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Flavin Faces His Waterloo

Posted on: May 19th, 2008 1 Comment

Tomorrow Jim Flavin’s DCC reports full-year figures. No one is interested in the results. Everyone is interested in Flavin. It had been widely expected that Flavin would seize the day to announce a date for his retirement. If so, it will have been wrung out of him by shareholders working behind closed doors.

Now it seems that Flavin will tough it out despite a serious verdict against him in the Supreme Court. Where else in the world could a chief executive survive after being judged by the highest court in the land as dealing in shares while in possession of inside information? Where else in the world could the same chief executive have been awarded a €150,000 bonus “in recognition of the exceptional demands arising from the successful defence of the action taken by Fyffes against DCC?”

Was this gift from his fellow directors not a trifle premature, considering the verdict was reversed in the Supreme Court? Will the payment now be reversed? Where else could the boss have been responsible for a €41m award against his company, plus legal costs of maybe another €10m, without a single member of the business establishment making an adverse comment? The record award could amount to around a quarter of tomorrow’s profits at DCC.

It would hardly happen in the Zimbabwe of Robert Mugabe. But it happened in Ireland, where the Financial Regulator, the Institute of Chartered Accountants, the Stock Exchange, the Irish Association of Investment Managers, sympathetic bankers and various other friendly bodies have been mute. What is most remarkable is Flavin’s failure to resign immediately after the Supreme Court verdict, now ten months ago.

“Omerta” is the watchword at the top of Irish business where the gang of insiders have circled the wagons.

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I HAVE applied to renew my licence to practise as Sean de Rossa, estate agent, and will be back in the District Court within weeks. Readers may remember that last year I was granted an auctioneering licence. Which just goes to prove that any old bullshitter can qualify.

Sadly, ever since I was given the go-ahead, the housing market has been plunging, so I have not yet started trading; but I believe that I am as well-equipped as any chancer to lie to the newspapers about prices achieved at private sales; I can gazump as skilfully as the next man; I am longing to value houses, when I have no idea of their value; I cannot wait to trouser all those lovely booking deposits — which have no legal status; I look forward to filling an auction room with stooge bidders; forgive me for relishing the prospect of opening sealed bids without the buyer being present; paradise will arrive when my own in-house financial mortgage subsidiary has lent money to buyers, thus revealing the depth of their pockets .

My paltry bond of 12 grand is already lodged. That is the maximum I can lose when I scarper away to Florida with clients’ funds.

Of course I have no intention of doing any of the above, but the scandalous situation survives, where untrained cowboys can enter the auctioneering jungle without more than a passing knowledge of the industry.

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A MASSIVE PR operation from Anglo Irish Banks following the interim results seems to have temporarily halted the slide in the share price. Most Irish brokers, the tame Financial Regulator and the investment institutions are rallying round. Even the motley rag bag of “Friends of Anglo” seem determined to keep buying stock to punish the bears.

Last week I met one of those bears. He was not prepared to break cover because of what he called “the witchhunt led by the Financial Regulator and Anglo”. But he made some convincing arguments for selling Anglo shares. First, he maintained that the bank has lent too much to high-risk property tycoons. More ominously, he went on to quote a 2007 Fitch credit rating report querying the quality of Anglo’s tier-one ratio. Apparently, a fairly high proportion of what is tortuously known as hybrid tier-one capital, has inflated Anglo’s tier-one ratio. Hybrid is of lower quality than core capital. He points out that many banks will not include hybrid capital as part of their tier-one ratio. Anglo apparently does.

Stuart Draper of Dolmen Securities disagrees. He says that, even taking out Anglo’s hybrid stuff, it still has a stronger tier-one ratio than AIB and Bank of Ireland. My bear was also unsettled by Anglo’s refusal to acknowledge any increase in bad debts despite the slump in the housing market. But even more fundamentally, he was convinced that the meteoric Anglo growth story means a sea change in its capital base.

Anglo’s friends in the Financial Regulator have now been investigating the frenzied St Patrick’s Day action in the bank’s shares for seven weeks. After all the huffing and puffing by the Regulator, do not expect any dramatic results. The shares closed at €9.41 on Friday, more than €2.50 above their low of €6.90

A sell.

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GOD forbid; but John Purcell, the Comptroller and Auditor General, has dared to prick the Fas balloon. Last week, the man who takes no political prisoners slated the national training agency with the bloated budget.

You will not find a politician in Ireland with the guts to challenge the tin gods in Fas, so hopeful are they that the wasteful giant will dispense some largesse in their direction. John unhelpfully disturbed the cosy relationship between Fas and politicians by exposing this State agency for spending taxpayers’ money as though it was going out of fashion. If new Finance Minister Brian Lenihan is short of targets for his axe he could start with Fas.

Fas has spent €1.7m on a new jobs website that was already being supplied by existing systems. The auditor-to-the-nation also reckoned that the website cost a cool million too much! Another Fas contract with an advertising agency cost €250,000 “at least twice as much as was paid previously, or since, for such work,” according to John.

Fas was never much of a hotshot at websites. A year ago a quick check of its own website found that it was years out of date in places. The State agency tried to improve, but its efforts obviously meant frittering more money away in the usual Fas manner. Old habits die hard.

On Friday I decided to check the national waster’s website, turning to the page with all the latest news from Fas. The agency that promotes courses in high-tech skills, communications, etc — at great cost to the State — has improved. Nothing has been entered yet this year, but probably nothing has yet happened at Fas in 2008. It is a bit early in the calendar for activity. Today, the website is only five months out of date, the last item — a posting of “Minister launches Fas Labour Market Annual Report”. That was back in December. If the dossers are short of material they could always post John Purcell’s comments about value for money at this protected political shrine.