Judge rejects claims O’Brien got ‘favourable interest rate’ from IBRC

Draft final report on Siteserv affair says IBRC executives worked ‘honestly and diligently’

The High Court judge investigating the Siteserv affair has rejected claims that Denis O’Brien received a “favourable interest rate” from the State-owned Irish Bank Resolution Corporation (IBRC).

In a draft final report on the 2012 sale of the company to Mr O’Brien, Mr Justice Brian Cregan’s overall assessment was that IBRC executives worked “honestly and diligently” throughout the transaction to protect its interests.

There was no evidence of “improper or unduly close” relationships at the time between Mr O’Brien and Richard Woodhouse, who handled IBRC’s dealings with the businessman, or between Mr O’Brien and then IBRC chief executive Mike Aynsley.

Mr Woodhouse and Mr Aynsley were “reliable” witnesses, the draft says. There was no prima facie evidence of any material deficiency in their performance, it says, and IBRC chairman Alan Dukes behaved “entirely properly at all material times” in relation to the deal.

IBRC, formerly Anglo Irish Bank, wrote off €119 million of the €150 million Siteserv owed when Mr O’Brien, a top IBRC borrower, bought the company.

The inquiry was established in 2015 after a political furore over the deal. Central to the row were Dáil claims by Catherine Murphy TD that the interest rate on Mr O’Brien’s IBRC loans was “extremely favourable”.

Mr Justice Cregan noted Dáil suggestions and anonymous published commentary that Mr Woodhouse had a close and improper relationship with Mr O’Brien, including claims that he arranged a “cosy” interest rate.

“There is no evidence before the commission to support such an allegation, which, in any event is not directly within the commission’s terms of reference. However, Mr Woodhouse in his evidence to the commission said he absolutely did not provide Mr O’Brien with a favourable interest rate,” the draft says.

“Mr Woodhouse gave evidence that the rate he agreed with Mr O’Brien involved a tripling of the rate he previously enjoyed. He said it was a commercial rate and one that he would apply again in similar circumstances today.

“The commission accepts this evidence and rejects any allegation that Mr Woodhouse provided Mr O’Brien with a favourable interest rate.”

The judge also examined claims that Mr Woodhouse contacted Mr O’Brien to advise him his first Siteserv bid “would not be sufficient”. Mr Woodhouse was asked to sign an IBRC letter to Dermot Hayes of Island Capital, Mr O’Brien’s adviser.

“[W]hile Mr Woodhouse signed a letter presented to him addressed to Mr Hayes about Mr O’Brien’s first round bid, the letter was in fact never sent. Once Mr O’Brien’s interest was confirmed, he was admitted to the second round based on his first round bid. He did not increase his first round bid in order to be brought into the second round.

“[T]here is no truth in the anonymous allegations to the effect that Mr O’Brien was excluded from the second round of the bidding process, that he was ‘livid’ and contacted Mr Woodhouse, and that Mr O’Brien was allowed to increase his bid and was thus invited into the second round.”

Mr Aynsley told the inquiry that IBRC imposed more oversight on the Siteserv sale because of “enhanced reputational risk” from the involvement of a “very large high-profile performing borrower”. Mr Woodhouse stood aside from any decision-making on the sale.

The inquiry also examined anonymous claims that IBRC’s entertaining of Mr O’Brien “increased significantly” under Mr Aynsley. It cited a dinner “in a modest restaurant” attended by Mr O’Brien, Mr Aynsley and Mr Woodhouse and their wives after Mr O’Brien had renewed his facilities and paid back a large amount of his loan.

“The evidence before the commission is that, apart from a mention that Mr O’Brien had been granted exclusivity, Siteserv was not discussed at the dinner. The dinner was arranged with the consent and knowledge of Mr Dukes.”

The judge accepted evidence that Mr Woodhouse made “absolutely no apology” for meeting a top client a few times a year.

“Large borrowers need to be cultivated. You need to keep close and you need to understand them,” the banker said.

Good working relationship

It was “reasonable” for Mr Aynsley as IBRC chief to cultivate a good working relationship with one of its biggest customers.

The draft report adds: “The commission has heard evidence that Mr Woodhouse and Mr Aynsley set up a financial services consultancy based in London in April 2014, a year after their contracts with IBRC were terminated.”

Mr O’Brien kept in occasional touch, introducing them in 2016 to the chief of Digicel, his Caribbean mobile-phone group. “Their firm, Prospera, was engaged on specialist consultancy work for a Digicel financial services business in the Caribbean, which assignment was successfully completed.”

In relation to Mr Aynsley, the draft cites a March 2012 opinion piece in The Irish Times by John McManus, then business editor, which set out assertions regarding the bank.

“Mr Aynsley regarded the article as a personal attack on him,” it said.

“Insofar as the comments in the article relate to Siteserv, the commission finds no basis whatever for the statement that Mr Aynsley was ‘chumming up to big Anglo clients and doing deals’.

“Mr O’Brien was a client of the bank in good standing. The bank was satisfied it had visibility over Mr O’Brien’s worldwide assets and there was, in the view of the bank, no reason not to deal with him as a potential buyer of Siteserv.”

Best interests

IBRC’s board was found to act appropriately and in the bank’s best interests by approving the deal on the basis of “information before it”. No prima facie evidence was found of any material deficiency by any board members.

Still, the draft blamed an “unfortunate lack of communication” for the IBRC credit committee’s failure to realise at a key stage that Mr O’Brien was in exclusive talks 13 days earlier.

IBRC overlooked a disputed €5 million payment to Siteserv investors, which the judge said was too high. An update on Siteserv’s falling share price “would have resulted in a requirement to only pay shareholders a sum between €2.9 million and €4.3 million, not €5 million – a saving of between €0.7 million and €2.1 million for the bank.”

The draft report says responsibility was between the lending team and credit committee, but “it would be unfair to blame any one individual”.