Ship of Fools (6 page)

Did the Corruption Assets Bureau get established? For an answer the reader is referred to Mick Bailey's famous response to James Gogarty(?). Gradually, encouraged by the evidence of public support for fraudsters and tax dodgers, Fianna Fáil began to realise that it did not in fact have to do anything that might upset its own wealthy supporters. It really was possible to get away with it.

The starkest consequence of this attitude was that it continued to be acceptable, within Fianna Fáil at least, for senior politicians to accept money from wealthy private individuals. This became clear in the party's reaction to the gradual
revelation of the strange state of Bertie Ahern's own finances. The Mahon tribunal, successor to the Flood inquiry, looking into an allegation that Ahern had accepted money from the Cork-based property developer Owen O'Callaghan (a claim both men vigorously denied), found itself examining bank lodgements and other transactions totalling IR£452,800 - the equivalent in 2008 of €886,830. These lodgements - some of them in sterling and therefore almost certainly not from his salary - were made to Ahern's accounts in the period between 1988 and 1997. In that respect Fianna Fáil could claim that they represented an old pre-Celtic Tiger political culture. The problem was that, as they began to be revealed from 2006 onwards, not one senior figure in Fianna Fáil, least of all Ahern himself, managed to state that the acceptance by a senior minister (Ahern was Minister for Finance for much of the period in question) of private donations was unequivocally wrong.

The best that Ahern could manage in relation to his acceptance of two supposed ‘dig-outs' from businessmen was that they represented ‘an error of judgment' because they were ‘capable of misinterpretation'. (The real problem therefore being, of course, the bad-mindedness of the misinterpreters.) The realisation that the sitting Taoiseach did not qualify for a tax clearance certificate from the Revenue (demanded of most of those undertaking state contracts) caused barely a ripple of concern in the party. Even when it was revealed that IR£30,000 from a Fianna Fáil constituency account was used to buy a house for Ahern's girlfriend Celia Larkin, no senior party figure could be found to express disquiet. Even the party's resident intellectual Martin Mansergh denounced condemnations of Ahern's behaviour as ‘synthetic pseudo-ethical furores'. This defiance was bolstered
by the knowledge that Ahern could get away with it. Politically, there was no price to pay: Ahern was re-elected as Taoiseach in 2007 even though he had admitted being on the take.

In many ways, the explanations of Ahern and of those who had given him money brought public life to a new low by openly appealing to a culture of cronyism that he seemed to regard simply as the way things were done. When pressed as to why he appointed people who gave him money to state boards, such as Aer Lingus, Dublin Port and Enterprise Ireland, Ahern stated on RTE television that ‘I didn't appoint them because they gave me money, I appointed them because
they were my friends
'. This perfectly encapsulated the problem of what Brian Lenihan would later describe, in relation to the banking crisis, as the problem of Ireland being a small country ‘with too many incestuous relationships'.

This, after all, was the point of the relationship between businessmen and politicians. There were certainly times when there was a direct exchange of money for favours - as in the case of Haughey in the 1980s making tax changes that conferred massive benefits on Dunnes Stores, whose boss, Ben Dunne, was one of his main benefactors. Mostly, though, it was all about being on the inside track, being in the know, getting your calls returned, being able to have that quiet word. It was also a kind of freemasonry - acquiring a reputation for being one of the lads (and it was all lads) conferred an aura of knowledge and authority that impressed one's peers.

In explaining why he gave Bertie Ahern money even though he barely knew him, one businessman, Barry English, encapsulated this attitude perfectly: ‘I work in the construction industry and my clients are developers and the like and I
don't think it does me any harm to be known as a friend of Bertie Ahern's.' On the other side of this exchange, Ahern's expression of gratitude to English was equally telling: ‘He said, “Thanks very much and I'll sort you out.”'

The other side of this warm glow of inclusion was the fear of exclusion. If membership of the circle gave you the sense that you were being ‘sorted out' by the Minister for Finance (as Ahern was at the time of the dig-out by English and other businessmen), not being one of the lads made you wonder whether a rival was being sorted out ahead of you. In the RTE documentary
Bertie
, Ahern's money-man Des Richardson explained of the first dig-out in December 1993, when he raised IR£22,500 for his pal, that ‘If I wanted to raise IR£100,000 for Bertie Ahern, I could have done that in one week'. He subsequently explained to the present writer what he meant by this statement. Richardson referred to a payment of IR£5,000 from Pádraic O'Connor of National City Brokers (a payment O'Connor maintained he intended for the party, not for Ahern personally): ‘I could have raised IR£100,000 for Bertie in one week, and let me explain how. Pádraic O'Connor from NCB had given me IR£5,000 for Bertie. If I had gone to every stockbroker in Ireland and said “Pádraic O'Connor/NCB has given me IR£5,000 for Bertie Ahern, who was minister for finance at that time, so I would like you to do likewise”, in my view, they would have been falling over themselves to do so, just to maintain a “perceived” level playing pitch for their company. It's all about perception.'

In the minds of those who were raising money for Fianna Fáil (and Richardson was the party's chief fundraiser), business people were not giving money because they wanted to support democracy but because they ‘perceived' that otherwise
their company would be playing on a pitch that was slanted against them. In many ways, it barely matters whether that perception was accurate or not. It served in itself to create both the fear of not being on the inside and the promise of being ‘sorted out' if you were. It tilted relations between money and politics, business and the state away from the general public interest and towards a search for mutual benefits in which politicians got access to the money and business people got access to the politicians.

The beauty of this dependence on ‘perception' is that it is unquantifiable, unaccountable and therefore limitless. A system in which everyone knows that bribes have to be paid in return for favourable treatment from the authorities is obviously sleazy. But one in which everyone is trying to size up who's in and who's out is more insidious and in some respects even more corrosive. Because it is fluid and unspoken, it is also unbounded. For those who see themselves as insiders, it generates a sense of being untouchable. And for those who see themselves as outsiders, it creates a sense of fear. They never feel they quite know what's going on. They believe there is a power that could, if it wished, do them harm. They learn to be cautious, watchful and discreet.

On both sides of this equation, there were dire consequences. For those on the inside, the sense of being untouchable fed what would become a hysterical hubris. For those who were making big money in banking and property, the belief, as Bertie Ahern put it in 2006, that ‘the boom times are getting even more boomier' (and would continue to get even more boomier still) was a potent enough drug, creating its own delusions of invulnerability. But its effect was greatly enhanced by the idea of having a special relationship with power.

That relationship was ideological as well as financial. Besotted with the idea that the titans of free enterprise could do no wrong, Fianna Fáil politicians convinced themselves that their close alliance with the builders and developers was in fact a form of public service. The interests of the nation were those of the men who made the money and the men who made the money were those who gathered in the Fianna Fáil fundraising tent at the annual Galway races, a favourite meeting place for property developers, builders and party bigwigs. As Bertie Ahern told the
Irish Times
in 2004, ‘If there are not the guys at the Galway races in the tent who are earning wealth, who are creating wealth, then I can't redistribute that.'

The reality that Ahern's governments made damn sure that the wealth of the guys in the tent was not redistributed anywhere does not mean that this statement was insincere. It perfectly encapsulated the mix of half-baked egalitarianism and crony capitalism that characterised Fianna Fáil's governing style. Ireland was one big tent, but that tent was full of developers, builders and other rich men making substantial donations to the party.

The sense of intimacy (or, in less attractive terms, incestuousness) that was epitomised in this relationship set the tone for a great deal else in Irish institutional and business culture. From banks run by board members who were directors of each other's companies to regulators and civil servants going to work for the companies they had been supervising, the ethics of the small world permeated Irish business. The problem was that Ireland was no longer a small world, but an extremely open, fast-growing global economy in which the stakes were getting ever higher.

On the other side of the equation, that of the outsiders, the
consequences were less obvious but just as lethal. If the insiders felt untouchable, the outsiders worried about laying a glove on them. The sense of impunity enjoyed by those within the circle was tangible and obvious. Especially if you were in the business of attempting to regulate, control or supervise the massively growing areas of the indigenous economy like banking and property, you had to take notice of the fact that some people belonged to a circle whose circumference was never quite defined.

The assumption that there were clear, unambiguous ethical and legal standards that could be upheld without fear or favour did not apply in an atmosphere where fear and favours were always in the air. Rules seemed to apply to some and not to others, and it was a matter of conjecture and surmise as why this should be so. The guesswork would have been foolishly incomplete if it did not include the question of political connections.

Above all, ethics became irrelevant. The lines between thievery and patriotism, between private advantage and the national interest, became impossibly blurred. And if you were a public servant who was supposed to be guarding those borders and ensuring that they were not crossed, you were patrolling a minefield.

‘For God's sake, whatever you do, don't rock the boat'

- Maurice O'Connell, governor of the Central Bank

 

 

 

It was rather apt that the Irish Central Bank literally could not spell the word ‘ethical'. One of its inspection reports on a small Dublin merchant bank, Guinness and Mahon, which was running a huge tax scam for its clients, expressed the view that ‘it is not, in our view, appropriate or ethitical [
sic
] for a bank to participate in, as distinct from advise on, tax avoidance schemes'. Stumbling over ethics was one of the bank's specialities. A central cause of the disaster that hit the Irish financial sector in 2008 was a culture, both of banking and of bank regulation, in which right and wrong were strange and elusive concepts.

For more than thirty years before the Irish banking system collapsed, it had been colluding, on a massive scale, with fraud, tax evasion and routine breaches of exchange control laws. Large sections of the Irish business class, from strong farmers to chairmen of blue chip companies, were hiding money in offshore accounts or claiming to be living outside the country when they were in fact making that money in shops, pubs, property deals and companies within its borders. While pre-Celtic Tiger Ireland was suffering from mass unemployment, mass emigration, a squeeze of vital services in health and education and a persistent crisis in its public finances, many of its most respectable citizens were simply
absenting themselves from society. The banks were helping them to do so, and the authorities in turn were scrupulously ignoring what was going on.

The scale of the racket can be judged from the amount of tax that was eventually harvested after media investigations had prompted official inquiries. In all, the Revenue was eventually able to identify 34,000 people who had engaged in one or other of five major tax-dodging enterprises. By April 2009, it had recovered €2.5 billion from these individuals. To put this in perspective, €2.5 billion is almost a tenth of the entire Irish national debt in 1987. These people, of course, were simply those who were ultimately caught.

The important point about these scams, however, is that they were not secret conspiracies, so wickedly brilliant that even the best minds in the public service could not penetrate their dark purposes. The truth is that, in the case of two of the largest scams - the widespread evasion of Deposit Interest Retention Tax (DIRT), and the elite Ansbacher con, in which wealthy individuals salted money in the Cayman Islands to evade tax - both the Central Bank and its political master, the Department of Finance, had a damn good idea of what was going on. To understand the sickness at the heart of the Irish banking system it is necessary to grasp the extraordinary fact that the state authorities knew about widespread organised crime committed by financial institutions and their customers and did essentially nothing to stop it.

As the scandals unravelled in the late 1990s, the Central Bank, which regulated the system throughout most of the relevant period, would claim that its job was to make sure that the banks were solvent, and that issues like tax evasion were not really its business. It is worth noting that this claim was always patent nonsense. As the High Court inspectors who
investigated the Ansbacher con put it, ‘from the very beginning of banking regulation the [Central] Bank was required to have regard to qualitative factors. These factors included the quality of the management of a bank and the nature of the activities being carried on by a bank. Thus, whilst it has been emphasised . . . that the Bank is not principally concerned with Revenue matters, the Bank was and is statutorily obliged to concern itself with the proper regulation of banking. In this context, any evidence that a bank was facilitating tax evasion was at all material times a matter of concern for the Bank.' To put it simply, if evidence that bankers were engaged in, or colluding with, financial crimes wasn't the Central Bank's concern, it is hard to imagine what would be.