Settlement talks' failure left Minister with few options

THE Government's main priority when it met to discuss the Bord na Mona controversy last night was to get the whole thing dealt with as quickly as possible. But the failure to make progress on a settlement package left last night's Cabinet meeting with a very tricky legal and political dilemma. The decision to suspend Dr O'Connor and sanction a further investigation provoked the managing director to say he would seek a judicial review. Instead of a speedy solution, the Government now may face a lengthy legal action.

The only way to avoid this would be to strike a settlement package. However, contacts to try to broker such a deal yesterday came to nothing

The decision to suspend Dr O'Connor was certainly taken after detailed advice from the Attorney General. No doubt the Cabinet would have preferred to have sanctioned a settlement package through which Dr O'Connor could depart on agreed terms.

Some members of the Government are understood to strongly support this solution and to be unhappy with the way the issue has been dealt with by the board and Mr Lowry's department. The length of last night's Cabinet discussion on the issue suggests that there was a frank exchange of views around the table.

The Government used the report from the company board as the basis on which to suspend Dr O'Connor. This report concluded that his remuneration package breached Government guidelines.

But Ministers also considered Dr O'Connor's reply, which was that he had a valid contract agreed with the former chairman, Mr Brendan Halligan, including a £15,000 per annum public affairs budget allowing him to claim unvouched expenses.

If Dr O'Connor's case for a judicial review goes ahead, he will no doubt be leaning heavily on these arguments. He is also expected to object to the whole process through which the board examined the issue and made the recommendation which led to last night's decision. The managing director has also pointed repeatedly to the succession of leaks to the media relating to his remuneration package.

The danger for the Government is that the affair will now drag on through the courts, bringing with it further controversy. The Government already faces Opposition statements alleging a "hidden agenda" against Dr O'Connor, a view supported by the company's unions and the four worker directors. These issues would all be dragged up again in a court action.

Politically, the Government must also contend with a growing public scepticism about the way the affairs has been handled. It has so far taken almost three months to investigate Dr O'Connor's remuneration package and, in particular, to examine issues such as his unvouched expenses.

The board eventually decided that his package breached Government guidelines, but the Government has decided that yet another inquiry is required by an independent third party.

The cost of the various inquiries now greatly exceeds the £66,000 in unvouched expenses claimed by Dr O'Connor over nine years central to the controversy.

What started out as some fairly straightforward questions about corporate governance at a State company have grown into a major Government headache. In turn, this has raised questions about the motivations behind an affair which still has some way to run.