The contentious sale of Siteserv to businessman Denis O’Brien during the financial crisis was based on “misleading and incomplete information” that the building services company provided to the former Anglo Irish Bank, a High Court judge has found.
Mr Justice Brian Cregan circulated a confidential draft final report to witnesses on Thursday after seven years of investigation, in which he criticised a process “below the surface” where certain events occurred during the sale without the bank’s knowledge.
He is heavily critical of the terms on which Siteserv was sold and finds the transaction was “not concluded in a manner that was reasonable from the perspective of the bank”, then known as Irish Bank Resolution Corporation (IBRC).
The judge also criticised large bonus payments to Siteserv directors on the eve of the sale, saying they received more than corporate finance advisers KPMG and Davy. He also says a €5 million payment to Siteserv shareholders as part of the deal “was too high”.
The judge is understood to have told witnesses to come back with any observations or responses to his draft conclusions within two months. It remains unclear whether any witnesses will seek to challenge his latest draft report by taking judicial review proceedings in the High Court.
Although the findings are still subject to change, the judge has reiterated the conclusion set out in a previous draft report last year that the deal was not commercially sound.
There was no comment on Thursday night from the commission of inquiry on the draft final report, which runs to several hundred pages. Mr O’Brien’s representative declined to comment on the draft, and Siteserv could not immediately be reached.
Siteserv, heavily indebted to the IBRC, was sold to Millington, owned by Mr O’Brien, for €45 million in 2012, with IBRC writing off €119 million of the €150 million it was owed by the company.
“The commission has determined that it can be concluded that the bank made it decision to approve the sale of the Siteserv group to Mr O’Brien in good faith, but based on misleading and incomplete information provided to it by the company,” the judge said.
“The commission finds that it can be concluded that the Siteserv transaction was not commercially sound in respect of the manner in which was it was conducted, the decisions made and the outcomes achieved.”
Bonsuses cost the company €802,200, the judge said, noting KPMG received €450,000 and Davy €275,000.
“In the context of Siteserv these were bonuses on a lavish scale and entirely unacceptable for a company that was costing the taxpayer almost €118 million in loan write-offs and losses,” he said.
“The commission has determined that the concealment of information about the bonus plan and the payment of these bonuses was tainted by impropriety. The commission has determined that that it can be concluded that they affected the commercial soundness of the Siteserv transaction.”
Describing what he found to be “two parallel processes” during the sale, the judge said there was an above-the-surface process and one below the surface.
“This ‘below the surface’ process meant that steps were taken and decisions made – described in this report – in the course of the Sitserv sale process in a manner was manifestly improper and which undermined the integrity of the Siteserv sale process .”