Politicking under the influence

28 Mar 11

Elaine Byrne, Sunday Business Post 27 March 2011

This is not rocket science. At the heart of Michael Lowry and Denis O’Brien’s objections to The Moriarty report is the assertion that the High Court judge, with over four decades of legal experience, ‘‘outrageously abused the tribunal’s ability to form opinions which are not substantiated by evidence or fact’’.

Mr Justice Moriarty did not make a definitive finding of corruption about the decision by the Minister for Transport, Energy and Communications to award the lucrative second GSM licence to Esat Digifone in 1996. He instead, and very deliberately, used the word ‘‘influence’’. Making a direct comparison with the activities of Charles Haughey , Moriarty determined that Lowry had intentionally intervened in the decision-making process to bring ‘‘improper influence to bear on public servants for the end as sought’’.

Lowry’s ‘‘insidious and pervasive influence’’ during the ‘‘most sensitive stages of the process’’ was not only ‘‘disgraceful’’, but ‘‘cast a further shadow over this country’s public life’’. Indeed, in the 1,694 pages of volume two of the tribunal report, the word ‘‘corruption’’ appears on only three occasions and, in each case, has no direct significance to the matters under inquiry. An understanding of the distinction between corruption and influence is important in order to appreciate the two very different interpretations of the tribunal report by Lowry and O’Brien on the one hand, and that which is intended by Moriarty.

A traditional definition of corruption necessitates that a finding of corrupt behaviour is one where a direct exchange of public goods or state resources has occurred in return for private financial gain.

The corruption is therefore direct and explicit.

The world has not worked like that for some time.

By its very nature, corruption is secretive, complex and generally not of the obliging kind that provides an arsenal of smoking guns. Influence, however, is indirect and implicit. It is an informal misuse of power which occurs where personal relationships, lobbying, political favours and political donations unduly influence the decision-making process, even if no laws are broken.

The role of influence in the definition of corruption has been internationally recognised for some time now. Article 18 of the United Nations Convention Against Corruption, which Ireland has extraordinarily not yet ratified, is dedicated to ‘‘trading in influence’’.

The 1999 Council of Europe Criminal Law Convention on Corruption has defined influence as ‘‘background corruption’’. In its 2009 evaluation of Ireland’s compliance with this convention, the Council of Europe rapped Ireland on the knuckles for not yet introducing a specific criminal statute prohibiting ‘‘trading in influence’’.

The Transparency International 2009 country study of Ireland defined influence in terms of ‘‘legal corruption’’.

The definition of corruption Moriarty used in his report reflected these international conventions. In essence, he found that the behaviour exercised by Lowry and O’Brien amounted to undue, but not illegal, influence by vested interests over regulation and policy-making where elites have access to insider information which they utilise for their private benefit.

This ‘‘golden circle’’ approach has repeated itself in Irish public life, particularly since the late 1980s.

A range of transactions all attracted controversy – for example, the allocation of a licence to Century Radio, the privatisation of Irish Sugar; the sale of land involving Telecom Eireann, and the provision of passports to foreign nationals.

Most famously, there was the underwriting by Albert Reynolds, while Minister for Industry and Commerce, of almost IR£120million in export credit insurance for Goodman International beef exports to Iraq from1987-1988.

This led to the Beef Tribunal. It is probably no coincidence, then, that Ireland’s national emblem is the harp, to be found on the seals of the President and Taoiseach, on the back of Irish coins, on postage stamps and, facing the other way round, on pints of Guinness.

That’s because, in order to get anything done in Ireland, it is necessary to pull strings.

The implication, therefore, is that concepts of meritocracy and legitimate entitlement are superseded by notions of special advantage through unorthodox influence.

In Lowry’s case, Moriarty found that he routinely abused his position as a servant of the public trust.

He exercised utterly inappropriate influence during particularly sensitive stages of the process on too many occasions to be dismissed as ‘‘flimsy’’ or coincidental.

Lowry ‘‘imparted information’’ to O’Brien, made ‘‘his preferences as between the leading candidates known’’ to senior civil servants and conveyed ‘‘his views on how the financial weakness of Esat Digifone should be countered’’.

Lowry was also responsible for a ‘‘groundless rumour’’ that, if a rival consortium won the licence, ‘‘it would result in a ‘‘nest egg for a former prominent Fianna Fáil politician’’.

‘‘The most pervasive and abusive instance’’ of Lowry’s influence, the judge found, was bringing a guillotine down on the work of the project group.

Moreover, he deprived his cabinet colleagues in government of an opportunity to scrutinise and review the result, and thereby ‘‘not only influenced, but delivered’’ the result that led to Esat Digifone being licensed.

Esat was later sold for IR»2.3 billion.

O’Brien earned IR»289 million from the sale, and his decision to become a tax exile in Portugal is estimated to have saved him IR£55 million in tax.

The report found that Lowry received three payments from O’Brien – of stg£147,000 and stg£300,000 and a ‘‘benefit equivalent to a payment in the form of O’Brien’s support for a loan of stg£420,000 – the first less than seven weeks after the mobile phone licence was granted.

It is easy to dismiss the tribunal because it cost too much and took too long. On the first charge, the cost of the three tribunals established since 1997, including third-party costs, is estimated at €500 million.

There is understandable public concern at the unjustifiable financial liability to the exchequer of such investigations. However, the direct yield to the exchequer, on foot of tax interest, penalties and settlements recovered, including the Ansbacher and Dirt investigations which arose from McCracken and Moriarty, is just over €1 billion.

Unlikely as it may seem, the tribunals have paid for themselves.

Others may ask why Irish public life should be so unduly concerned about an inquiry into a political decision taken 16 years ago.

The purpose of volume two of the tribunal report was to investigate the process by which the largest procurement award in the history of the state was made.

Procurement is not only still big business in Ireland, but serious underlying issues regarding undue influence in the decision-making process remain unresolved.

The annual procurement market is estimated at €15 billion by the Forum on Public Procurement in Ireland.

The Comptroller and Auditor General and the Public Accounts Committee have repeatedly asserted that ongoing parliamentary scrutiny of major expenditure projects is almost non-existent, and have raised serious questions about the ability of parliament to examine public procurement practices.

Fás is the most famous case for ‘‘failures relating to the procurement process, governance and financial management’’.

And what of the coalition commitment to sell valuable state assets, such as ESB, Bord Gáis and Eirgrid?

The Moriarty report not only has lessons for the quality of Ireland’s procurement process, at a time when our international reputation is already shot to bits, but also for public life and how it defines corruption and influence.

Not rocket science at all.

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