Ship of Fools (24 page)

But there's not much to do in Ireland now that it's free, so everyone goes to New York. They dance with homeboys and Spaniards and Michael dances dressed as a gangster with nifty spats and a Tommy gun, so he's clearly doing well. But what of Ireland back home? It's struggling to become modern: here's Kathleen ni Houlihan as an Aer Lingus stewardess in a green uniform, dancing a jig in high heels - modernity and tradition. Then Michael and his crew of sun-glassed beefcake boys in Pan Am uniforms fly her over New York. She sees Ireland's destiny. She does a striptease act, peeling off her green Irish uniform to reveal underneath a bra and panties imprinted with the Stars and Stripes. Ireland was really America all along and now the Celtic Tiger has allowed itself to reveal its true identity. All that suffering - the Famine, the evictions, the murder of Saint Michael Flatley
by the redcoat Brit bastards - has been repaid at last. Flatley leads the chorus line in a big, rapturous tap-along to ‘Yankee Doodle Dandy'. The triumph has come: we are real live cousins of our Uncle Sam.

Risible as all of this is, it is the best that Irish culture could do in constructing a mythic version of the meaning of the Celtic Tiger in its manic, delusional phase. It was crass and bloated, vulgar and ridiculous, but it came to a conclusion that made some kind of sense: Ireland is not Ireland any more but someplace else. And it came up with a name for that place: America.

There were other names too, of course: Bermuda, Liechtenstein, Dubai. And they were all attempts to escape from a reality that would ultimately assert itself, the real society behind the dreamy facades.

‘The world watched in astonishment. That is no exaggeration.'

- Seán FitzPatrick, chairman of Anglo Irish Bank

 

 

 

In late November 2008, there was a business lunch in the pavilion at Leopardstown racecourse. The star turns were the former Taoiseach Bertie Ahern and his old pal Seánie, more formally known as Seán FitzPatrick, chairman of Ireland's third largest bank, Anglo Irish. Less than two months previously, Fitzpatrick's bank had precipitated a crisis that led to a state guarantee of all deposits in Irish banks. Yet both Bertie and Seánie were on jovial form. Both referred to the coming end of the recession, which they both called ‘the other side of the hill'. Bertie quipped, in relation to the venue, that ‘If you can't make money any other way, you can try it on a horse.' Anyway, he added to cheer up his listeners, ‘I think Seánie has a bit left.'

Less than a month later, on 18 December 2008, Seánie resigned as chairman of Anglo Irish. It had emerged that FitzPatrick had €84 million in loans from his own bank. The lending was approved by the bank's credit committee and known to its internal auditor. Anglo Irish had, however, been cooking its books to hide these liabilities from shareholders and potential investors. Each year, as the deadline for the annual accounts approached, FitzPatrick borrowed whatever amount he owed to Anglo from a building society, Irish Nationwide. The auditors would examine the books
and see no holes. Within a few days, FitzPatrick repaid the money to Nationwide. The sums involved were huge: at one stage in 2007, FitzPatrick's loans amounted to €129 million and in June 2009 the figure stood at €106 million. The purpose of the operation was entirely straightforward - to hide the fact that Seánie was taking large chunks of the bank's cash for a private gambling spree on Irish and international property, the financing of films and the purchase of shares in Anglo Irish itself. Fitzpatrick had been doing this end-of-year financial shuffle for eight years, to the tune of €228 million in total.

Even more bizarre than this juggling act at a supposedly reputable bank, however, was the fact that the Financial Regulator knew about it. Anglo Irish didn't tell the regulator, and its auditors Ernst and Young never managed to spot the strange pattern of money coming in from Irish Nationwide and flowing out again, always between 26 and 30 September of each year. But Irish Nationwide's auditors, KPMG, had warned its directors of the ‘reputational risk' from the loans. The building society, in turn, had covered its own behind by informing the Regulator. As Irish Nationwide's chairman Danny Kitchen explained in a formal statement in May 2009, ‘The Society, in line with its normal reporting procedures, informed the Regulator of this loan amongst others and at no time was any adverse comment received.'

More outlandish still was the reaction, in December 2008, of the Financial Regulator, the government and the Minister for Finance Brian Lenihan to the revelations. Firstly, the Regulator, Pat Neary, confirmed that his office ‘became aware, following an inspection earlier this year, of matters surrounding loans from Anglo Irish Bank to Seán FitzPatrick'. It had merely ‘advised Anglo Irish Bank to ensure that these loans
are reported in the annual accounts for 2008' - please stop cooking the books. But this was not a matter of any great consequence since ‘it does not appear that anything illegal took place in relation to these loans'. The highest pitch of indignation the Financial Regulator could manage was to mutter that ‘the practices surrounding these loans were not appropriate'.

It was not hard to understand this urge to slap Seánie about the head with a feather. The Financial Regulator, under Neary, had known about FitzPatrick's dodgy back-to-back loans for years from Irish Nationwide's reports, had actually spotted them in the Anglo Irish accounts early in 2008 and had done next to nothing. However personally uncomfortable individual supervisors may have been, the Financial Regulator was institutionally bound to underplay the affair. If FitzPatrick's book-cookery had been illegal, then the Financial Regulator had failed to stop a crime. It followed, therefore, that nothing illegal can have occurred.

But this standard exercise in corporate arse-covering also became official government policy. Just as Ireland's international reputation was disappearing over the horizon, the crew of the ship sent a signal to shore - it's perfectly legal to doctor your annual accounts in Ireland.

Brian Lenihan issued a statement on behalf of the government. It ‘expressed his disappointment at the circumstances surrounding the resignation of Mr Seán FitzPatrick as chairman' of Anglo Irish.

Disappointment had always been the emotion of choice for Fianna Fáil and other members of the Irish establishment confronted with scams, swindles and con-jobs by respectable bankers. Charlie McCreevy, as Minister for Finance in 2000, commented on the revelation of the DIRT conspiracy: ‘I must
again say that the standards the public are entitled to expect were not adhered to in many financial institutions, and that was very disappointing.' Bertie Ahern, in the same year, was ‘gravely disappointed' that a member of his party, Denis Foley, was part of the Ansbacher scam. The Moriarty report into the way his mentor Charles Haughey trousered the equivalent of €45 million was also, funnily enough, a cause of ‘grave disappointment'.

Being disappointed was Fianna Fáil's default mode when faced with crookery. Instead of reflecting on the ways in which they might have colluded with the behaviour in question, it allowed them to present themselves as victims whose feelings had been quite terribly hurt.

Lenihan's insipid statement was a signal that the government was adopting as its own position both FitzPatrick's claim in his resignation statement that his behaviour has been merely ‘inappropriate from a transparency point of view' and the Regulator's self-serving insistence that nothing illegal had been done. These two positions were in fact conflated by the Tánaiste (deputy prime minister) Mary Coughlan later the same day when she said of Lenihan: ‘As he said, he is disappointed about the actions, although not illegal.' It was now official government policy, broadcast to the world, that Seán FitzPatrick had broken no laws when he shifted tens of millions of euro off the books and into his own investment schemes eight years in a row.

Lenihan's and Coughlan's statements were among the stupidest ever made by an Irish government - a significant achievement in itself. There were just two possible conclusions that any rational international observer could have drawn. One was that cooking the books is actually illegal in Ireland, but that the authorities were rushing to protect a
well-got banker with strong connections to the ruling party. The other was that naked deception is perfectly legal in Ireland and that you can't trust the accounts of any Irish-regulated company. The
Independent
newspaper of London reported that ‘Analysts were also stunned that the practice was not illegal in Ireland.' The
Financial Times
called Ireland a banana republic. The description in 2005 by the
New York Times
of Dublin as ‘the Wild West of European finance' was widely revived. The thin shred of credibility that covered the Irish banking system's global reputation was torn asunder.

And all of this happened because Fianna Fáil simply could not bring itself to acknowledge the emerging truth that, institutionally, Anglo Irish was as bent as a Brazilian free kick. The party went even deeper into denial when Lenihan appeared on RTE radio and tried to undo the damage. He firstly denied that he had used the word ‘disappointing' about FitzPatrick's resignation: ‘No, I never said I was disappointed. ' He had in fact, he claimed, used the word only in relation to the failure of the Financial Regulator to inform his department of the loans. This was flatly untrue on both counts. Even more strangely, having tried to rewrite his own reaction to the scandal, Lenihan then went on to rewrite FitzPatrick's contemptible statement about ‘inappropriate' behaviour: ‘I believe it was, as he himself acknowledged in his statement, wrong, unethical behaviour.' FitzPatrick's statement did not contain the words ‘wrong' or ‘unethical' or any synonyms of those words. They would have stood out as startlingly in his self-regarding announcement as a call for a worker's revolution. Lenihan was convincing himself, as much as his listeners, that concepts of right and wrong truly applied in the Irish financial system. What we had in effect
was the surreal situation of the Minister for Finance spinning for a banker who was involved in large-scale systematic deception.

Where did this need for denial come from? In part, it was rooted in the general cosiness of the relationship between government politicians, regulators and bankers. There was a broad ideological consensus that the free market knows best and that it was wise to let the money-makers take care of business. In spite of the often farcically lax state of regulation, a self-pitying belief that they were under siege from voracious, busybody bureaucrats was a standard item of gossip around the exclusive golf courses on which the insiders mingled.

Seán FitzPatrick himself was the loudest champion of this world view. In one swaggering speech in 2005, at the
Irish Times
Property Awards, Seánie paid tribute to people like himself who had created the boom: ‘we had ideas and we had balls . . . as we worked the scene and maximised the moment, the world watched in astonishment. That is no exaggeration. ' But there were clouds on the previously clear horizon. Where the boom had been enabled by ‘a positive environment where risk-taking was applauded and success rewarded', there were now two forces that threatened everything. One was ‘the quite hostile approach towards business by elements in the media'. He moaned that ‘issues of compliance or general corporate conduct get coverage that is disproportionate to their importance, or the frequency with which they would arise'. The state broadcaster RTE, he complained, had given airtime to people who were critical of the running of the economy. This commentary could ‘support a political agenda that is far removed from any of our long-established political parties'. ‘This whole area', he warned darkly, ‘needs attention.'

The other dragon that Seánie wished to slay, though, was regulation. ‘Moves towards greater control and regulation could squeeze the life out of an economy that has thrived on intuition, imagination and a spirit of adventure.' There were, he informed his horrified listeners, ‘those who appear to want to establish Ireland as the perfect model in corporate policing and regulation'. What, he demanded in one of the great rhetorical questions of the Celtic Tiger era, ‘has been done here over the past decade that demands such a reaction?'

Since corporate Ireland was so patently pure and honest, demands for regulation could only come from paranoid maniacs: in a speech in June 2007 FitzPatrick actually called regulation ‘corporate McCarthyism [that] shouldn't be tolerated'. The truth, of course, was that if the Irish financial regulator was the House Un-American Activities Committee, the US would would have been overrun by Communist infiltrators.

But if FitzPatrick epitomised the self-image of much of the Celtic Tiger elite - men with big balls whom the world watched in astonishment while petty media folk whinged about corporate conduct - he also epitomised its arrogant disregard for either basic ethics or sustainable business practices.

In Fianna Fáil and its hinterland, FitzPatrick inspired awe. Having joined Anglo's precursor in 1974, when he was twenty-six and it was a tiny niche bank, he turned it into the chariot on which Ireland's property developers would ride to the stars. In 1985, Anglo had profits of IR£286,000. In 2007, the figure was €1.2 billion.

The graph of Fitzpatrick's success matched and indeed surpassed the rising euphoria of the boom years. In 2001, Anglo had assets of €15.8 billion. By 2008, the assets were within touching distance of €100 billion. It had €44 billion in loans
in the Republic of Ireland, €21 billion in the UK and €9.5 billion in the US. Anglo was a rocket blazing across the skies of Bertie Ahern's Ireland, illuminating the money-strewn landscape beneath.