Ireland's professional fee 'cartels' appear to be
in a business-as-usual mode despite the economic crash and why wouldn't they
when their biggest customer, the Government/public sector, is continuing to
provide the fuel?
There are of course many professional firms and
individuals suffering like others in the private sector. The category we are
referring to are the insider firms who would for example be shortlisted by the
toxic property agency NAMA for plum assignments, big accounting firms and
individuals who are among the select who can become multimillionaires on public
tribunal fees where virtually all their overheads are also paid from public
In recent times, it has been in the Four Courts
where questions have been raised about outrageous fee claims and last February,
in the High Court, an examiner seeking fees equivalent to a €884,000 annual
salary for investigating the viability of the insolvent Dublin private members
club, the Residence, was told by the High Court to re-examine his rates. Mr Justice
Peter Kelly said fees of €425 an hour sought by Jim Stafford, of Friel Stafford
Corporate Recovery, were not acceptable in the current climate.
Stafford was seeking costs of €61,857, plus
€50,000 legal costs, for the 90-day examinership period.
The judge questioned why five people (including Stafford) were involved in an
examinership and he also queried the legal fees.
This week, the Taxing Master of the High Court,
Charles Moran, granted only €393,472 of a €2.143 million legal bill and expressed
his “disgust and bewilderment” at the level of costs claimed. He
described the costs claimed as “revolting in the
A claim for postage, photocopying, paper and
other such costs, of €10,000, was reduced to €1,000.
A ream (packet) of 500 sheets of paper costs
€5 to €6.
This should be investigated further to ascertain the basis of the
claim on public funds.
Last year, fees for the
unsuccessful examinership of the Thomas Read Group of pubs, amounted to
€1,072,126 including VAT @ 21%, split between the examiner Kieran McCarthy of
accountants Hughes Blake, who sought €554,109, and his solicitors Lyons Kenny,
who claimed €346,275. Their senior counsel Lyndon McCann charged €104,611 and
his junior Ross Gorman charged €66,271.
The Irish Times
reported that €1,250 was charged for five hours spent by one employee on
“general photocopying, e-mails”; €3,500 for two employees who spent “7
hours each – 15 booklets of papers prepared.”
Quite a return on an employee for
photocopying during a recession period and he or she may have been paid the
Beyond the issue of what can be termed
opportunistic charging or worse, there is of course the routine of legitimate
bubble-time charge levels and the Government is often the willing victim.
Against a backdrop of politicians feathering
their own nests and
governments acting as arbiters between vested interests seeking as big a share
as possible from public funds, it has long been evident that there is no Irish
constituency for parsimony.
“The scene was sickening and all the Irish were
there, most of them vying with each other in eagerness to plunder the public
William Ewart Gladstone, British Chancellor
of the Exchequer, wrote in an 1859 letter to his wife concerning a House of
Commons debate, on the cancellation of a subsidy
for the mail steam-packet service between Galway, Ireland and Newfoundland.
Gladstone was facing a budget deficit of £5m.
Last May, the Irish firm Arthur Cox, which sells
services to Government departments and has been contracted by NAMA,
was reported to have one of the highest turnovers for a law firm in Europe
with annual revenue per partner in excess of €1 million, according to
The firm reported fee income of €105 million and is in 14th place in a list of
the top 100 in Europe in terms of turnover.
Not only has the Government ignored a raft
of Competition Authority reports, it facilitates these significant wealthy firms
and individuals in two ways. 1) Because limited liability doesn't apply, the
firms or individuals do not have to publicly disclose relevant financial information. For
example, the biggest of the Big 4 accounting firms, PricewaterhouseCoopers, in
Ireland only discloses its annual revenue in a one-line statement, while its
sister company in the UK, provides much more information. 2) Government
Departments and agencies, including NAMA, maintain the Victorian era policy of
secrecy on public contracts, which is in the interest of insiders and against
the public interest. There are some exceptions via Freedom of Information
requests, but it is a very unsatisfactory system. What is termed 'commercial
confidentiality' is absolutely inimical to competition because the default
system is to select via tender or otherwise from the biggest firms who maintain
close contacts with senior civil servants.
Aidan Lambe, Director, Technical Policy at Institute of Chartered Accountants in
Ireland (ICAI) commented on remarks by Tánaiste
Mary Coughlan on professions and competition: "ICAI supports fully the need
for an open and competitive economy. Far from being part of the 'sheltered
sector', the accounting profession is arguably the most competitive and
regulated profession in the State. There are currently nine professional
accountancy bodies recognized under the Companies Acts whose activities are
overseen by the Irish Auditing and Accounting Supervisory Authority. Such
competition is healthy. The structural rigidities, such as set fee scales or
barriers to competition referred to by the Tánaistecertainly are not present in the accounting
profession. Indeed, the accounting profession was not included within the scope
of a recent review of certain regulated professions by the Competition
The chill winds of
economic reality have certainly impacted on ICAI members in the past months.
ICAI members have experienced unemployment, have accepted salary cuts, and, as
regards ICAI practitioners, have been reducing fees charged to clients.
both in business and in practice have played a vital role in helping their
employers and clients through these strained economic times and will continue to
The facts are that bodies such as the recently
rebranded Chartered Accountants Ireland, are ruled by the big cats and for
example, Anglo Irish Bank's Seán FitzPatrick, was on the governing council for
The professional bodies can be voluble about many
issues but they generally remain silent on the issue of overcharging.
They are also silent on their roles in the
Chartered Accountants Ireland is investigating
members who held senior positions at Anglo Irish Bank. However, other members
headed the two biggest banks, over several years, which were brought to the
brink of ruin. There apparently is nothing to answer for.
NAMA has a budget of €2.4bn for professional fees
and so there is wealth for the taking from the bubble and the crash.
IBEC the business group had also
been silent on the issue of the protected sheltered sector until yesterday, when
it welcomed the Taxing Master's decision this week. It also said that many
professional fees, but particularly legal fees, must fall as part of the major
and necessary adjustment that is taking place right across the economy.
IBEC Director General Danny McCoy said: "In serious
cases of excessive pricing, the deterrents must be substantial. Where fees are
grossly overstated there is a case for all entitlements to be forfeited."
Speaking about business costs across the economy, McCoy said: "If the economy
is to return to sustainable growth, Ireland's cost base must come back into line
with competitor economies. While significant strides have been made in getting
business costs under control, there remain areas where costs are excessive.
"Irish companies continue to pay above the odds for many professional services
and this is making it more difficult for them to survive the downturn. While the
cost of some professional services has dropped considerably in the last 18
months, some costs remain at unsustainably high levels. The country is going
through a painful but necessary period of economic adjustment and it is
important that all sectors play their part."
Finfacts has advocated transparency on public
contracts as that is the only way to promote more competition. Without it, there
will be no change.
It was interesting in the Thomas Reed pubs
examinership case, that
despite the crash, the banks did not query the charges from the lawyers and
accountants, reflecting the legacy of the bubble when it was partytime for the
philosopher-economist and author of The Wealth of Nations,
which was published in 1776,
wrote: "Masters are always and every where in a sort of tacit, but
constant and uniform combination, not to raise the wages of labour above their
actual rate. To violate this combination is every where a most unpopular action,
and a sort of reproach to a master among his neighbours and equals. We seldom,
indeed, hear of this combination, because it is the usual, and one may say, the
natural state of things which nobody ever hears of."
The masters in the
professions, have called the tune for too long. It's time for the fee 'cartels'
as the "the natural state of things," to change in Ireland. However, if
politicians continue to support Victorian secrecy and practices, what can be
expected of others?
We can keep singing the
mantra about improving competitiveness but as
the EU survey on prices showed this week, the reality is different. There
are other sectors where a recovery will result a return to the past.
The Waste Land - - Bord Snip, Irish Public Spending Transparency and the motto
"Never do anything for the first time"