Walter Hobbs recalls vividly being called by Prime Time on the afternoon of April 23, 2015, at the height of the controversy into the sale of Siteserv to the businessman Denis O’Brien. It was a frenzied time with various accusations being made in the Dail in relation to the sale of Siteserv, a utilities and infrastructure business, to O’Brien for €45 million in 2012. Some of the allegations would later prove to be false.

Siteserv’s main creditor, the state-owned bank IBRC, formerly Anglo Irish Bank, wrote off more than €100 million of borrowings owed by the distressed business after the sale closed. When the deal went through there was some critical coverage of it, but it was relatively muted.

By 2015 the circumstances of the sale were being intensely criticised in the Dail, media and by business interests who had not been invited to bid for the company. Hobbs was now being contacted by the state’s biggest television current affairs show, asking him for comment.

“It was the third phone call I’d received from a journalist that day asking me to defend the sale of the business,” Hobbs recalled. “I decided to go on.”

Hobbs is a chartered accountant, corporate financier, venture and private equity investor, and an experienced non-executive director. He had a blue-chip track record in KPMG for 11 years, AIB corporate finance for seven years and with venture firm ACT for 15 years.

He was also one of the people at the epicentre of the Siteserv deal, although, up until then, he had seldom featured in media reports on the transaction. 

Now, however, he was on national television defending the most controversial business transaction since the awarding of the state’s first mobile phone licence in 1995. His intervention however wasn’t enough to calm a gathering storm that had been brewing for weeks.

To deal with the claims and counterclaims surrounding the transaction, the Department of the Taoiseach under Enda Kenny set up the IBRC Commission.

Carried out in secrecy and given a sweeping remit, the IBRC Commission would sit for seven years, interview 41 witnesses, collect affidavits from 56 witnesses, and gather millions of documents.

Six months ago, the IBRC Commission produced a 1,545-page report that found the Siteserv transaction was from the perspective of the state-owned bank so “tainted with impropriety” that it was “not commercially sound”.

For eight years, Hobbs, an important figure in the sale of Siteserv as a key link between the company and the bank, could not and did not say anything about the deal, the fallout from which took over his life. 

Unexpectedly Hobbs approached me to meet for a coffee recently. I wasn’t sure if there was anything more to say about Siteserv but agreed to meet him with an open-mind. 

Hobbs had a lot to say. Not everyone will agree with all Hobbs says, not least perhaps the Commission.

But the corporate financier makes his case based on first-hand experience. It is in the public interest to publish his views of an investigation paid for by the public but carried out behind closed doors.

Hobbs defends his decision-making as an advisor to IBRC on the transaction and deals with the impact the Commission had on his life. In effect, he was under secret investigation by the State over a seven-year period as were dozens of others embroiled in it.

“It took me time to realise that business opportunities evaporating at an advanced stage had the common factor of Siteserv behind them,” Hobbs told me.

“You learn to sense where the closed doors are and adopt your business life accordingly, which I have successfully done.”

In a wide-ranging interview Hobbs criticises the failure by the state to carry out a scoping exercise before starting its investigations saying it “rushed into a commission of investigation just to get the allegations off the political agenda”.

The length of time it took to reach conclusions and the cost of its work both to the state and witnesses are also criticised; Hobbs says he, and some other witnesses, could not afford the millions required to fund hiring the best lawyers and experts to defend themselves over seven years against a well-resourced state commission. “Witnesses without financial leverage achieved very little,” he claims.

Hobbs believes appointing legal experts to lead the investigation into IBRC and Siteserv was a fundamental mistake.

“An international expert could have investigated the transaction in a few months, at very small cost, and come up with credible conclusions,” he says. “The investigation of the Cervical Check controversy by Dr Gabriel Scally is an obvious template.”

Hobbs says until Ireland reforms how it carries out investigations, businesspeople should be careful about taking on state work.

“The professional business community should be very wary about engaging in commercial transactions which have a State dimension,” Hobbs warns.

Hobbs also makes 12 recommendations to prevent what happened with the IBRC Commission from happening again. This is our interview.

******

Tom Lyons (TL): How were you appointed and what was your role in the sale of Siteserv to the businessman Denis O’Brien?

Walter Hobbs (WH): I was approached by IBRC in summer 2011 asking me to become a non-executive director (NED) at Siteserv to represent the bank’s interest on the board with a particular emphasis on the expected sale process.

They told me that they were exposed for circa €150 million but hoped to extricate themselves with around €50 million from the sale process. They also said they expected to have to buy off the shareholders with €5 million.

I was sent some documents for review from KPMG, PWC and others. I quickly reverted to the Bank declining to become a NED of Siteserv. I was not interested in becoming the NED of a plc that had a balance sheet that was €100 million underwater. I also felt that the notion of a NED joining the Board to watch out specifically for the interest of a major secured creditor was not legally sound. As a NED, one would have to act in the interests of all creditors and shareholders.

However, I offered to oversee the sale process in a consultancy capacity. The idea was that it would be a non-executive role, just to be the eyes and ears of the Bank in the process and keep them informed with my independent observations. I was to have no decision-making role on behalf of the Bank. The sale process itself would be resourced from KPMG and Davy together with the company management and staff. It was a significantly lesser role than that of a NED but nevertheless totally focused on finding a buyer and agreeing terms.

The Bank reverted and wanted to go ahead. I was connected with the late Hugh Cooney who was the chairman of Siteserv at the time.

Eventually, I signed a consultancy agreement with Siteserv. They were paying the bill even though I was working for IBRC. That was not unusual in situations like this. I attended my first sale process meeting in early September 2011.

TL: Did you have sufficient information to do your job properly on the behalf of IBRC?

WH: Yes, absolutely. I attended all the meetings and was included in the email loops. My presence in the process was accepted and respected.

TL: Do you feel that things occurred during the sales process that you should have been told about?

WH: No, I don’t. Human nature is to want to know every tittle-tattle. Nothing of any significance that had any bearing on the transaction process and decisions made was withheld from me.

TL: Should you have been told that Niall McFadden, the founder of Siteserv and a large creditor of IBRC, was involved in the Denis O’Brien bid unknown to you, IBRC and all the advisors?

WH: Firstly, Niall McFadden was a free agent as his consultancy contract with Siteserv had been terminated some time earlier on the insistence of IBRC. As such, he was free to offer his wares in the marketplace as he chose.

He saw Denis O’Brien as a good target to do business with. He set about persuading him to buy Siteserv and thereby earn for himself an introductory fee and a role in Siteserv after the purchase.

Secondly, the prospective purchaser Denis O’Brien was free to retain advisory services as he saw fit and involve whoever he wished in the running of Siteserv after purchase. He had no disclosure obligation to the sale process in that regard. Equally, Mr O’ Brien was entitled to issue shares in return for services provided, that was no one’s business except his own.

Other bidders retained advisers, some of whom were disclosed and others not. This is just the normal conduct of such business.

There is a big difference between liking to know and having the right to know.

TL: This was a very complicated sale undertaken in a tough macroeconomic environment. Originally the bank considered appointing PWC to oversee the process but instead appointed an individual – you. How much were you paid to oversee the sale and did you have sufficient resources to adequately do so?

WH: I don’t think this was a complicated transaction, but it was a pressurised one.

We were selling the businesses as a package out of the plc. There wasn’t even going to be warranties and indemnities given on the sale. It was very straightforward in that sense.

The macro-economic environment was difficult but things were improving. International funds were flying into Ireland in numbers hoping to buy assets on the cheap.

One factor in my mind as an experienced investor was that Siteserv was not a particularly attractive business from an investment perspective. It was largely reliant on a couple of lumpy contracts that could easily move elsewhere. I had real concerns about any preferred bidder getting this business acquisition through the final stages of an institutional investment committee approval process.

Things only really got rough from January 2012 when a run started on the company. Rumours of restructuring caused institutions providing credit insurance and bond coverage to pull their lines. Materials required to fulfill contracts had to be paid for in cash. Initially, Siteserv appeared to have weeks to stave off insolvency. As things got worse, we were down to days. That was the context in which big decisions were made.

Therefore, for everyone, this became a highly pressurised situation. It was hard not to get caught up in that pressure. The total collapse of Siteserv was staring us in the face with its awful consequences.

Denis O’Brien took the initiative to close out a deal in return for exclusivity. In my view then and now, none of the other bidders would have closed a sale in the circumstances. It should be acknowledged that Niall McFadden was instrumental in bringing Denis O’Brien to the table on this sale.

I was paid €5,000 a month as a consultant. This sale process was a journey into the unknown and it was hard to price the service to be provided by me. The sale process might have gone on much longer if the cash crisis had not happened and I would have earned more. The monthly fee was in line with that of a good NED fee.

I had a renegotiation clause but I chose not to exercise it due to the difficult circumstances that had arisen.

I gave the role whatever time it needed; the fee arrangement was a relatively minor issue. The remuneration was not adequate. That happens, some deals work better than others from a fee point of view.

A cautionary tale of a commission

TL: Why do you think the IBRC Commission was set up into dozens of deals undertaken by IBRC rather than just the Siteserv transaction?

WH: This arose from an array of allegations against IBRC in the Dáil. Mixing Denis O’Brien into the allegations heightened political and public interest.

My view is that the Government of the day rushed into a commission of investigation just to get the allegations off the political agenda. There was no scoping enquiry to establish if such an investigation was justified or if another method of investigation might be more effective.

Setting up the IBRC Commission in that manner was, in my view, a reckless abuse of power by the Government and the Oireachtas.

TL: Did the broadness of the scope of the IBRC Commission contribute to the long delays before it delivered any key findings? 

WH: The first module of the Commission’s work was all Siteserv related in some fashion. It never moved on to investigate other IBRC transactions and the Commission is now being closed down. The fact that it took seven years to investigate a single transaction is a damning indictment of the investigation model itself.

TL: The IBRC Commission was led by an experienced judge and legal team. Were these the right people to lead the Commission? Did it have all the skill sets it needed?

WH: The judge and barristers involved were indeed senior legal people.

The role they tried to play was entirely different to what they do during the course of their normal work. In that setting, counsel promotes the line given to them by the underlying client and instructing solicitor. They act out the case scripted by others. A judge hears the case thrashed out by both sides and then takes a view on balance. Again, the judge does not prepare the case from either perspective. Neither counsel nor judge need to be an expert in the subject matter. Outside of purely legal matters, they are otherwise typically generalists.

In the case of the IBRC Commission, the judge and counsel assumed all roles: client, prosecutor, judge, jury and executioner. I believe that it did not have the expertise in the subject matter which was selling a business in a distressed market. Unfortunately, it failed to retain sufficient expertise.

The subject matter of the investigation would appear complex to anyone who doesn’t deal with matters of this nature on a regular basis during the course of their business and professional lives. Under law, there is no requirement that a commission of investigation should be chaired by a judge or even a lawyer. Once it was decided to set up a commission, it was a fatal error on the part of the Government not to appoint a chair who was an expert in the subject matter to be investigated. The investigation needed to be led by specialists, not generalists.

The Commission struggled with basic concepts, terms and language associated with the corporate finance/M&A space. Even when the facts were correctly established, it had difficulty in placing sensible commercial interpretations on those facts. It simply did not have the expertise to do that in my view. In addition, it struggled to appreciate the dynamics of commercial negotiations.

In my view, the Commission’s lack of expertise in the subject matter was a significant contributor to wholly excessive duration of its investigation.

It seemed to me that the process was run like a criminal trial rather than an investigation, with the Commission at ease in the “prosecution” role of trying to discredit the Siteserv sale at every turn.

All of this went on in private behind closed doors for seven years. Had this been a public investigation, there would have been a public outcry about what was happening.

The Commission’s failure to retain appropriate expertise is a clear breach of the Commissions of Investigation Act 2004.

In any event, there was no need for a commission of investigation. An international expert could have investigated the transaction in a few months, at very small cost, and come up with credible conclusions. The investigation of the Cervical Check controversy by Dr Gabriel Scally is an obvious template.

“It is a fundamental principle of justice that the accused get the opportunity to face their accusers. That was denied by the IBRC Commission.”

TL: Do you think the IBRC Commission looked at issues beyond its scope? If so, what were they?

WH: Yes, the Commission extended its reach beyond the conclusion of the Siteserv sale in my view.

It was set up to investigate the sale of Siteserv. The investigation should have stopped at the point that the sale was finally concluded, June 2012.

Instead, the investigation kept going for a year into the new ownership regime, when Mr Harvey’s relationship with Mr O’Brien broke down and he exited Siteserv with a generous settlement package.

The Commission pursued its own conspiracy theory that the settlement package for Mr Harvey was somehow a “pay-off” for Mr Harvey “delivering” Siteserv to Mr O’Brien. There was not a shred of evidence to support this. There was an abundance of evidence that Mr Harvey had run his course at Siteserv and with Mr O’Brien. The generous settlement was to avoid litigation. It was correctly felt that litigation might be damaging to the commercial interests of Siteserv/Actavo.

Some transactions relating to shares and other matters took place in Siteserv in the months following the change of ownership and were executed in December 2012. Concerns about tax compliance arose in relation to these transactions. There are 7,000 staff in the Revenue Commissioners to deal with matters of this nature. Their timing and scope were beyond the terms of reference of the IBRC Commission in my view.

The Commission unnecessarily published huge amounts of confidential information about the internal affairs of Siteserv/Actavo in respect of the 2012/2013 period when the sale had already been completed. That would not have happened had the tax concerns been addressed in the normal way through the Revenue Commissioners. This is just one example of the IBRC Commission going beyond its remit in my opinion.

The commission’s 12 reasons

TL: There was extensive investigation of anonymous emails. Do you think the IBRC Commission was right to expend its resources pursuing theories emailed anonymously?

WH: As far as I know, not a great deal of resources was expended in identifying the sources of Deputy Catherine Murphy and other politicians.

The Commission did appear to make some progress but then chose to not to disclose this in its report. I believe that was wrong and a gross injustice to those of us who are victims of this misguided investigation.

It is a fundamental principle of justice that the accused get the opportunity to face their accusers. That was denied by the IBRC Commission.

TL: The Commission identified 12 reasons why the transaction was commercially unsound and said it was “tainted”. How do you respond?

WH: My submission to the IBRC Commission on July 8 2022 set out in specific terms why none of the twelve reasons the Commission came up with to find the sale commercially unsound, stood up scrutiny.

Three of the reasons relate to the erroneous narrative which the Commission allowed to develop at the oral hearings in relation to the exclusive negotiating period granted to Mr O’ Brien. This narrative is in direct conflict with the hard documentary evidence. This serious error has significant implications for several aspects of the report. Extraordinarily, the Commission proceeded to publish its final report knowing that it contained serious errors in respect of exclusivity, which led to false findings against individuals and the commercial soundness of the transaction.

The bootcamp, [which saw O’Brien, McFadden and Harvey participate in a ski-based physical training event during the sale process], and the principle of the CEO of Siteserv, Brian Harvey, getting equity under the new ownership are on the Commission’s list of reasons for commercial unsoundness but neither had any impact on commercial soundness whatsoever.

The Commission claimed that IBRC was denied the opportunity to re-engage with Anchorage following their unsolicited third bid. This is a baseless finding as is evidenced in emails between senior IBRC executives. We have “made our bed” with Mr O’Brien they said.

Another issue that demonstrates the competence deficit at the Commission is its misunderstanding of a letter on March 1 2012 from Mr O’Brien’s Island Capital requesting a price reduction, for reasons associated with the deterioration of Siteserv. Mr O’Brien had legally binding exclusivity rights up to March 8. The price reduction request letter of March 1 was taken off the table over the next two days of negotiations, making it totally redundant, and no price reduction was conceded.

The Commission claims that had the letter been shown to IBRC, they could have jumped to Anchorage and got a higher price. When the Bank was given the final deal terms on March 5, there was no price reduction and the Bank executives wanted to accept the deal. The letter of March 1 was dead and irrelevant. Given the level of distress in Siteserv, IBRC had no reason to or interest in moving on to Anchorage after March 8, which would have been a highly dangerous manoeuvre. The inability of the Commission to understand the irrelevance of the letter of March 1 is embarrassing.

The IBRC Credit Committee made its decision to recommend the Siteserv sale to the Bank’s board on foot of a letter dated March 13, 2012 from Siteserv and its advisers. This was an excellent and comprehensive letter, setting out the compelling reasons as to why the sale should be approved. In my view, the Commission’s attempt to discredit this letter reflects on its competence and objectivity.

A draft working capital adjustment report, prepared by KPMG, was submitted by the sell side to the buy side. Normal negotiations followed and legitimate changes were agreed before finalising the report. The Commission’s attempt to discredit these changes is baseless.

The Commission claims that the payment to shareholders should have been less than the €5 million paid. That is a matter of opinion.

Two further issues relate to an error in the schedule of net proceeds and the bonuses. Neither of these were material in the context of the transaction size.

The twelfth issue is the Commission’s claim about two parallel processes. This is a sweeping generalisation with no basis in reality.

It is important to note that there were two transaction processes going on in parallel here:

       Transaction No. 2 could not occur until after Transaction No. 1 was completed.

Both the payments to shareholders, the error in the schedule of net proceeds, and the bonuses were Transaction No. 2 items. Therefore, they had nothing to do with Mr O’Brien as he was in Transaction No.1 only.

For the Commission to claim that Transaction No. 1 was commercially unsound because of issues with the deductions in Transaction No. 2, doesn’t make any sense.

TL: Do you believe the IBRC Commission was concerned about being the subject of a judicial review? Could this have impacted its final report?

WH: From the very beginning of the investigation, it was evident that the Commission was obsessed about avoiding judicial review. This divided witnesses into two camps, those who could fund a judicial review and those who couldn’t. For the latter, it was a vulnerable position to be in.

The draft report

TL: The IBRC Commission produced a draft report before a final report. Without disclosing any specific information about this draft report, would you agree that there were significant changes made between its first draft report and its final report?

WH: The first draft of the report was circulated in early August 2021 for comment.  Material aspects of it were simply wrong and caused widespread dismay amongst witnesses.

Witnesses submitted their responses in October 2021, having incurred in my estimation circa €5 million in legal costs.

A second draft of the report was circulated in May 2022. There were in my view some essential differences between the first and second drafts. The second draft was dumbed down sufficiently to deter those witnesses who had the financial resources from initiating a judicial review. For example, baseless findings by the Commission against professional advisers were weakened by saying that the professional advisers were acting on client instructions in the particular circumstances.

There was very little change between the second draft and final report in relation to individual witnesses. Once again, witnesses without financial leverage achieved very little.

A deficiency of performance?

TL: The IBRC Commission concluded in relation to you that there “is prima facie evidence of a deficiency by Mr Hobbs in the performance of his duties for and on behalf of the Bank.” What do you think of this?

WH: This conclusion by the Commission arose out of erroneous findings in relation to the legally binding exclusivity period with Mr O’Brien. The criticism of me centres around what the Commission found were inappropriate interventions by me on two dates: February 10 and February 27, 2012.

On the first date, February 10, the sale team (Siteserv, advisers and myself) met to take a position on a request from Mr O’Brien for a legally binding exclusivity period in return for a further price concession.

The meeting came to the view that exclusivity should be given to Mr O’Brien’s Island Capital subject to approval from IBRC. It was decided to write to IBRC to seek such approval and to inform Island Capital of this. In relation to the latter, I was asked if this could be done without the agreement of the Bank. I was of the view that it could as exclusivity was not being granted then but just that Siteserv was in favour if IBRC agreed.

The Bank eventually confirmed its agreement to exclusivity for Mr O’Brien on February 23. Between February 10 and 23, while work on the sale continued, the process was in a kind of no man’s land as it was uncertain as to what decision the Bank would make about exclusivity for Mr O’Brien.

In spite of all the hard documentary and oral evidence, the Commission wrongly concluded that exclusivity was awarded to Island Capital on February 10, and not February 23. It wrongly concluded that I inappropriately intervened to say that Siteserv should go exclusive with Mr O’Brien without the approval of IBRC. I never said any such thing.

On the second date, February 27, a conference call of the sale team was convened at short notice to discuss an unsolicited revised offer from Anchorage. A few days earlier on February 23, IBRC had approved the granting of legally binding exclusivity to Mr O’Brien. This had been communicated verbally to Island Capital by Siteserv’s advisers. On the conference call, I made it known that it was unsatisfactory to have legally binding exclusivity in place on a verbal basis and that it should be confirmed in writing.

Later that evening, the advisers emailed Island Capital confirming legally binding exclusivity from February 23 as already advised verbally. This was fully aligned with the Bank’s position. The Commission criticised me for what it saw as an inappropriate intervention by me insisting on this written communication, wrongly claiming that it stopped IBRC jumping ship to Anchorage.

“It does not put forward an iota of evidence to support that contention.”

TL: There were also a few other criticisms of you by the Commission. What would you say about them?

WH: Another criticism of me related to my recollection of an event after a formal meeting on Sunday, March 4, 2012. For reasons only known to the Commission, it declined to accept my crystal clear recollection of this event.

In a casual conversation with a small group, Brian Harvey disclosed that he was going off to meet Denis O’Brien. I had a jovial exchange with Brian, describing the meeting as a “job interview”. I cannot recollect who the other members of the group were.

I held the view at the time, and still do, that this was a highly timely and appropriate meeting. Mr O’ Brien was likely to be signing a contract to purchase Siteserv within two weeks and it would be highly abnormal not to have met the CEO of the business beforehand.

I am not responsible for the failure of recollection on the part of other witnesses.

The meeting between Mr Harvey and Mr O’Brien was timely, not secret and appropriate.

The personal impact

TL: How much has the IBRC Commission cost you financially to interact with and respond to? Will you be refunded any of this by the state? 

WH: In a tribunal, costs can be claimed in the same manner as a court process. However, in a commission of investigation, the cost recovery regime is set out in a statutory instrument agreed between the Department of Finance and the sponsoring department.

In the case of the IBRC Commission, cost recovery was set at a fraction of the market rate and certain costs such as instruction fees were disallowed. The Commission decided to disallow all costs incurred in responding to the drafts of its report.

The Commissions of Investigation Act 2004 states that witnesses can claim in respect of legal fees but not other professional fees.

Due to the cost regime imposed, I had to go without legal representation for the six years of the active investigation. I had no alternative but to hire a legal team to deal with the first and second drafts of the report.

My legal costs were €125,000. The Commission has refused to refund any of this. I have to accept this unless I take a successful court action against this decision.

In addition, I spent c.1,200 professional hours dealing with the IBRC Commission which were unremunerated. This is the equivalent of one full year of chargeable professional time.

My high-level estimate is that there is c. €25 million of legal costs that the State is refusing to reimburse witnesses for. This is notwithstanding that the allegations in the Dáil, that caused the Commission to be set up, were found to be false.

Apart from the €25 million the State is refusing to reimburse, it will incur costs in the region of €30-€40 million.

TL:  Has your involvement in the IBRC Commission impacted you professionally or in any way damaged your reputation? 

WH: In 2015, the Siteserv sale was wrongly painted as a corrupt transaction and the IBRC Commission was set up to investigate corruption.

Anyone under the shadow of a corruption investigation, however, is adversely affected. Those operating under their own personal name rather than a big brand, suffer more.

I have had to deal with this investigation innumerable times over the years in my business, professional and private life. The reality is that when you are explaining, you’re losing.

It took time to realise that business opportunities evaporating at an advanced stage had the common factor of Siteserv behind them. You learn to sense where the closed doors are and adopt your business life accordingly, which I have successfully done.

Another issue was the regular written reminders from the Commission as to the potential criminal consequence of disclosing anything about the Commission’s investigation. Consequently, when trying to explain yourself to anyone in connection with this matter, for the purposes of defending one’s good name, one had to be very conscious of the legal peril involved.

Witnesses were not just the victim of false allegations by politicians in 2015, the suppression of free speech arising from the Commissions of Investigation Act 2004 left the accused for seven long years with their hands tied behind their backs in terms of defending their good names.

Even with the investigation completed, there still appears to be legal limitations as to what witnesses can say or disclose.

Findings, facts, and boot camps

TL: The IBRC Commission arrives at a figure that it believes the state missed out on in the sale of Siteserv. Do you accept this figure?

WH: The extra €8.7 million that the Commissions claims should have been realised from the sale is largely based on serious error and lack of basic understanding on the part of the Commission.

This is dealt with more fully in my submission to the Commission on July 8, 2022.

A sum of €4.7 million relates to the extra amount the Commission claims IBRC could have got from Anchorage. This view arises from the serious error made by the Commission in relation to exclusivity and the misrepresentation of the status of Anchorage in the process and the attitude of IBRC to Anchorage.

The claim that the final changes to the working capital report amounting to €1.8 million, were not legitimate is entirely without validity.

The notion that €2 million could have been shaved off the payment to shareholders is highly speculative.

The final element is bonuses. The notion that the bonus cost of €800,000 could have been saved completely is not valid. Had it been handled better, there still would have been some cost.

TL: The ski bootcamp by Denis O’Brien, Niall McFadden and Robert Dix, who was a senior independent non-executive director at Siteserv, was a chapter in the IBRC Commission’s final report. What is your view of this chapter in the report?

WH: The evidence given and accepted by the commission was that Mr Dix (who was also a former KPMG partner) and Mr O’Brien did not discuss Siteserv on this trip.

How then can the Commission put forward the claim that the trip (which was known as the bootcamp) was one of the twelve reasons why the Siteserv sale was not commercially sound? It does not put forward an iota of evidence to support that contention.

All key decisions on the Siteserv sale were put for approval to IBRC on the basis of written submissions. These submissions were a team effort involving the management and directors from Siteserv together with their advisers from KPMG and Davy. I had oversight of what was going on. The notion that the bootcamp had any impact on these processes is plain ridiculous and utterly devoid of evidence.

TL: If you had known Robert Dix was on the trip, would you have told him not to go? Would you have informed IBRC and sought its approval?

WH: To answer the question on a more general basis, Ireland is a very small country. The pool of people involved in professional corporate business is quite small and senior people can expect to know many of their business peers. It is completely unrealistic to only transact business with people you don’t know.

 I have been operating in this circle for several decades. I have multiple experiences of meeting people on the other side of a live deal in unrelated business and private settings. This is just normal. One just handles the situation professionally.

I would have assumed that someone as senior as Robert Dix would handle matters in this way. Therefore, I think there would have been little reaction from me if Robert Dix had consulted me about the bootcamp trip.

“I categorically had no knowledge of the bonus issue. If I had, I believe I would have been streetwise enough to mention it to IBRC.”

TL: Did you know at the time that Robert Dix and Niall McFadden knew each other? 

WH: Niall Mc Fadden’s name was brought to my attention for the first time in March 2012 by IBRC in the context of the media hype over Altrad’s interest. IBRC mentioned to me in an email that there were market rumours that Niall Mc Fadden was somehow involved in the sale. When I raised this with the sale team, there was no meaningful response. At this stage, Denis O’Brien had already signed the contract to buy Siteserv.

Prior to this email, Niall Mc Fadden’s name had never come up in my presence, not even with IBRC. I knew nothing of his history with Siteserv and IBRC.

From reading the annual report of Siteserv, I would have noticed that Niall Mc Fadden was a sizeable shareholder but no one marked my card in any way.

I don’t recollect being aware at that time of a business connection between Robert Dix and Niall Mc Fadden. Even if I did, it might not have resonated with me as I was not made aware of Mc Fadden’s controversial consultancy agreement with Siteserv and his toxic relationship with IBRC.

TL: Do you believe the ski trip impacted Robert Dix’s independence from an optics point of view?

WH: The Commission was set up to establish the facts, not the optics. I am absolutely satisfied that neither the bootcamp nor Niall McFadden had any relevance to the decisions made in the Siteserv sale process.

The bootcamp is, in my opinion, probably the greatest red herring in the Commission’s report.

TL: Robert Dix admitted it was an “error of judgement” by him to go on the ski / weight-loss trip. Do you agree with him?

WH: That’s a matter for him, he made this remark under pressure from the Commission.

The Clifford Forster report

TL: On Christmas Eve 2019 witnesses were given a 114-page report by banking expert Clifford Forster on the transaction. When you gave your evidence were you aware of this report or questioned on it?

WH: I gave my oral evidence for 11 days in September 2018 and was not made aware that Mr Forster was retained by the Commission at that stage.

The first I heard of Mr Forster was Christmas Eve 2019 when I received a final draft of his report from the Commission. I was somewhat taken aback that this person was working in the background with the Commission for nearly three years, at considerable cost to the taxpayer.

TL: Mr Forster is an experienced banker. But did he have corporate finance experience or had he ever sold loans in a distressed market?

WH: Mr Forster outlined his CV in his draft report. It was clear to me that he was not an expert in the area of corporate finance/M&A. His report disagreed with almost everything that was done.

I was also shocked to find that a considerable body of the evidence that I had submitted to the Commission had been withheld from Mr Foster. This was a serious matter from the point of view of fair procedures.

I responded to Mr Forster’s report by way of a 33-page sworn affidavit in January 2020 in which I challenged his expertise. He responded by email to the Commission on January 31, 2020 admitting that he was not an expert in these areas.

Mr Forster was also strongly challenged in relation to his expertise by senior counsel, acting on behalf of witnesses, when he came to Dublin in February 2022 for cross examination.

The Commission itself was also strongly challenged by senior counsel on its awareness of and compliance with the Supreme Court principles in relation to expert witnesses.

I’m sure Mr Forster acted in good faith and did his best but, in my opinion, he wasn’t the right person for this job.

It was a fatal error by the Commission not to retain alternative expert corporate finance advice after it became clear that it had wasted three years with Mr Forster and there was an obvious expertise deficit at the Commission. Consequently, the Commission spent seven years investigating a commercial transaction without the necessary competence to do so.

TL: Did you ever see or receive correspondence from Forster explaining his expertise, and can we see a copy of that?

WH: Mr Forster emailed the Commission on January 31, 2020 acknowledging that he was not an expert in the relevant area. The Commission provided me with a copy of this email but I do not believe it is legally permissible for me to pass it on to you.

Deals within deals

TL: The Commission found that Brian Harvey was doing a deal with Denis O’Brien prior to the sale closing. Do you believe it was legitimate for him to do so?

The formal sale contract was signed on March 15, 2012. Over the subsequent fortnight there were active negotiations between Mc Fadden and Island Capital on equity participation for himself and the management. Everything was changing on the outline proposals, even the basic shareholding percentages. In fact, discussions went on for months and a formal deal was only executed in December 2012.

Therefore, there was no agreed deal (as claimed by the Commission) between Island Capital and Niall Mc Fadden or Brian Harvey on March 15, 2012 when Denis O’Brien signed the contract to buy Siteserv. Certainly, the principle of an equity incentive scheme was acceptable to Mr O’Brien as it was to all the other bidders at that stage.

The other bidders all had large portfolios of companies and had a standard management equity incentive scheme that they would roll into all portfolio companies. As such, they would not have the need to design a bespoke scheme for Siteserv as Island Capital needed to do.

I have no doubt had one of the other institutional bidders signed the contract to buy Siteserv, they would have moved quickly to advise the senior management of the details of the management equity incentives envisaged for them. This would just be the normal conduct of such business. They had already, in the course of the bidding process, given management an indication of their approach to this matter.

The Commission’s position seems to be that Denis O’Brien indicating his willingness in principle to put a management equity incentive scheme in place was completely different to the other bidders doing something similar. There is absolutely no basis for this differentiation. All bidders, including Mr O’Brien, acted properly and in accordance with normal commercial practice in relation to this matter.

TL: Did you know anything about this at that time? Should you have been informed of it?

WH: I wasn’t made aware of anything specifically about the activities of the bidders promoting their wares in relation to management equity incentives.

On the basis that it appeared that the bidders were going to retain Brian Harvey as CEO, Brian to was going to get equity irrespective of who the successful bidder was. The notion that senior people on the Siteserv or IBRC sides may not have appreciated that is just not credible.

“The €5 million payment clearly worked. How much could that figure be dropped before there was a shareholder rebellion at the EGM blocking the deal?”

TL: The Commission found that Brian Harvey and others in Siteserv were in receipt of a bonus unknown to shareholders or IBRC. Did you know about this bonus? Should you have? What would you have done if you did know about it?

WH: I categorically had no knowledge of the bonus issue. If I had, I believe I would have been streetwise enough to mention it to IBRC.

The bonus issue was not well handled by the late Chairman (of Siteserv, Hugh Cooney). Had he approached it in a transparent manner, the outcome would have been much better I believe.

I do not believe that loan agreements with IBRC contained any provision for the Bank’s approval to be sought in respect of any aspect of executive remuneration. However, in the context of a collaborative relationship with the Bank to get out of a difficult situation and crystallise a large loss for the Bank, full transparency would have been assumed and expected.

It is important to differentiate between executive bonuses and additional payments to the non-executive board members for the additional time spent, over normal duties, on the sale process. The latter category should not attach the bonus label at all in my view and is a normal occurrence in a plc situation when something big and time consuming is happening.

The Chairman’s maximum leverage with IBRC on executive bonuses would have been in August /September 2011 when the sale process was starting in earnest. It would have been reasonable to discuss retention bonuses for the key executives to tie them in and make sure they didn’t leave until the sale was completed.

It appears that the Chairman did not do anything at that stage. He became active on the matter in February 2012, considered consulting the Bank but decided against it. That was a wrong call.

Had a proposal been brought to the Bank at that stage, there would have been a row but I believe a deal would have been done. The senior management had been through a harrowing experience. There was no way the sale would have been allowed to become derailed because of this.

TL: The Commission criticises IBRC for not recalculating the amount to be paid to shareholders of Siteserv closer to the sale actually closing. It finds the amount would have been reviewed down from €5 million if this had happened. Do you think you should have suggested this to IBRC? 

WH: Frankly, the €5 million figure was pretty well settled in everyone’s mind before I ever became involved. It had been the subject of extensive discussion between IBRC, Davy, KPMG and Siteserv itself.

It was not an agenda item in the sale meetings that I attended. These were entirely about the sale, finding a buyer and agreeing terms with the buyer.

The Bank never asked me for assistance with any aspect of the Transaction No. 2 process which I knew little about.

In December 2011, I found myself accidentally at a meeting, at the tail end of a sale meeting, in which Davy made a PowerPoint presentation to IBRC putting some science around the €5 million figure. This was based on average share prices, takeover premiums etc. I suppose there was a level of reverse engineering here to justify the €5 million figure.

I learned subsequently that IBRC had reverted to Davy saying that they had no issue with its analysis. I was not taken into that loop, presumably because it was not within my mandate.

Had this exercise been reworked in March 2012, the €5 million figure would have been lower because average share prices had moved down. However, that does not mean that the lower figure would be sufficient to get the sale voted through the EGM.

The €5 million payment clearly worked. How much could that figure be dropped before there was a shareholder rebellion at the EGM blocking the deal? The rebellious shareholders had no interest in the science behind the payment, it was just about money and using their leverage to extract as much as they could.

The former CEO

TL: Do you believe that Brian Harvey was influenced in his decision-making by a share incentive scheme?

WH: Absolutely not. In addition, Brian Harvey had little influence in the process that led to the sale to O’Brien. The big decisions were driven by the Sale Sub-committee (of which Brian was not a member) and the advisers. The decisions were then approved by IBRC on the foot of written submissions, the drafting of which Brian Harvey had little if any involvement. His job was to run the business and support the sale process as required.

“Like other witnesses, I regret being caught up in an unnecessary and misguided commission of investigation for seven years.”

TL: The IBRC Commission refers various matters for review by the Revenue Commissioners. Did you think the IBRC Commission was right to review how various things were structured from a tax perspective post the transaction? 

WH: In so far as anything came to the Commission’s attention that raised tax compliance concerns, those matters should have been referred to the Revenue Commissioners without any further investigation by the Commission in my view, particularly as they arose after the sale was completed.

TL: Brian Harvey had substantial personal debts to IBRC. Do you believe this impacted his decision making? Was Denis O’Brien correct to lobby the bank in relation to his personal debts?

WH: I suspect that Brian Harvey’s personal debt situation just added to his motivation to save Siteserv from insolvency. In that regard, his interests were aligned with that of IBRC who would have come very badly out of an insolvency process.

Any buyer of the business would want to see Brian Harvey’s personal debt situation stabilised so he could focus all his energies on running the business for them.

I believe Denis O’Brien was right to lobby for a solution.

Anchorage made a strong pitch to Brian Harvey that, if they were the successful bidder, they would work with him to get a solution in place.

The Dail record

TL: The IBRC Commission finds that some statements made in the Dáil about the IBRC sale process were incorrect. In relation to the incorrect statements, should the record of the Dáil be corrected?

WH: Of course, the record should be corrected and appropriate apologies made to the victims. During the course of the Dáil debate on the Commission’s report, there was only oblique reference to the Dáil allegations on the Siteserv sale being found to have been false. No one in the House or the Seanad seemed to care.

Dáil privilege is an essential feature of our democracy. Equally, abuse of Dáil privilege is a threat to our democracy and tramples on the rights of citizens.

TL: The then Taoiseach Micheál Martin said that the report “shines a light on unacceptable practices” by certain parties during the course of the transaction. Do you agree with his conclusion?

WH: No, I do not. The report up to the point of the Siteserv sale being concluded is based in material respects on false narratives, developed by the IBRC Commission.

The matters that arose in Siteserv under new ownership are largely tax related and are for the Revenue Commissioners to consider in the normal course.

The Taoiseach unequivocally endorsed the Commission’s final report notwithstanding the serious concerns I had raised about it, in advance of publication, through my letter to the Attorney General. Neither the offices of the Attorney General or the Taoiseach put a single question to me about my concerns and ploughed ahead regardless. That lack of response needs to be called out for what it is, abuse of power and lack of respect for citizens’ rights.

One of the features of the IBRC Commission is the failure of oversight by the Department of the Taoiseach, the sponsoring department. They “rubber stamped” twelve extensions without it seems any meaningful challenge as to what the Commission was up to.  Twelve extensions over seven years raise profound questions as to what was going on behind closed doors.

The Department might claim that extensions were a mere “administrative” matter. Not so, the Department of the Taoiseach had a serious obligation to act in the public interest in relation to a commission of investigation which was clearly struggling to complete the job asked of it.

Responsibility for the wholly excessive seven-year duration of the investigation starts with the Taoiseach.

TL: The IBRC Commission report concludes the sale was based on “misleading and incomplete information” that Siteserv provided to the former Anglo Irish Bank. Do you agree with this statement?

WH: The IBRC Credit Committee recommended the Siteserv sale to the board of the Bank on the basis of a letter dated March 13, 2012, received from the Siteserv board and its advisers. I recall you may have managed to get a copy of this letter during the course of past journalistic work.

I saw a draft of this letter in advance. I made a few suggestions to add to precision and clarity which were accepted.

This was an excellent and comprehensive letter and sets out clearly the reasons, which were the only reasons, for proceeding with the sale of the Siteserv business to Denis O’Brien. A similar process had been followed earlier in the process when exclusive negotiations with Mr O’Brien were recommended to the Bank.

In its report (sections 12.87 to 12.124), the Commission attempts to discredit this letter of March 13, 2012 for reasons that do not stand up to scrutiny. 

These reasons given are amongst the twelve reasons which the Commission used to find the sale commercially unsound and not a single one of these stand up to expert analysis.

The reasons given also feature amongst the extra €8.7 million the Commission claims should have been realised from the sale. Again, this figure collapses like a deck of cards on expert examination.

Looking back

TL: If you were appointed again today to oversee the sale, what would you do differently if anything?

WH: I was and still am very happy with how I fulfilled my role. We got an extraordinarily good result in very difficult commercial and financial circumstances.

TL: Do you regret getting involved in Siteserv at all?

WH: I have no regret about being involved in the transaction at all. It was challenging but the outcome achieved in very difficult circumstances was very satisfying.

Like other witnesses, I regret being caught up in an unnecessary and misguided commission of investigation for seven years.

TL:  What are the lessons you think the state could learn about future commissions into business transactions?

WH: Some hard learning for the State comes from the debacle of the IBRC Commission:

• Setting up a tribunal or commission of investigation should be a last resort in all circumstances. The bar should be set extremely high, with stringent criteria to be met before any statutory investigation is approved.

• Other investigative models are likely to be far more cost-effective and credible in terms of their findings. Dr Scally’s investigation into Cervical Check is a case in point.

• If a tribunal or commission of investigation has to be set up, the chairman does not have to be a lawyer but must be an undisputed expert in the subject matter to be investigated.

• A statutory investigation team should never be less than 3-people, each with the right to record dissenting views. Conferring extraordinary powers on one person, in the manner of the IBRC Commission, is dangerous and irresponsible.

• Given the small size of the country, it will generally be desirable to have investigations led by experts from outside the jurisdiction.

• The terms of reference of any investigation should shift the balance dramatically from resourcing legal advice to resourcing expert advice in the subject matter, for both the investigative body and witnesses. The stranglehold of the legal profession on State investigations needs to be broken.

• Fees should be fully recoverable by witnesses in respect of both legal and expert advice.

• The legal fee recovery model imposed on witnesses to the IBRC Commission would struggle to survive a determined legal challenge through the various iterations of the higher courts. Containing the costs of State investigations cannot be at the expense of witnesses not being able to fund proper legal and expert representation to defend their good names.

• Statutory investigations in private are a serious threat to the country’s democratic and open way of life. They pose great dangers for witnesses in terms of their constitutional and human rights.

• A cost-effective mechanism needs to be devised to give witnesses redress against investigators behaving in a manner that raises concerns about expertise and/or conduct.

• The need for effective and transparent monitoring mechanisms by the sponsoring department as the investigation progresses.

• The Commissions of Investigation Act 2004, an ill-conceived and dangerous piece of legislation, should be immediately suspended pending a fundamental review of more suitable investigative models.

Until there is a fundamental change to the State’s trigger-happy approach to setting up politically motivated, unnecessary and unfit-for-purpose investigations, the professional business community should be very wary about engaging in commercial transactions which have a State dimension.

Further reading:

Unravelling Siteserv – the full three-part series

A tangled corporate web: Siteserv report singles out key individuals for further investigation