was happening was inappropriate or failed to recognize in the first instance that it was inappropriate,” he said.

The process “ultimately fell foul” of the prohibition on the coaching of witnesses and the contamination of evidence, he said.

Mr Drennan said the factors that led to the collapse ofMr FitzPatrick’s criminal trial “extend well beyond” failures within the ODCE..

Mr Drennan sought to cast wider blame beyond his office for the decision of a trial judge to direct the acquittal of Mr FitzPatrick over alarming flaws in his prosecution.

Mr FitzPatrick walked away a free man in 2017 after the collapse of a retrial. He was accused of furnishing false and misleading information to Anglo’s auditors over the scale of his loans at the bank – charges he denied.

Judge John Aylmer, on day 126 of the State’s longest running criminal trial, brought proceedings to a close after he criticised how the (OCDE) conducted its investigation into Mr FitzPatrick.

The judge found that the ODCE coached and cross-contaminated evidence in preparing witness statements taken from two partners at Ernst & Young, Anglo’s auditors, and that it adopted an “inappropriate, biased and partisan approach that tried to “build and defend” a case against Mr FitzPatrick rather investigate the alleged crimes.

Mr FitzPatrick’s first trial collapsed after Kevin O’Connell, then legal adviser to the ODCE, admitted shredding a number of relevant files in a “panic” after he found he had not disclosed documents to Mr FitzPatrick’s lawyers.

‘Unprecedented’ scale

In his first appearance before an Oireachtas committee since he became director in 2012, Mr Drennan said that “the seriousness of the investigative failures” that occurred within the ODCE were “fully acknowledged.”

The committee sat after meeting private session for two hours, delaying the scheduled start of Mr Drennan’s appearance. The committee met briefly with Mr Drennan and his officials in private session before the hearing began.

In his opening statement, the director told TDs and senators that he would could assure the committee that “valuable lessons, particularly as regards risk management, have been learned.”

The corporate watchdog was called before the committee to question whether the ODCE was fit for purpose and to examine new legislation proposed by the Government to replace the ODCE with a new white-collar crime agency, the Corporate Enforcement Authority, in response to the criticisms raised around the investigation.

Mr Drennan sought to cast the “serious failures” in one of its five investigations into Anglo as a “subset” of the ODCE’s broader enforcement work. He said that it could not be validly extrapolated to draw conclusions on the office’s overall fitness for purpose almost 10 years over the failures in that single investigation.

He accepted that the scale of the ODCE’s five investigations into Anglo was “unprecedented, not merely in terms of the ODCE’s history up to that point but, arguably, in the history of the State.”

“Unfortunately, the risks associated with taking on a suite of investigations of this scale were not sufficiently appreciated at the time, as a consequences of which those risks were not appropriately mitigated,” he said.

Witness statements

Mr Drennan pointed out that Judge Aylmer cited the “most fundamental error” as being the manner in which the ODCE took witness statements from two audit partners at Ernst & Young, now EY, when the ODCE took 60 statements from other witnesses which attracted no criticism from the judge or Mr FitzPatrick’s defence team.

“The factors that contributed to the trial judge ultimately directing the jury to acquit the accused extend well beyond the failures within the ODCE,” he told the committee.

While it may not “fit neatly with the narrative,” Mr Drennan pointed out that four of the five Anglo investigations conducted by the ODCE resulted in convictions.

“Sight is sometimes lost of that fact,” he said.

He defended the investigation work carried out by the ODCE in the Anglo inquiries.

“Notwithstanding the failures that occurred in the investigation that preceded DPP v FitzPatrick, an enormous level of high quality investigative work was done over that period – an achievement that, unfortunately, came at a considerable human cost,” said Mr Drennan.

Last week, Mr O’Connell wrote to the committee to say that he had new information about the botched Fitzpatrick investigation that was never aired at trial and he would be willing to share it with the committee.

He complained in his 10-page letter that he has become “the personification” of all that went wrong with the investigation and prosecution and suggested that he is not wholly to blame.