Inside the world of business
Legal eagles take issue with competitiveness claim – again
LEGAL EAGLES have been following their own advice this week and trawling through the fine print, in this case the fine print being the footnotes of the National Competitiveness Council’s latest report on business costs, and they’re not one bit happy.
In its report the council suggested that solicitors’ fees are not only expensive relative to other countries, but have, in fact, been on the increase while most other business input costs have been falling. The problem is this claim is partly based on CSO data that is of questionable significance.
Yes, the CSO’s Services Producer Price Index indicates that legal fees have risen 12 per cent since 2006. But as a footnote to the report confirms, this is an “experimental” series, and in the fourth quarter of 2010 only 18 law firms responded to it.
The Law Society of Ireland promptly rubbished the council’s claims, and not for the first time. Last year it had an almost identical criticism of the council. “There seems to be almost a desire to reach a conclusion whether the data supports it or not,” director general Ken Murphy said yesterday. He certainly paints a grim picture of the industry. Between 1,000 and 1,300 solicitors are unemployed, and those still in practice are being “played off against one another” by customers determined to get lower quotes. “Solicitors’ firms are hanging on by their fingernail. The level of competition is cut-throat,” he says.
So how much have solicitors’ fees actually fallen by then? He couldn’t possibly say. Why not? Apparently any such statement from him would be seen as a regulatory signal to the market as to what they should be charging.
But if the Law Society won’t tell the public what level of fees it charges, or even the percentage increase or decrease in their fee levels, and not even 1 per cent of Irish law firms responded to the CSO’s survey, does it really have the right to criticise the council for using the scant data available?
New way for McInerney?
THE SUPREME Court is likely to rule during the current legal term on McInerney’s appeal against the High Court’s refusal to approve the rescue plan drawn up for the troubled house builder by examiner Billy O’Riordan.
The Supreme Court heard the appeal at the beginning of last month and it did not look like it was going to go anywhere else until last week, when a new shareholder emerged claiming that there is another way.
David Nabarro acquired 21.45 per cent of the plc as a result of the unwinding of contracts for difference held by Seán Quinn. He wants to call an extraordinary general meeting and replace the existing board with himself and two colleagues, who will try and retrieve some value for shareholders.
Nabarro was a founder and partner of Nabarro Wells, which was fined £250,000 and censured by the London Stock Exchange in 2007 following a review of its operations that resulted from the fallout of the collapse of an AIM-listed shell called Langbar.
Langbar made misleading statements to the market about the whereabouts of cash that was supposed to have been held for it in a Brazilian bank account.
Nabarro Wells was Langbar’s nominated adviser and had no part in the fraud. It was, in fact, taken in, along with stockbrokers, lawyers and auditors’ firm, Baker Tilly.
Nabarro subsequently sold the firm, but continues to work as a licensed corporate financier. This is not his first encounter with McInerney. When the group’s problems were beginning to build up in 2009, it approached him.
It is understood that he and former chief executive Barry O’Connor know each other. At that stage, Nabarro did not get involved with the company.
However, something has changed, and he now believes that he can come to an arrangement with the banks and get a better deal for shareholders. It is not clear how he intends to do that, but it is likely that the group itself will call a shareholders’ meeting at some point. Presumably he will be able to make his case to the group’s other investors at that point.
No one’s banking on AIB
IT IS a sign of how shareholders have thrown in the towel on AIB that the day after the bank said the State’s shareholding would “increase substantially” from the current level of 93 per cent the share price barely moved.
The bank’s share price fell just 0.6 of a percentage point following the announcement on Thursday evening. It is a foregone conclusion that the State’s shareholding could rise as high as 99 per cent given the size of the capital bill (€13.3 billion) the bank has to raise with a market value of just €1.9 billion.
Leaving a free float of shares after the move to the junior Irish stock market was no more than a technical exercise to leave shareholders some skin in the game – okay, very thin skin – and to create an easy mechanism for the State to sell down its stake in the bank.
AIB now falls virtually into the same category as Anglo Irish Bank – nationalised banks. The differences are a painful two and a half years between the two nationalisations, while AIB has a rather meaningless sliver of publicly traded shares and a future as one of the State’s “pillar” banks.
It is barely a glimmer of hope for the punch-drunk shareholders.
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