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Look out for our Greek Pals

Posted on: September 18th, 2011

DO you feel a twinge of sympathy for Greek Prime Minister George Papandreou?

Was poor George handbagged by Angela Merkel and savaged by Nicolas Sarkozy during that three-way telephone call on Wednesday? George is emerging as the enfant terrible of Europe, the guy who swears undying loyalty to reform… until he escapes from the room . Then he heads back to Athens and goes native again. The latest Greek wheeze — the promise to impose a property tax to plug a sudden €2bn hole — has comical characteristics. George has decided to collect it through the citizens’ electricity bills! Greeks have a bit of a difficulty with tax collection.

The tax anarchy in Greece is far from a minus in George’s armoury. Last week he emerged as a clear winner in the scrap on the blower with Angela and Nicolas. While George must have privately pleaded that Greeks were not amenable to tax collection, such a danger is a useful weapon in his hands. The other two players had reason to be scared of George. If the Greek premier pulls the pin on the sovereign debt grenade, Angela may be forced to mop up the devastation. If Greek banks go belly-up, Nicolas will be next in the firing line.

The haughty French President was on the back foot last week as Moodys downgraded Credit Agricole and Societe Generale for fear that George’s banks might pull them down. Poor Nicolas was forced to head for the relative tranquility of Libya to take refuge from the financial markets. This weekend Angela faces another election defeat in Berlin. The law-abiding German electorate is in open revolt at the sight of their precious taxpayers’ money propping up Athens, where tax dodging is a national pastime. George will probably have a pretty normal, relaxed weekend. He may have an uneasy thought running through his head. How can he reconcile the unorthodox tax traditions in Greece with the strict discipline required from his EU/ IMF masters? Greece has already been caught cooking the books.

Ireland could help. Enda Kenny and Michael Noonan are beginning to win plaudits from Europe. Last week they received another pat on the head from Eurocrat Olli Rehn. They love being the Commissioners’ darlings, not seeing high praise from this quarter as applause for putting European bankers’ interests before those of the Irish people’s. Enda and Michael should wince every time a European bureaucrat praises their obedience to the troika’s diktats. Instead, they are beginning to wallow in being the teacher’s pet. At the very least, they should exploit their new found status to help fellow-sufferer George Papandreou. We three bailout sinners — Ireland, Portugal and Greece — should give each other a hand.

The least we could do is to swap mutual help with the Greeks, especially with their intractable tax problems. We rely on exports. We could export a little tax expertise to Athens. Ireland and Greece seem to have a lot in common. Enda should ring George and offer him a loan. No, not money. He should offer to lend him one of our ace accountancy firms to pull him out of his tax quagmire. Enda should offer the services of Ireland’s most understanding group of auditors, Ernst & Young. Enda will have to be up front with George. He must tell George that E&Y were auditors to Anglo Irish Bank and that only last week an independent investigator, John Purcell, found that they had failed to “detect the scale of Sean FitzPatrick’s loans and their systematic refinancing over year ends”.

Purcell added that they had a case to answer over a possible failure to refer to the infamous €7bn transfer from Irish Life to Anglo. Enda will have to warn George that E&Y are brazen adversaries. Last May they lost a High Court case seeking to halt the investigation into its audit of Anglo. The Greek premier might warm to such feisty auditors. That will be the bad news out of the way. The good news for E&Y is that they are now facing justice — accountancy- style. The auditors’ firm will come before the Chartered Accountants Regulatory Board’s (CARB) disciplinary panel.

My guess is that the champagne corks have been popping at E&Y’s headquarters in the last three days. The next hoop will not be the hardest. CARB has an appalling history. I should know. I have personal experience of them finding in favour of KPMG, one of the big accountancy firms, after I had lobbed a complaint in their lap. KPMG had failed to identify an error of nearly €2m in the accounts of NTR. The mistake had been spotted by an alert member of staff in the Comptroller’s office. The State lost revenue as a result. CARB breached its own procedures on five occasions when judging my complaint. Furthermore, it simply rejected the finding in my favour by its own independent reviewer.

KPMG escaped, acquitted by the Chartered Accountancy Institute’s own disciplinary body. That was meant to be the end of it. Unfortunately for CARB, the last government was not happy with justice accountancy- style. They set up an independent body, not stuffed with accountants, to monitor accountants. The new group, IAASA, did not like what they saw at CARB. So they decided to review my case. They hauled the accountancy body over the coals and demanded explanations for multiple breaches of its own procedures. The verdict was damning. Two months ago IAASA fined CARB €110,000 — a record — for multiple breaches of its bye-laws during my complaint.

It called CARB’s failure to comply “ serious”. It rejected CARB’s evidence and condemned its contradictory behaviour. It found that the Chartered Accountants’ Institute recklessly “communicated inaccurate and misleading information” to me. It has now annulled the decision. A new investigation has been ordered. If my case was the only one where CARB had been fined, perhaps we could forgive the accountancy body for a one-off lapse. But there have been three cases in a space of eight months where IAASA has found that the chartered accountants watchdog failed to comply with its own investigation and disciplinary procedures. In each of the other two cases, CARB was fined ten grand.

Ernst & Young is in the wars elsewhere. In the US, it is facing a lawsuit over its vetting of Lehman Brothers’ accounts. Its Irish subsidiary will not be shivering in its shoes at the prospect of facing similar scrutiny from CARB, a body that has the dubious distinction of only once having fined any of the big four accountancy firms. It is difficult to understand why CARB still exists. It causes constant headaches to IAASA, who must feel compelled to monitor all its activities because of its flawed record. Ireland’s magic circles are still alive and well. Not just in the case of CARB. Rogue bankers are living it up in the Med and Marbella, rogue developers are living high on the hog employed by Nama and rotten regulators are roaming the land, enriched.

It would not be fair to export all of them to Greece — but in its present plight, George Papandreou could find a sympathetic ear from Ireland’s accountants, bankers, developers and regulators.