The fondness for secrets was a side of Fingleton that allowed him to build bridges to journalists by dropping an occasional dazzling story, sometimes to score a point against a rival or merely for his own amusement. Fingleton hired Morrissey to handle the society’s dealings with the media when he drifted away from business by joining Murray Consultants in 1995. By 2002 Morrissey was essentially out on his own, but his list of clients, including developers like Bernard McNamara and Seán Dunne, overlapped somewhat with the society’s customers.
Morrissey tended to become so close to his clients that he sometimes felt more passionate about any slight towards them than they did themselves. He was not afraid to play hard-ball with anybody who challenged his masters, as Burgess was finding out.
‘I told him, Look, if I have written something incorrect I will apologise,’ Burgess recalled. ‘I’m talking to a PR guy, so I’m expecting the guy to be reasonable or whatever. I said, Look, I’ll meet your client. He said you won’t meet my client, this will be resolved in another venue.’
Burgess interpreted this as a legal threat. Afterwards he was ‘a bit shook.’ He took a note of the phone call for his files as a cautionary measure, just in case the society followed through on the threat. As Burgess wrote it all down he made up his mind that, rather than backing off Irish Nationwide, he would take it on. ‘I don’t owe them any money, they have nothing over me, and yet I was a bit upset. It was unpleasant to have someone screaming down the phone. I said, Could you imagine if I was one of those borrowers who Bill Tyson was covering and they can’t make their payments, and these guys are shouting and roaring that we’re going to repossess your house? I just resolved there and then that I would actually campaign on those guys’ behalf and sort out the issues in the Irish Nationwide.’
Although he did not realise it, for the first time Fingleton was about to face a serious external challenge. A rebellion had begun.
——
On Wednesday 24 April 2002 some three hundred members of Irish Nationwide Building Society showed up in the five-star Conrad Hotel for its AGM.
For decades the meetings had been rather sedate affairs, with members more concerned about free tea and sandwiches than about asking hard questions of Fingleton. A former Irish Times finance correspondent, Siobhán Creaton, recalls one of the first times she went to cover an AGM of Irish Nationwide. She says she distinctly remembers one elderly person sitting beside her snoring throughout the proceedings.
The format was usually the same. The members every year were promised a windfall when the society finally demutualised, and in the meantime Fingleton should be congratulated for yet again posting a record profit. There was little dissent, as members of the society typically only held deposits there. Their interests were not aligned with borrowers who had fallen into arrears.
This time, however, the mood was different. A campaign was about to begin. Outside the Conrad, Brendan Burgess and his twenty-year-old nephew, on a day off from university, handed out leaflets to members outlining his criticisms of the society’s punitive interest charges on borrowers who went into arrears and on its repeated failure to pass on cuts in interest rates to them. The leaflet said that borrowers who went into arrears could pay a surcharge as high as 5 per cent per quarter, which, when combined with the society’s standard interest, could push the cost of borrowing as high as 27 per cent APR. This made it impossible for some borrowers ever to repay their mounting debts to the society.
The leaflet also criticised the society for its lack of transparency about how much exactly it paid Fingleton. This amount had never been broken down but instead was hidden within the category of ‘directors’ emoluments.’
Hotel employees moved in on Burgess and his nephew, telling them to leave as they were committing an ‘offence against the Litter Act.’ By then it didn’t matter, as most members had been given a leaflet.
A small number of disgruntled borrowers followed Burgess through the revolving doors of the hotel. They hoped to be allowed in to the meeting to confront Fingleton and his board, but as they were only borrowers and not registered members of the society they were not sure if they would be allowed. Chief among this group was Gerry Mullin, a Co. Monaghan garage-owner who had spent years paying off ultra-high interest bills to the society. Security men headed them off and told them they would have to wait in the lobby and would not be allowed into the meeting.
Burgess, however, had to be allowed in. He was a full member of the society for many years, after depositing £1,000 in the hope of getting a windfall if it ever demutualised. Taking his seat in the room, he glanced around him. Dotted around he knew was a hard core group of rebels who had met in his office earlier that day. From the corner of his eye he could see Shane Hogan, a 37-year-old information technology project manager and a fellow-ringleader, take his seat. Hogan was a seasoned AGM campaigner who had spoken out for members or shareholders of First Active and Eircom. He was primarily concerned with hastening the society’s demutualisation so that its members could finally get their hands on a windfall. But he was also conscious of borrowers’ concerns and believed that the best way of getting them better treatment was for Fingleton to sell, a move that would surely trigger his departure.
Also scattered around the hall were various borrowers who were also members of the society. They had all fallen on hard times under the weight of the society’s vertiginous penalty interest charges. Some of them made contact with Burgess and Hogan after Tyson published an article in the Irish Independent on 20 April calling for them to make contact with the rebels. They planned to air their grievances as soon as questions were allowed from the floor.
First, however, the ordinary business of the society had to be dealt with. Between two great bunches of golden flowers was the society’s recently expanded board of directors: Con Power; Michael Fingleton; Michael Walsh, a long-time director making his debut as chairman; the secretary, Stan Purcell; the accountant, Terry Cooney; and a new addition, Maurice Harte.
An experienced accountant and banker with the merchant bank Hill Samuel and AIB Investment Managers, Harte had been appointed chief general manager of the society in January. He also knew how to work with developers after becoming chief executive of Johnny Ronan and Richard Barrett’s Treasury Holdings in 2000, where he had laid the groundwork for the National Convention Centre at Spencer Dock, Dublin, and helped develop the €43 million Westin Hotel in the city centre and the sprawling Central Park office complex in Leopardstown.
Harte had been headhunted as a successor to Fingleton by Walsh. ‘Michael Walsh was extremely anxious that an appropriate successor could be found,’ Con Power recalled. ‘After I met with Maurice Harte, I agreed. I saw him as the ideal replacement.’
Harte was tipped by the media as a successor to Fingleton, to the latter’s chagrin. Below the board, former employees said they recalled that everybody doubted that the boss was ready to let go of his life’s work just yet. Harte would find this out in time, to his cost.
Walsh began with the society’s finances, which, as usual, appeared to be spectacular. In its most recent results, to the end of December 2001, the society told members it had increased its pre-tax profit by 19 per cent, to €77 million. Its assets had increased by 16 per cent, to €4.7 billion, as the society trebled in size within five years.
For the first time, lending passed the €1 billion mark, an increase of 8 per cent on the previous year. The society’s total loan book was up 20 per cent, to €3.2 billion. ‘The society has increased its lending book by a remarkable 94% in the past three years,’ the directors’ report for members said.
The results were greeted warmly, and nobody questioned the sustainability or possible dangers of such growth. Instead the board sought to assure the meeting that the outlook was rosy. Low interest rates and strong employment levels were ‘extremely positive’ for the society. There was no chance that it would ever get carried away, was the message.
The society continues to refine and u
pdate its systems of control together with the introduction of risk management techniques. The society has, as part of its conservative traditions, adopted a very strong provisioning policy, which reflects the relatively high level of house prices and our increasing exposure to the commercial markets.
This is also of course a reflection of the increasing concerns of the Central Bank for caution to be at the forefront of all lending and credit policies.
Having spun its members again through the results, Walsh sought to preemptively take the sting out of the rebels’ criticisms by announcing a series of changes. He had been on the board of the society since 1995, but despite his refined understanding of banking he had never pushed for these changes in public before. Now, in his first meeting as chairman, suddenly he was magnanimous. In future, he said, Irish Nationwide would include details of the interest rate charged in all annual mortgage statements issued to borrowers. It was an incredible admission that the society had until then failed to do so. Already the rebels were making an impact.
As a result of not knowing what interest they were paying, tens of thousands of borrowers were simply unaware that many of them were paying above market rates as the society jacked them up. Even when the society cut its rates—after the Central Bank or European Central Bank did—they were in the dark about how much of a given reduction was passed on to them.
In another remarkable concession, Walsh said that in future Irish Nationwide would credit interest payments to mortgage holders’ accounts monthly from 1 June. Up to then the society had applied an ‘annual rest’ on mortgage payments, which meant the full year’s interest was calculated at the beginning of the year, ignoring payments throughout the year. This had made the society more money, at the expense of its borrowers.
But there was still no pleasing the protesters, who were anxious to make their points. A chaotic meeting ensued, with elderly members who couldn’t hear questions shouting out, ‘I can’t hear a thing!’ ‘This is a meeting—we should all be able to hear,’ ‘Why aren’t there two microphones?’ and so on.
In fact microphones were passed around the floor, leading at one point to some confusion as one member questioned a DIRT settlement of €5.64 million with the Revenue Commissioners on the years 1986–99 in the accounts (‘Did the auditors realise this was illegal?’) while another objected to the reappointment of its auditors, KPMG, because it was time for ‘fresh eyes.’
Amid questioning from the floor on Fingleton’s salary, Walsh again sought to calm things down. For the first time in its history, he announced, Irish Nationwide next year would break down Michael Fingleton’s remuneration as part of a plan to improve communication with its members. He was not prepared, however, to reveal it before then.
The two executive directors, Fingleton and Purcell, were paid €1.1 million between them in 2001, Walsh explained. This was made up of €854,000 in pay and €258,000 in pension contributions. Walsh quipped, to laughter, that ‘you can ask Stan later how much he got.’
Burgess then stood up to challenge Walsh. Neither man realised that this would be the first of many such tussles. Burgess said that Irish Nationwide’s mortgage rate was ‘the most expensive of any institution, excluding moneylenders.’ He claimed that the average rate was 7.2 per cent, significantly more expensive than others in the market. The society, he said, would have to ‘buck up’ with the appointment of the new Irish Financial Services Regulatory Authority (Financial Regulator), which he predicted ‘will have great interest in Irish Nationwide.’
Walsh responded coolly that the society had ‘no problem’ with the new regulator. Anybody, he said, who felt they were being unfairly treated was already free to complain to the Central Bank.
Burgess welcomed Walsh’s moves to finally allow its borrowers to know what their interest rate was, before going back on the attack. The society, he said, was ‘coming the heavy immediately’ on any borrower who fell into arrears. Deliberately, he finished his attack by asking Walsh what the society’s policy was on jailing its members.
Fingleton grabbed the microphone from Walsh, his fury palpable. ‘The courts may—but we never, ever sought to put anybody in jail,’ he angrily declared. He called on Burgess to apologise and to retract the remark.
Burgess’s response was to sit down, further infuriating Fingleton. This cleared the way for the orchestrated appearance of another speaker from the floor. Joseph Nulty, a carpenter from Barna, Co. Galway, stood up. He had been locked in a dispute for years with the society, which claimed he owed it £65,500 in arrears on £113,000 he borrowed in 1993, to build his dream home in Barna. When he was a child in school he even drew some outline plans of the house that one day he wanted to build. It also had his carpenter’s workshop attached. Because Nulty was self-employed and his income was sometimes erratic, he wanted a mortgage with a difference. He got his broker to negotiate a special deal with Irish Nationwide whereby his interest rate would not fluctuate above a certain level in relation to the general inter-bank rate.
‘In a sense, I got the first tracker mortgage in Ireland,’ Nulty said recently, recounting his experiences. He put his heart and soul into the house, designing and making all the furniture. When he ran into difficulties with his mortgage he noticed that the repayments and interest levels did not appear to correspond to the mortgage contract he had. Things got worse for him as he fell deeper into arrears under punitive penalty interest.
He had got someone to take an independent view of what, under his contract, his repayments should have been. His arrears, he believed, should have been about €25,000. This was a lot less than he was told he owed. He decided to take legal action against the society.
The situation became really nasty when his electricity and phone were cut off. He says this was not as a result of his not paying the bills but that it happened after Irish Nationwide contacted the ESB and Telecom Éireann to say that his house was no longer insured and for this reason he was cut off.
Nulty borrowed a generator and eventually managed to get his basic utilities back. His career had suffered, and he was now at an extremely low ebb. This made it even more difficult for him to financially get back on track. Eventually, amid confusion and acrimony in a court hearing, he was sent to Castlerea Prison in Co. Roscommon for contempt of court. ‘I remember being taken down to the cells in handcuffs. I was then put into a van and taken to Castlerea,’ he said. He spent a week in prison before being transferred to Dublin for a new court appearance. He was released immediately. Irish Nationwide had faxed a letter saying it would not contest his being released.
But when he got back to Barna he discovered that the society had repossessed his house. Nulty claimed that the society had pursued him unfairly for years. It went as far as Fingleton himself showing up on his lane in a big car, he said. ‘I knew something was happening when Skittles, my little three-legged dog, became agitated as a huge Beemer [BMW] came to half way up the driveway with the engine still running. I recognised Fingleton, with another person in the car. As soon as I approached my uninvited guests they left the property.’
As Nulty told his story the meeting was in disarray, with members shouting and interrupting each other. Michael Walsh struggled to regain control as members shouted both for and against Fingleton.
‘You were told off by a High Court judge,’ Nulty roared at Fingleton. Walsh said it was ‘not appropriate’ to discuss Nulty’s case, as it was still before the courts.
Then Brian Thompson, another borrower, stood up to add another voice to the cacophony. He was the owner of Cloghan Castle, near Banagher, Co. Offaly. A seventy-year-old former American paratrooper, Thompson had worked in insurance in New York before returning to Ireland to restore the castle. Over thirty years he had spent €2 million in today’s money. He borrowed about £30,000 from Irish Nationwide, he said, and was in a dispute with the society over alleged arrears, paying interest, he claimed, of 30 per cent. ‘I have had over a hundred mortgages in four countries,’ he said. ‘Never in my w
ildest dreams could I have envisaged anything as appalling—nothing even close. It’s the most troublesome I have ever known.’
Furious about his spiralling interest bill, Thompson said he had stopped paying the society in 1997. ‘This is the time to show that we, the members, are the ultimate bosses,’ he said.
Another member shouted at Thompson that if he wasn’t happy why didn’t he just move his loans?
‘I spent five months trying to pay them off and they wouldn’t let me,’ he replied. Another roar from Nulty, ‘I know that feckin’ feeling,’ led to laughter.
Shane Hogan stood up to press the society to appoint a members’ director. He pointed out that nobody knew how many members the society had, or their addresses. He asked for members to leave their addresses with him at the end of the meeting so that he could write to them. ‘If someone wants to go on the board,’ Walsh said, ‘it is the board’s obligation to ensure all members are circulated.’
More unrest. A member said the society needed to be demutualised, as it was not being run for its members any more. ‘We get the feeling on this side of the table that the society is being run for the benefit of those on that side of the table,’ he said.
Amid chaotic scenes, another member called for the society to hold a day out on the Christina O, the yacht that was bought two years before by a syndicate using money from Irish Nationwide. The yacht was formerly owned by the Greek shipping magnate Aristotle Onassis, who had lovingly restored it. Guests of Onassis had included his lover Maria Callas, the opera singer, and his wife, Jacqueline Onassis, widow of President John F. Kennedy. Its Irish owners, assembled by the lawyer Ivor FitzPatrick by way of the Cook Islands, included the trucking magnate Pino Harris. The partnership had spent €50 million renovating the yacht as well as restoring its many features, including bar stools upholstered with leather from the foreskin of Minke whales.
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