Why Sir Tony got the deal

eircomtribunal

Press statement from the Green Party sheds some more light on things not so long ago.

Peter



"15th February 2004 PRESS STATEMENT

_

Green Party reveal details of secret Government deal allowing Valentia to purchase Eircom

The Green Party has obtained, via the Freedom of Information Act,_ copies_ of correspondence between the Department of Finance and tax advisors to the Eircom Employee Ownership Trust (ESOT) from June 2001._ The letters shows how the Governement gave a guarantee to amend Irish tax laws to enable Valentia to take over Eircom in the summer of 2001._

Securing the ESOT support was the key to Valentia's success_but it is now clear that that support was contingent on the Minister of Finance amending the Irish tax laws to suit Valentia.______ Valentia were forced to offer some €225 million in preference shares to purchase part of the ESOT's_14.9% existing stake in the company, as it_ had insufficient ordinary share capital to buy the ESOT holding and still maintain a controlling stake in the company.__ The problem with these preference shares was that they did not have the same tax free status which the ordinary shares would have had when used for such a takeover.__ Not surprisingly the ESOT trustees were unwilling to accept a Valentia deal whereby their members would have to pay tax on the capital gain or the dividend income from these preference shares._

In a frantic exchange of correspondence in the week leading up to the 21st of June 2001, the KPMG tax advisors for the ESOT wrote to the Government looking for a guarantee that the tax laws would be changed to extend the tax exemption to include the use of such preference shares.__ Despite clear warnings from his department about the possible consequences of such a change, the Minister of Finance signed along the dotted line on the 21st of June 2001._ The bidding war continued with Denis O'Brien’s Eisland consortium for several weeks after that date but the reality was that Valentia already had the deal in the bag.__ The Minister then retrospectively amended the Tax Consolidation Act 1997_via an amendment contained in Section 13 of the 2002 Finance bill.__ In July 2003 Valentia Holdings raised €512 million_ in a U.S. bond issue which was distributed back to the shareholders.__The Green Party estimate that over €100m of this money would have been returned as cash to the ESOT either in the form of dividends from their preference shares or else in redemption of these shares._ All of which was, of course, tax free.

Commenting on the revelations, Green Party_ Communications spokesperson, Eamon Ryan TD,_ said today, "The letters show that the Eircom board and the Unions were very keen to see Valentia buy the company but_ what is remarkable is how the Irish Government were so eager to become a consort to the deal.__ We can understand why the venture capital consortia and the trade unions would try to get the very best for their members but why was the Government so willing to bend over backwards to make sure that this particular bid was approved?"

"Why did the Minister of Finance ignore the warnings of his own officials that the tax laws should not be changed just to suit the particular set of circumstances that an individual company might require.___ In what other country in the world would the government secretly guarantee to change the law to favour one bidder, during_ a competitive takeover battle for one of the largest companies in the state?"

" The civil servants also raised alarm bells that the tax break might have to be applied to other employee preference shareholder schemes, which could then be used as vehicles for tax free payments to employees._ However the concession was custom designed for the circumstances of this ESOT bid._ It would seem that there is one tax law for ordinary workers and a seperate one for those who are within the golden circle of government influence. "

"The 550,000 other ordinary shareholders in the company who were forced to sell their shares to Valentia at a loss as a result of this deal the , must also wonder why the Minister of Finance was so indifferent to their interests in the matter.__ Did no-one in the Government question the policy of facilitating the sale of this vital economic infrastructure to venture capitalists, who were always more likely to try to make a quick profit than invest in the long term future of Irish telecommunications? "

"The Government rushed though the decision to meet a deadline that_the KPMG tax advisors said was crucial but which in the end seemed to be of little significance._ The "same-day" response from the Government in this case must sicken anyone else who painstakingly presented their pre-budget submissions in the normal manner."

_"Unfortunately the role of our parliament in scrutinising legislation also comes out very badly in this affair._ Minister McCreevy's contribution at the second stage debate was worded in a way which would make you think that he was actually tightening up the tax code rather than doing a favour for a particular company._ Unusually, the committee stage debate on the relevant section of the Bill_ was held in private session, and more typically_ the report stage of the debate was guillotined before coming to the relevant section.___ The information_ we have gleaned is, however, another vindication of the Freedom of Information Act, which can sometimes belatedly throw light on the way that vital economic_ decisions are made in Ireland."

“The Green Party _want to encourage more employee share ownership schemes so that workers have a direct interest in the future of their company but the Government seems to see them as a sweetener to ease the privatisation of state assets.__ By bending the tax laws to allow the Valentia deal go through, the Government has created a climate whereby any new ESOT will be the target of corporate raiders rather than corporate strategists."

"Minister McCreevy depicts himself as a tough negotiator who is happy saying no to vested interests but in this deal he rolled over without hesitation for the Valentia and ESOT shareholders._ On Tuesday next at Ministerial question time _in the Dáil, the Green Party will be asking him why,"_ concluded Deputy Ryan.

_
INFORMATION

Eamon Ryan TD________________________________________________ 086 829 4429

Stephen Rawson Press Officer__________________________ 087 235 7551"

dahamsta

You can read it without all the bizarre underscores here.

I wonder will Denis O'Brien seek vengeance...

adam

Moriarty

Blimey.

Capt'n Midnight

GUBU - except it's not unbelieveable or unprecidented.

Where are we now in the OECD corruption league ?

nahdoic

Double blimey.

The letters show that the Eircom board and the Unions were very keen to see Valentia buy the company but what is remarkable is how the Irish Government were so eager to become a consort to the deal. We can understand why the venture capital consortia and the trade unions would try to get the very best for their members but why was the Government so willing to bend over backwards to make sure that this particular bid was approved?

Can't wait to hear the response next tuesday.

TheSonOfBattles

Originally posted by nahdoic
Can't wait to hear the response next tuesday.

Will that be live on radio/tv? Or will I have to wait till a transcript is available or the news shows it?

Keep in mind I watch next to no tv, never listen to the radio and know nothing about politics. It may be a silly question, but I honestly have no idea, and I really wanna hear what they have to say about this.

Ripwave

Originally posted by nahdoic
Can't wait to hear the response next tuesday.

Why - do you honestly think this government will give a straight answer to a straight question?

dahamsta

What annoys me most is that this is only coming up now.

adam

yellum

Oh sweet lord. Eircom Tribunal indeed.