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Analysis/Comment Last Updated: Oct 27, 2011 - 9:17 AM

A comeback for Crony Ireland?: Millionaire lawyers oppose change in conservative country
By Michael Hennigan, Finfacts founder and editor
Oct 26, 2011 - 4:38 AM

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Crony Ireland - - the toxic nexus of business and local politics, in a system of limited accountability - - maybe about to make a comeback with the election of a Fianna Fáil property services insider as the next Irish head of state. Meanwhile, the opposition of eight former attorney generals to proposals on judges' pay and Oireachtas inquiries - - all of the individuals likely multi-millionaires and two who have served as chairmen of Allied Irish Banks (AIB) - - confirms again how difficult it is to bring about change in such a conservative country.   

A vote for Seán Gallagher on Thursday would be even more of an endorsement of the Fianna Fáil system that brought the Irish economy to its knees than a vote for a Celtic Tiger era developer in NAMA's gallery of leading borrowers.

Gallagher was the quintessential cavalry insider in the machine politics of Fianna Fáil; on the public payroll as secretary to a Fianna Fáil minister; on the payroll of a public enterprise agency; becoming a property services entrepreneur during the boom but still acting as a Fianna Fáil director of elections in Louth during the 2007 general election and joining the ruling national executive in 2009.

He went with the flow during the boom and picked up State quango appointments -- all boosting his insider connections. As was the case with many communist apparatchiks in Eastern Europe after the fall of communism, Gallagher now wants the past to be inoperative.

The questions about business transactions in themselves are enough to disqualify him for the office of head of state.

The Irish Times says today that issues have been raised about aspects of Seán Gallagher’s business record, including: the loans he has taken out of his company as a director; other drawdowns from the company such as patent royalties, rent and directors’ fees; and the level of State support for his company.

Corporate governance expert Prof Niamh Brennan has said there is a “bad vibe” about these aspects of Gallagher’s record, while Glenna Lynch, the Dublin businesswoman who tackled him on television and radio in recent days, has accused the Dragon’s Den panellist of “raiding the coffers” of his business, thereby weakening it. 

The Irish Times also reports that Seán Gallagher has refused to answer questions about his €82,829 company loan which breached company law.

It seems weird that the self-proclaimed guru for entrepreneurs would have been unaware about the focus on the abuse of director loans following the revelations about Seán FitzPatrick of Anglo Irish Bank in Dec 2008, that he had hidden large director loans over an eight-year period.  

Last Saturday, The Irish Independent reported that Gallagher's company Smarthomes benefited from public grants totalling  €830,000.

On Tuesday, Glenna Lynch from Stillorgan, Dublin, who runs the interior design shop Mimosa Interiors, raised with Gallagher on the Today with Pat Kenny programme on RTÉ Radio One the issue of the very high level of grants paid to a domestic services company. He did not reply to the issue.

It's a question that many business people have wondered about including myself, as apart from county enterprise board supports and a number of job promotion schemes, public agencies generally provide only significant support to businesses that are exporting.

There is no suggestion that there was anything underhand in the grant applications by Smarthomes but the public agencies involved should clarify why a company with about 70 employees providing a home-market property-related service during a housing boom, was given such a large amount of public funds. It is also a fact of life that having connections with agency staff is a plus for applications.

Attorney Generals for the comfortable status quo

Four years ago last August, the music stopped on international credit markets. Weeks before, in July 2007, Chuck Prince, then CEO of American banking giant Citigroup, famously dismissed fears about an early end to the postmillennial debt frolics. “When the music stops,” he told The Financial Times, “in terms of liquidity, things will get complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing.” 

Chuck Prince may do his dancing these days on golf courses and in the interval of four years, much appears to have changed in both the global economy and Ireland. However, it's also striking how little fundamentally has changed in Ireland despite the swift transition from boom to bust.

For decades, change in Ireland has happened at glacial speed, if at all. Since 2007, there has been little interest in reforming broken systems and the new Government hasn't accelerated from the default slow-motion mode. In contrast, there appears to be a significant constituency that sees salvation from shifting responsibility for our travails to Europe. It is part of the evident delusion among those who wish to retain bubble gains that the status quo can be maintained.

The eight former attorney generals who wrote to the national newspapers can always find reasons not to change and none of them have saw fit to push for reform of the system that made all of them very rich in a small country.

Dermot Gleeson and Peter Sutherland are former chairmen of AIB Bank.

So our parliament should not have the power to investigate issues of public importance such as the banking crash while the referendum on judges pay may undermine the independence of the judiciary?

Any number of things can happen and a failed system which they were part of for a span of three decades has destroyed the lives of tens of thousands of their fellow citizens. However, that system remains today essentially unreformed and a Fianna Fáil insider may well become the head of state of what is currently a bankrupt country and the calamity was mainly self-made at home.

Michael McDowell, a former attorney general, presciently said his party, the Progressive Democrats (PDs) had a choice of being radical or redundant.

Today despite the crash, the conservative mode remains the default one and both the election of Gallagher and the rejection of the referenda would leave no room for doubt or hope of meaningful change.

Peter Monahan, of Mornington, Co Meath, frames the issue very well in The Irish Times today.

"The dramatic intervention by eight former attorneys general is a shameful effort to protect the most profitable and cossetted profession in this broken and bankrupt republic. Crying wolf with regard to our citizens’ constitutional rights really takes the legal biscuit. Let us recall their interventions on our behalf during the disgraceful governance by government and banking regulators during the Celtic Tiger years.

Where were they when their learned colleagues negotiated huge and immoral tribunal daily rates? Racking up over €300 million to be paid for from the public purse. The net result for such huge cost is nothing, no one found accountable.

Perhaps the politicians should be given at least one term to see if they can do better than our super- paid and selfish barristers. I of course recognise that a large amount of solicitors and juniors work on the clippings of tin to survive, but surely this shows how their cosy self-regulation needs to be radically changed. Vote Yes to both amendments at least we can change the politicians and monitor their wages."

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