Corporate Governance & ODCE

pedroeibar1

Fascinating study of the results of the UK’s equivalent to our ODCE. Apart from a ‘corporate governance’ interest for existing directors in Irish entities, it is interesting from a credit control perspective as it indicates the higher risk industry sectors for Irish exporters.

In the UK Director disqualifications increased by 11% this quarter (264) compared to 237 in Q1 and by 46% over the same quarter (Q2) in 2013-14 (264 compared to 181). Many disqualification actions date to wrong-doing during the ‘credit crunch’ 2008 to 2010. Approximately half of the director disqualification orders made this quarter were the result of directors trading through the bad times to the detriment of their company’s creditors.
Comparing the first six months of the 2014-15 financial year to the last six months of the 2013-14 financial year, director disqualifications have increased by 33% from 377 to 501.

I’ve no idea how many staff work in our ODCE, or what its budget is, (underfunded? understaffed? underactive?) but its website informs us that an underwhelming total of six (6) directors have been disqualified this year.

Gloomtastic!

My wife manages the Credit Control department of a large organisation and says Corporate Governance in Ireland is a joke.

Just been on the ODCE website and it's clearly just another toothless quango that is there for appearances only. One of the cases they highlight as a 2014 disqualification - the infamous Bailey Brothers of Bovale - relates to what happened in 1998 - 16 years ago! Yet Nama have no problem working with them and lending them our money http://www.independent.ie/business/irish/bovale-chief-gets-nama-nod-for-d4-development-30158964.html

pedroeibar1

Agreed. I'd add that the credit control function in Ireland is also a disaster (no offense to your wife;)) - how anyone supplied or lent money to most of the big builders in the noughties is beyond my understanding - no accounts, stupid prices, greed to 'get in the door', etc.
What I also find surprising is that on this BB (supposedly about management) the thread has had so few views and apart from Duckett's 'thanks' yours is the only response.

Graham

pedroeibar1 wrote: »

I’ve no idea how many staff work in our ODCE, or what its budget is, (underfunded? understaffed? underactive?) but its website informs us that an underwhelming total of six (6) directors have been disqualified this year.

According to the ODCE for 2013:

• the securing of the rectification, on a non- statutory basis, of directors’ loans issues to an aggregate value of approximately €62m;
• successfully securing, in 230 cases, compliance on the part of a range of parties with their obligations under the Companies Acts through more formal measures;
• the securing of the disqualification of 25 individuals, and the restriction of a further 3, on foot of Court applications made by the Office;
• the restriction of 219 company directors, and the disqualification of a further 9,
on foot of liquidators’ applications made to the High Court subsequent to the Office’s having scrutinised the underlying liquidators’ reports; and
• the securing of 17 criminal convictions for breaches of the Companies Acts.

42.9 Staff
Budget €5.4million
Actual €3.1million the differential mainly down to expected legal costs not arising.

pedroeibar1

Thanks, but I was writing about 2014, so my figures remain valid.

It is a pity the ODCE website and media releases/presence are so poor and reactive. Much of their 2013 PR is leaden in tone and meaningless. For example:-

• the securing of the rectification, on a non- statutory basis, of directors’ loans issues to an aggregate value of approximately €62m;

Meaningless unless the number of cases involved is given.

• successfully securing, in 230 cases, compliance on the part of a range of parties with their obligations under the Companies Acts through more formal measures;

Meaningless - this could mean a “Dear Sirs, Please file your accounts” letter.

• the securing of the disqualification of 25 individuals, and the restriction of a further 3, on foot of Court applications made by the Office;

Meaningless – how many of those were as a result of actions taken in previous years? That figure probably includes those 17 below with the criminal convictions who are automatically disqualified.

• the restriction of 219 company directors, and the disqualification of a further 9, on foot of liquidators’ applications made to the High Court subsequent to the Office’s having scrutinised the underlying liquidators’ reports;

Meaningless – the liquidators are obliged to take this action (Sections 56 and 150) unless it is waived by the ODCE. How many directors agreed to a “restriction” rather than risk a “disqualification” and how many had no option but to accept it due to lack of funds to fight?

• the securing of 17 criminal convictions for breaches of the Companies Acts.

Meaningless as stated – were these individual actions? How many were referrals from CAB/Revenue?

In the last couple of months there were about 1,600 companies struck off or dissolved. Another 3,700 are strike-off listed. How many of the promoters of these will escape?

What is interesting, inferred from the above figures, is that much of the work is happening outside the courts system, as borne out by the overprovision for legal fees.

I’m not out for a witch-hunt on anyone whose business has failed, nor to punish directors for misjudgement or errors, but I do wish to see the cowboys dealt with. And I contend what we have is not fit for purpose.

The current government’s stance on governance is equally poor to that of the last. Appointing someone to a board because he is a party hack or someone’s driver is an insult to every professional director.

Graham

pedroeibar1 wrote: »

Thanks, but I was writing about 2014, so my figures remain valid.

I didn't doubt that, threw the bullet points in there while answering your how many/how much question.

pedronomix

The ODCE, Garda fraud squad, Irish Water all have a common denominator, the are not staffed or run by qualified experienced professionals who are experts in their subject, as would be the case in any other normal commercial entity and as happens in many of the semi-states. To attempt to run any specialist technical unit/business without the appropriate expertise and specialisms is doomed to fail. Revenue stand out as an example of the public sector properly structured and empowered, run in line with modern best practices, use of technology and widely used internationally as an example of how to do that job.

dbran

The ODCE are underfunded and under resourced. This much is clear.

A lot of time was taken up dealing with the fallout from the Anglo case which stretched their resources somewhat.

Also due to the way the reporting structure was set up (without any thought of the actual practicalities involved) they were snowed under by auditors etc. having to report things to them which were of no real consequence.

Also, the wording of Company Law as it is currently set out is inherently flawed. There are far to many loosely worded sections where it is next to impossible to get a conviction because the directors "ought to have known" or that didnt "knowingly know" that what they did was illegal. Most of the sections have never been tested in court and the judges, as there is no real precidence, use their own interpretations.

So it is partly because of scarce resources, partly because of poorly written legislation. Not just a simple as an inefficient quango in fairness.

dbran

pedronomix

Be that as it may, one lot of Sir Humphrey's writing bad legislation for another cohort of their own to enforce/implement/etc is quite irrelevant and only serves to confirm my fundamental point regarding the lack of talent and skill within the public sector/service when it comes to dealing with such real world issues. A bit like the new charter on here that we are still waiting to see!!

pedroeibar1

dbran wrote: »

The ODCE are underfunded and under resourced. This much is clear.

A lot of time was taken up dealing with the fallout from the Anglo case which stretched their resources somewhat.

Also due to the way the reporting structure was set up (without any thought of the actual practicalities involved) they were snowed under by auditors etc. having to report things to them which were of no real consequence.

Also, the wording of Company Law as it is currently set out is inherently flawed. There are far to many loosely worded sections where it is next to impossible to get a conviction because the directors "ought to have known" or that didnt "knowingly know" that what they did was illegal. Most of the sections have never been tested in court and the judges, as there is no real precidence, use their own interpretations.

So it is partly because of scarce resources, partly because of poorly written legislation. Not just a simple as an inefficient quango in fairness.

dbran

I disagree.

It’s hard to know what is (not) happening. The ODCE does have lawyers and accountants on its staff. I do not accept that company law is ‘too unspecific’ – all law is unspecific, court case results make law. Sitting on one’s ar$e and whining about the bad law and big bad lawyers/rich directors in the outside world is an unacceptable cop-out. Not taking actions that have a reasonable chance of success is commercial cowardice.

Blaming shedloads of paperwork on auditors is not acceptable either. Demand a précis/summary on the top of each report from them with a recommendation (which they’re obliged to do anyway) and the time could be managed more effectively.

Nor do I accept that the ODCE is underfunded, it actually gave back/did not use its budget allocation for years and according to its last annual report its ‘legal costs’ spend on enforcement in 2011/2012/2013 has reduced from €683k to €589k to €175k. See page 7 here

I’m not in favour of shovelling taxpayers money to lawyers, but any businessperson knows you have to spend to obtain results. But for the ODCE in this climate to drop its legal spend to €175k in a YEAR? No wonder the result is just a few disquals in H1 2014. What MD of a commercial entity would accept that as an adequate result from forty-odd staff and a budget of a few million?

In any of the other jurisdictions I’m familiar with the equivalent office is staffed by terriers, eager to make a name for themselves (to get headhunted). Maybe our guys are pussycats purring away on snooze control in their cosy little jobs?

pedroeibar1

pedroeibar1 wrote: »

I’m not out for a witch-hunt on anyone whose business has failed, nor to punish directors for misjudgement or errors, but I do wish to see the cowboys dealt with. And I contend what we have is not fit for purpose.

One hundred and thirty days in court, several millions in costs and where are we?

mrawkward

It is a more fundamental problem than staff numbers, staff quality is key. It is pretty clear that the public servants in the ODCE are every bit as talented, skilled and competent as their counterparts were in Patrick Neary's Financial Regulators Office. I am sure no jobs, time served promotions, lump sums or pensions will be harmed by this....yet again.

The other rather outrageous thing that strikes me is that when the evidence/testimony of shredding came to light, I fully expected the judge to halt the trial....process clearly and overtly tainted or even rigged. Perhaps S Ross has a point about judges.... to do so would have denied a lot of fees to a lot of legal eagles. Cynic is me!

Gloomtastic!

pedroeibar1 wrote: »

One hundred and thirty days in court, several millions in costs and where are we?

Ireland! :rolleyes:

pedroeibar1

mrawkward wrote: »

It is a more fundamental problem than staff numbers, staff quality is key. It is pretty clear that the public servants in the ODCE are every bit as talented, skilled and competent as their counterparts were in Patrick Neary's Financial Regulators Office. I am sure no jobs, time served promotions, lump sums or pensions will be harmed by this....yet again.

The other rather outrageous thing that strikes me is that when the evidence/testimony of shredding came to light, I fully expected the judge to halt the trial....process clearly and overtly tainted or even rigged. Perhaps S Ross has a point about judges.... to do so would have denied a lot of fees to a lot of legal eagles. Cynic is me!

I agree – comment was not appropriate at that time because the matter was still sub judice. The ODCE’s statement is cringe-making; it’s rare to see such a mealy-mouthed release. Here is the link

Their PR firm has no idea, does it really believe that people in the real world would be fooled by those excuses and claptrap?

From PR

However, they occurred at a time during which the staff member concerned was under enormous stress and against a backdrop of significant mental health issues, certain of which pre-dated the incident and which culminated in the staff member concerned being hospitalised for almost two months in the immediate aftermath of those events.

So what? All senior managers work under stress of varying degrees, it’s what we are paid to do! The real question is why, when his mental health issues were known, was he appointed to a senior role in the case? Why try to pin the whole fiasco on him and look for a sympathy vote?

The ODCE is a failure under past and present management. It has a budget of millions, 50 staff and a history of pi$$-poor results. It had one case in 2017 - a slam-dunk because the Gardaí ran the initial case and the defendant pleaded guilty. It had just one case in 2016, another slam-dunk as the auditor pleaded guilty in a lower court to a few sample charges. In 2015 it was a few more, again a little outing to the District court where a few auditors were rapped on the knuckles and paid a few quid to the Simon Community.

Business people are results-driven. Oh, I forgot, the Minister responsible is Mary Mitchell-O’Connor, whose entire career – until election a few years ago - has been as a primary teacher.

duploelabs

pedroeibar1 wrote: »

Oh, I forgot, the Minister responsible is Mary Mitchell-O’Connor, whose entire career – until election a few years ago - has been as a primary teacher.

In fairness, her replacement is doing as well as her predecessor is in her new(ish) role

The_Pretender

A lot of it really comes down to case law and the precedents set. The case we've to look to when considering a reckless trading action against the directors of a company is that of Appleyard Motors. For the first time in years, the High Court found the directors to have traded recklessly and made them liable for losses incurred as a result.

However, the Court of Appeal found that the directors had reason to believe that, while the situation had been perilous for years, that they would still be able to continue to trade. The CoA found that it must be clear that the directors knew that it would in fact cause a loss to its creditors, not that it might. :rolleyes:

pedroeibar1

The_Pretender wrote: »

.......The case we've to look to when considering a reckless trading action against the directors of a company is ................

Reckless trading? Where does that come from? That has absolutely nothing to do with this case.The ODCE faced an uphill battle, but do not forget it should have learned a lesson from screwing up in an earlier Anglo trial. Company law has since changed with the introduction of the recent act, but even if he were tried under the new act, the jury would have had the same direction from the trial judge. The blame squarely lies with the novices in the ODCE.

Sean F faced 27 charges relating to misleading the bank's auditors and providing false information about loans to him and to people connected to him between 2002 and 2007.
The judge directed the jury to acquit him because

• Key ODCE witnesses had been coached
• The ODCE had failed to seek out evidence of innocence as well as guilt.
• The ODCE made assumptions of guilt and tried to build their case on that presumption
• The ODCE's chief investigator shredded documents that may have been material and of assistance to the defence and damaging to the prosecution.

Any first-year accountancy or law student would have enough cop to know not to do any of those things. But the ODCE has only half a dozen solicitors/accountants on its staff, or about 10% of its total. What sort of recruitment policy is that? Were no lessons learned from the Dept. of Finance that once had no economists?

I actually have more sympathy for Seanie’s family than I do for the ODCE staff, the former were only bystanders, the latter an inept bunch of tools that are better suited to footing turf or snagging turnips.

Question – Will the disciplinary committee of the professional body to which SF belongs do anything?