Firms 'have case to answer' on banks crisis

A FORMER minister of state has ridiculed auditors as a “joke and a waste of time. They are lick-arses for the management of companies, because corporate governance doesn’t work in our society.”

Government backbencher Ned O’Keeffe (FF, Cork East) also condemned the Financial Regulator for appointing PricewaterhouseCoopers (PwC) to examine the delay by all major banks in collecting interest payments from property developers. He pointed out that PwC had already audited Bank of Ireland, which paid it €15.4 million.

Demanding that new legislation for auditors be put in place, he added that “the banks are in difficulty because of their auditing”. Auditors “are not independent but they are bloody-well paid”.

Speaking during the Dáil debate on the details of the State’s bank guarantee scheme, the Fianna Fáil TD said he would have far more confidence in Labour Party TD Pat Rabbitte doing an audit than he would have in PwC, because “he knows more about finance than anyone in this House”.

A former director of the then ACC bank, Mr O’Keeffe also described the Bank of Scotland and Royal Bank of Scotland as “two rogue banks. They’re behind the trouble in the UK. They over-lent.”

Royal Bank of Scotland was Ulster Bank in the Irish context and the Minister for Finance was being asked to guarantee them. “That’s why we’re in this crisis, because they came in here.”

However, he said, there was “no point in condemning British banks or Irish banks because we’re the same family, the same people, the same system, although they’re in sterling and we’re in the euro”.

Auditors though were to be condemned. They “are advisers for banks and they certainly have a case to answer when so many warning signs were evident. The red lights were shining for years but nobody stopped.”

Mr O’Keeffe warned: “The core of the problem will take a magician to solve it, not the legislation in this House.”

He was “taken aback” to read yesterday that PwC had been chosen. Anglo-Irish Bank was audited by Ernst Young and AIB by KPMG, while Bank of Ireland was audited by PwC, “the people who are getting this job to forensically investigate the problems in the banks”.

Auditing and remuneration committees “are appointed from the weakest people on the board, who will say Yes for everything and report back to the chief executive for fear they upset him in any way. So there has to be a whole change in our auditing system in this country.”

Auditors were a joke “because they get the audit and they then get the consultancies to look into tax problems” and to look into other difficulties in companies.

“Tens of billions were borrowed by Irish banks from other European banks. These are generally borrowed on a short-term basis and in many cases repayable over 12 months. However, the money was loaned in vast quantities to speculators for terms of up to 20 years. That’s why we’re a crisis. International banks will now be looking for their money back, but the speculators have squandered it.”

Other countries “can afford to rescue their banks but Ireland is in such a difficult financial state, with four million people, no such choice exists, I believe”.

Mr O’Keeffe also expressed concern about small investors “who bought shares, who are dentists and doctors, who don’t have pension funds, but invested in the stock markets since they left college”.

“What’s going to happen [to] them? They will be paupers.”