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CIE follows the FAS road

Posted on: October 18th, 2009

THOMAS the Tank Engine’s eyes would pop out of their sockets at the shenanigans down in CIE’s depots. The villain of the Thomas tales, Devious Diesel, would find a paradise for plunderers in Ireland’s railways.

Iarnrod Eireann (Irish Rail) is out of control. It badly needs the services of the Fat Controller, Sir Topham Hatt, of Thomas fame.

Iarnrod Eireann’s parent board — CIE — has known for some time that all was not well down at the semi-state depots. After internal inquiries had unearthed skulduggery, the directors decided to commission their own top secret report.

And they intended it to remain top secret.

The directors did not give the hush-hush report from consultants Baker Tilly Ryan Glennon to their shareholder, Transport Minister Noel Dempsey. They did not even tell him about its existence.

Last week, my colleague Nick Webb and I stumbled upon leaks from the report. Their publication ignited some of the dynamite that had been relayed to us.

When Noel Dempsey read the Sunday Independent’s revelations he appears to have been taken aback. Last Monday, he asked CIE for a copy of the Baker Tilly report. CIE agreed to hand it over.

And well they might.

The report finds that looting of sleepers was widespread down at Iarnrod Eireann; but looting of sleepers is only in the halfpenny place. Far bigger sins have emerged elsewhere in the semi-state joint, namely that the methods of awarding many Iarnrod Eireann contracts are rotten. Procurement rules have been breached by the bucketful. As a result, Baker Tilly conservatively estimates that around €9m has already been lost.

Baker Tilly are not tactless enough to remind the board that CIE received a government subsidy of €321m last year. Not to mention the minor matter of the extra €600m given to it under the National Development Plan. CIE is not subject to the Freedom of Information Act. It is protected. Its attitude to questions from the Sunday Independent has been unhelpful.

When I asked CIE for a copy of the report, with all its murky contents, they refused point blank.

The response from the CIE hired guns was frigid.

“The report,” spun a CIE spinner, “is an internal report and will not be issued externally.” (In other words: “Jump in a lake. We are not subject to all that old Freedom of Information bull.”)

Luckily, the Minister takes a different view. Now that Mr Dempsey knows about the existence of the hidden documents, he is intent on reading and then releasing them to the public.

Nor would the spinners tell me how much the report cost.

Cost was apparently a “commercial matter” between Iarnrod Eireann and Baker Tilly— the usual excuse for never telling taxpayers the destination of their money.

Asked about Baker Tilly’s findings, the spinner responded: “The report made a series of recommendations in the area of controls in materials and plant management and the implementation of these is progressing well.”

Quite a contorted effort at defusing explosive material.

Sir Topham Hatt, the Fat Controller, would have been horrified. In the fantasy world of Thomas, Devious Diesel was banished into outer darkness by Sir Topham for telling porkies.

Not in the world of CIE.

Baker Tilly spell out a scary litany of endemic malpractices, losses and theft down at CIE.

No one can blame CIE for spinning. The report, which the directors ordered, is a damning indictment of their stewardship.

What CIE’s spinners did not tell us was that the report highlights the loss of EU funds for breach of procurement rules; that missing documents are the norm; that collusion between Iarnrod Eireann staff and outside contractors is widespread; that manipulation of tenders is rife; that fraud, false invoices and fiddles galore all feature. Iarnrod Eireann is a shambles directed by a strangely anonymous board.

So who are the directors flying below the radar at CIE?

Nobody seems to know.

The directors are all listed in the annual report; but they might as well be monkeys from the moon. CIE does not take its board appointments seriously enough to tell us anything about them. The annual report simply gives their surnames and initials.

What a strange form of corporate governance — not to provide background information about a board of directors. Even the banks provide short CVs. CIE fails to give a single fact about any of them.

They have ordinary enough sounding names like Lynch, Canniffe, Cullen, Killen, Johnston, Moloney, Sheerin and Scannell. We know that Lynch is a “Dr” and Scannell is a “professor”, but otherwise their modesty about themselves is fetching. Especially as they must think they are worth the €17,000 annual fees.

Personally I recall that “Dr” Lynch was previously the boss at FAS , but no one will blame him for not putting that into his CV; that “professor” Scannell was on the board of the EBS, which is hardly a badge of honour. Yet we are entitled to know what qualifies them to draw fat fees from the taxpayer.

The annual report tells us nothing about them. Yet it begs one rather odd, unanswered question: as of September, just over a month ago, CIE’s key audit committee consisted of only two people. A trifle small for an outfit with expenditure of over €1.2bn.

For some reason there were two unfilled vacancies for at least six months. One of the vacancies existed for over 18 months.

There were only two directors on the audit committee at a key time when the Baker Tilly report was delivered in May. No explanation is given for the failure to fill the vacancies.

Thomas the Tank Engine’s world of steam engines is more transparent than the permanent fog that surrounds Ireland’s real-life railways.

Baker Tilly baldly point out the dangers of future losses to Iarnrod Eireann as a consequence of the spectacular breaches of the rules. European funds may be clawed back; competitors who lost out in rigged tenders may sue for millions; not to mention reputational damage.

Thankfully, the minister is on the case, but the familiar instinct of yet another semi-state body to hide information from the public is alarming. The CIE board should have come clean about the horrific scale of the fraud, collusion, kickbacks and millions of lost grants. Instead, it hoped that no one would ever know.

CIE, like FAS, appears to be working in a politically protected bubble, breaking its own rules and not informing its shareholder — the Government — of the full facts until they are exposed by the media.

New concerns now arise. CIE must answer the FAS questions: How much money does CIE spend on advertising? Where is it allocated and by whom? How are jobs dished out at this state agency? Do the top brass have cars, credit cards, travel or a huge expense account? No state body receiving €6m a week from the taxpayer should be so protected.

Is the board a politically appointed rubber stamp, or a group of serious directors guarding the interests of the taxpayer?

Judging by the Baker Tilly findings , there is “something of the dark” about CIE.