Cold storage blaze leads to long and costly legal battle

A mystery fire in a meat plant 10 years ago has proved costly for the State but the Department of Agriculture claims it could have been worse. Colm Keena reports

Beef frozen for intervention is not the type of material commonly held to be particularly flammable but €44.5 million (£35 million) of it went up in flames in Ballaghaderreen, Co Roscommon, on January 7th, 1992.

The fire started in the cold room in the United Meat Packers (UMP) plant during lunch hour. Fires in cold rooms are not uncommon.

Of the meat destroyed in the fire, beef worth €12.7 million belonged to UMP and the rest was EU intervention beef held by the Department of Agriculture as agent for the EU.

The fire led to a cashflow crisis for UMP, which in turn led to the company's collapse. UMP was a group founded and headed by Mr Sher Mohammed Rafique.

Not only did the company lose beef worth €12.7 million, it also found itself facing clean-up costs estimated at the time at close to €20 million.

When an examiner was appointed to UMP in February 1992, it emerged that the banks were owed €59.7 million.

The Department of Agriculture was responsible to the EU for the intervention beef lost. In 1990 the Mike Murphy Insurance Group had won the contract for insuring beef placed in intervention by the Department.

According to Mr Murphy, the amount involved was pretty small at the time he won the contract. However, because of the nature of the risk involved, he said, the insurance was placed abroad. It was placed through DB Agencies of Paris and Monaco.

Later in 1990 the value of beef held in intervention quadrupled and by 1992 it had increased tenfold, he said. All the insurance was placed abroad.

When the fire happened "everyone disappeared. No one wanted to know anything about it."

In subsequent court hearings some of the insurers claimed they had not been supplied with a material fact, namely UMP's claim that under a storage contract it was not responsible for any loss.

They also claimed that the policies had been terminated by the time of the fire. The State contested these claims and the matter has taken almost 10 years to resolve.

In the meantime, the EU had to be paid for the beef lost under the Department's watch. Because the liability for this debt was being contested, the Department took out a loan to settle it.

The thinking was that whoever lost the legal battle would have to settle the loan. While the legal dispute rumbled on, the interest on the loan was paid by the Department. As part of the settlement now agreed, the Department is not to be reimbursed for this.

Nevertheless, the deal is considered a good one by the Department, which feared that if the matter did go to court and was lost, it could have cost the taxpayer up to €40 million.

The Minister for Agriculture, Mr Walsh, said the settlement was a good result, which was won because of the Department's persistence.

Mr Murphy was a significant figure in the meat insurance sector in the early 1990s.

His firm was a major insurer to Mr Larry Goodman's companies and was involved in negotiating export credit insurance for Mr Goodman's meat companies' exports to Iraq.

He also provided insurance to Celtic Helicopters. The Moriarty tribunal heard that he sourced a €127,000 investment for the company in late 1992.

Mr Murphy said the investment was made by Mr David Gresty, of DB Agencies, Monaco. Mr Gresty was the broker through which Mr Murphy placed the insurance on the intervention beef as well as insurance to do with Mr Goodman's companies.

He gave evidence to the tribunal about his investment, on which he has never received any return.

The tribunal also heard that Mr Murphy, whose company provided insurance to Celtic Helicopters, organised a loan of €117,000 for the company so it could pay its premium.

Mr Murphy's company then helped the company pay off the loan. Mr Murphy told the tribunal that he feared being linked to the collapse of Celtic Helicopters because of its links to Mr Charles Haughey. He feared he might lose customers, he said.