Walsh told the society’s members that he had never been on the yacht, and neither had the society’s managing director, as far as he knew. Fingleton took the microphone again to correct him. Yes, he had been on the yacht, he said, but by then there were no loans outstanding on it.
The society’s chieftain then addressed more important matters: the issues of demutualisation and even going public by listing on the stock exchange. ‘People can’t have it every way,’ he said. ‘Mutual means giving everything away to everybody. If we went public, without five years of strong profitability we would be wasting our time.’
Irish Nationwide, he said, was storming ahead and in the last year alone had added €50 million to its reserves. ‘That’s our money,’ he said. It was a telling comment that showed how closely Fingleton aligned his own worth mentally with that of the society.
Fingleton was at once bemused and dismissive of his critics. The managing director of First Active, Cormac McCarthy, he said, had got a standing ovation only the day before, for less good results. ‘I don’t want a standing ovation, but I would like to thank any of you who support me and have supported me over the years.’ Fingleton felt he’d put his critics in their place.
Peter Tuite, a quiet-spoken financial adviser, then stood up and launched a devastating critique of the society. ‘Irish Nationwide is like a prehistoric monster eating its young. There is a lack of transparency and we all know that means there is something to hide. It’s like trying to draw the tusks of a boar trying to get any information out of this society.’
Tuite said that Walsh was wrong to claim that super-high interest rates had rarely if ever been applied since 1997. ‘I am looking at a statement that shows 12 per cent was charged in March,’ he said. Tuite knew what he was talking about. He was a career banker who helped set up Cork branches for Guinness Mahon and Citibank. Now retired, he had decided to use his financial nous to help distressed borrowers from the society. At the time of the AGM he had already tried to make the Central Bank take on the society by giving it a detailed dossier of complaints, including handwritten notes from customers setting out the pressures they were under. One of these complaints, later published in the Irish Independent by Bill Tyson on 12 September 2002, said: ‘We have done everything in our power to get this situation sorted but we find that due to the high interest, which they promised they would look at, we are unable to cope with this. We have sold machinery, land, anything we could to keep up with repayments but again we are falling in arrears …’
Over the years Tyson amassed a stack of similar complaints as the public wrote in to him, which he followed up on in the Irish Independent, despite pressure not to do so.
The Central Bank did respond to Tuite’s and others’ complaints, but it did so in an ineffectual manner.
Tuite told the Central Bank that he could prove that borrowers were being charged up to 42 per cent on their arrears, but he got nowhere. ‘They may have had a problem with it but they didn’t appear to do anything about it. They accepted the Nationwide’s account at face value. They kicked to touch.’
Instead of stepping in, the Central Bank told Tuite to tell his clients to ‘contact the society again to see if a mutually satisfactory agreement can be reached regarding arrears.’ Three years later Tuite said no deal had been done. ‘I spoke to the wife [of the borrower] recently, who told me she had been attending the doctor for high blood pressure treatment and that their ordeal was still ongoing,’ he told Tyson.
Tuite sent Walsh into a huddle with his board members. Eventually Walsh emerged and invited Tuite to discuss the matter with Purcell privately afterwards.
To the board’s relief, the meeting finally ended, after two hours. Burgess sprang out of his chair and approached the board. He had a copy of Nulty’s committal order in his hand and tried to give it to Walsh. Walsh brushed him off, saying he did not wish to discuss individual members.
Burgess then went to Cooney and asked him if he would come outside and meet the society’s distressed borrowers who hadn’t been allowed into the AGM. ‘He just looked down at his shoes and didn’t answer my question,’ Burgess said. ‘It was the usual thing: we can’t discuss individual circumstances.’
Finally Burgess turned to Power. ‘I said, “Mr Power, will you come out and talk to a borrower outside?” I had never met the man before. Power said, “Certainly I will, of course I will.”’
As Burgess walked towards the door with Power they were approached by an Irish Nationwide official. ‘Mr Power, can I speak with you a moment?’ the man said. A hushed conversation ensued. Then Power raised his voice and said: ‘Nobody tells me who I can and cannot meet.’
Power grabbed Burgess by the arm and they marched out to meet Gerry Mullin and the other borrowers. Mullin, a Monaghan garage owner and car dealer, had a powerful story to tell. Describing his ordeal anonymously in the Irish Independent three days after the AGM, he said:
It was sheer hell. Unbelievable. One day I had to give them £10,000 to get them off my back. In one year I paid back £20,000, and £15,833 of it was interest and penalty interest. You can’t think straight; you can’t sleep. The missus got diabetes out of it. Many a man would have cracked for less … Luckily I am the operator I am.
Mullin was unable to escape the society by refinancing his loan, because of his arrears record. He said he took out a loan of £75,000 in the 1990s and ended up paying back £221,699 in total. ‘I don’t know why—I can’t get answers.’
Power listened to his tale of woe and the others and promised to raise it with the board. Finally, it seemed, the borrowers were getting somewhere. Walsh had made some big concessions, and now they even had someone on the society’s board prepared to listen to them.
Burgess was happy as he went for a drink with his fellow-rebels in the bar of the Conrad. ‘We felt we had really got our message across. They were expecting a great gig and they had a rough time. They were just expecting everybody to be happy and we weren’t happy.’ The rebels were more determined than ever to force changes.
The final sentence of an article in the Sunday Business Post on 14 April 2002 did not seem so far-fetched. ‘However, recent controversies, competition from cross-channel banks, the loss of his unique grip on the media and what would appear to be the laying of foundations to appoint a successor all suggest that Fingleton may be contemplating life after Irish Nationwide.’ Nothing, as it turned out, could be further from the mind of the society’s feudal-style chieftain.
——
On 8 November 2002, Fingleton, Power and Purcell met Philip Williamson, chief executive of Nationwide, Britain’s biggest building society, and his finance director, Stuart Bernard.
Williamson ran Nationwide conservatively, and the society’s strong cash reserves led it to seek to break into the Irish market. He mentioned that he had already met Michael Walsh at an earlier meeting. They weren’t interested in buying Irish Nationwide outright but instead they wanted a merger. Power told Williamson: ‘That’s a good idea. Let’s keep up a dialogue and explore it.’
Fingleton took a different point of view. ‘The members expect cash from a trade sale,’ he said, ‘and that’s what I am going to give them.’ The talks ended. An opportunity to prevent catastrophe was missed.
Ten days later Irish Nationwide held its next board meeting. Maurice Harte was absent. That summer he had confided in Power that he felt ‘trivialised’ by Fingleton. ‘Relations between Michael Fingleton and Maurice Harte at board meetings were putrid!’ Con Power recalled. Fingleton and Harte would snipe at each other across the head of Stan Purcell. Power told Harte he would back him at board level if he was prepared to really take Fingleton on. ‘I can’t carry you like a eunuch! Don’t take it. Stand up to your man!’ Power told Harte. ‘I will do a tizzy fit at the board to support you but you need to give me an opening.’ Harte replied quietly, ‘Con, I don’t think I can do that.’
Just like that, Harte—the best-qualified person to run Irish Nationwide—was
gone.
On 20 November 2002 Power met Walsh in the head office of International Investment and Underwriting to discuss what to do next. ‘We must find a replacement,’ Walsh said. Power suggested a recently retired senior manager at TSB, Dermot Tippins. Tippins was interested. After months of Walsh pressing Fingleton to meet Tippins, he eventually did. Not long after the meeting Tippins withdrew. Asked by Power why he had withdrawn, he replied simply: ‘I couldn’t work with Michael Fingleton.’
——
Having made some progress taking on Irish Nationwide, Brendan Burgess and Shane Hogan decided in December 2002 to submit four motions to the society before its AGM the next year. When they looked at the society’s archaic rules, which Fingleton showed little interest in updating, they realised they were already too late.
Members wishing to submit any motion for discussion at an AGM had to do so six months in advance, in this case by the end of November. ‘We had missed the deadline,’ Burgess admitted. ‘But we decided to submit our motions anyway.’
Their motions were mainly designed to help borrowers, but they also included a proposal to put forward a vote of no confidence in Fingleton as chief executive.
Purcell refused to allow any of the motions to go to members, by arguing that they were submitted too late. Burgess and Hogan, however, went through the fine print of the legislation to try to find a loophole. ‘Within the Building Societies Act you have the right of appeal to the Central Bank,’ Burgess said, ‘So, we appealed to the Central Bank.’
The Central Bank decided to make a concession to the rebels and their campaign by instructing the society to allow the motions go forward. However, it wanted to rephrase the vote of no confidence in Fingleton to the less provocative phrasing of a vote of confidence.
Burgess recalls his meeting with the Central Bank at the time. ‘Mary O’Dea was the consumer director-designate at the time. She felt the motions were valid. The prudential side said that a motion of no confidence could undermine the society and even lead to a run on the Irish Nationwide.’ In the end the rebels had more or less what they wanted, once the phrasing of this motion was changed.
——
Friction at AGMs did not prevent Walsh and Fingleton socialising together with the elite of Irish business. Both men were among a social set of businessmen who revolved around Michael Smurfit, one of the first Irish businessmen to become a player on the global stage. In February 2003 they both attended Smurfit’s dinner which was themed the ‘Brave New World’. Other guests included the Tánaiste, Mary Harney, Elan’s former chairman Donal Geaney, ex-Senator Edward Haughey, and Denis O’Brien. Ben Dunne, Michael Lowry and Albert Reynolds were also in attendance.
The American private equity group Madison Dearborn had just bought out the Jefferson Smurfit Group, so the event was a raucous and good-humoured affair. Pat Leahy wrote in the Sunday Business Post:
One of the most eagerly anticipated features of the evening was the announcement of the coveted Employee of the Year award.
Two years ago, beating off stiff competition, the winner was Tony Smurfit. This year, after a similarly intense race, the winner was Michael Smurfit himself.
This year an extra special gong was handed out. Drawing gasps of admiration, a special Employee of the Century award was announced. The winner? Michael Smurfit. What a night.
It was great fun—a million miles from the lives of Joseph Nulty and Irish Nationwide’s tiny borrowers who were being pursued so ruthlessly.
The following month Walsh was back to the business of Irish Nationwide. Seeing the rebels gaining momentum, he decided to meet Hogan and Burgess to try to broker peace in the offices of Dermot Desmond’s investment group. Power, the only board member prepared to listen to the dissenters, was also invited. Burgess was glad to see Power there, as he considered him independent and supportive of his concerns.
The meeting at Walsh’s office in IIU took place at 8 a.m. ‘It was down in the IFSC in very luxurious offices,’ Burgess recalled. Stacks of paintings were piled against the wall of the meeting-room, waiting to be hung.
Walsh quickly got down to setting out his views as chairman of the society and what its future should hold. ‘Michael Walsh told me that he would get very fat if he went out for lunch with all the people who had offered to take him out to lunch to discuss the demutualisation,’ Burgess said. ‘All the banks and guys over in England, all the stockbrokers of Ireland, all wanted to handle the demutualisation.’ Burgess and Hogan pressed Walsh to put down a more specific motion that would set a time limit for demutualisation.
Walsh listened amiably. As he often did, he engaged intelligently and constructively but held back from being tied down to any specific deadlines. ‘He was absolutely keen on the demutualisation,’ Burgess said. ‘He thought Fingleton was essential to the demutualisation … We would have been of the view that Fingleton should go.’
Walsh ably defended Fingleton, pointing to his years of record profits. Despite their fundamental disagreement over Fingleton, Burgess and Hogan came away impressed by Walsh. ‘Michael Walsh recognised that there were problems with the society,’ Burgess said. ‘He wanted to fix the society and get it ready for demutualisation.’ Equally, he did not dispute that some borrowers were being treated badly by the society. ‘He recognised that Michael Fingleton kept costs to a tiny level. He had instructed him, as far as I remember, that it wasn’t enough to just have low costs, it had to be the lowest appropriate costs.’
The meeting, while cordial, was not enough to convince the rebels to back down. ‘We didn’t really believe we would win the vote,’ Burgess now recalls. ‘But by putting down the motion we had an opportunity to write to all of the members, ahead of the AGM, outlining our case. We felt this was a good benefit from the whole exercise in raising awareness.’
They circulated a statement to members, which hit the society’s failings hard. It was inflammatory stuff, which infuriated Fingleton.
Burgess and Hogan called on members to vote against the motion expressing confidence in Fingleton. They said Fingleton had taken the credit for Irish Nationwide’s strong financial performance and low cost base. Therefore, he must also accept responsibility for the issues that had brought the society into disrepute.
Their statement noted a comment by the Director of Consumer Affairs, Carmel Foley, who said she was ‘disgusted’ with the society over ‘swingeing’ penalty interest rates and ‘lack of information to borrowers.’ The society was ‘very aggressive’ with borrowers in arrears.
The case of a nine-year legal battle between Eileen Malone and the society was cited as an example of Fingleton’s bullying.
Malone’s 47-year old husband, Seán, had died on 29 July 1989, leaving her with four children and a newly purchased grocery, house and pub in Rathmolyon, Co. Meath. The property had a £100,000 mortgage from Irish Nationwide. Before his death Seán Malone had agreed with the society that he would buy insurance cover from Caledonian Life, which would pay off his mortgage in the event of his death. He had to buy the insurance cover from Caledonian as part of the terms of his Irish Nationwide mortgage. He had even paid the society an extra £1,200, including £1,000 in administration costs, for it to handle the paperwork for his mortgage and insurance cover.
The society, however, had failed to effect the insurance cover on behalf of the Malones, despite their solicitor’s promptings. Seán Malone had filled in a direct debit form to cover his mortgage repayment and mortgage protection insurance; but the society had failed to lodge it. Irish Nationwide had admitted its oversight but refused to take responsibility for it. It spent the next ten years chasing the Malones for £100,000 on their property, which multiplied in value as the boom took off.
Eventually the case went to the Supreme Court, which found in favour of Eileen Malone. It ruled that the society had been ‘manifestly negligent’ in its treatment of her. At least €500,000 had been spent by the society in pursuing its fruitless action against the widow as she struggled to bri
ng up her family.
Burgess and Hogan then reminded members of the jailing of Joseph Nulty as further evidence that Fingleton was unsuitable. It also raised the question of the society’s appearance at the Flood Tribunal and the claim by Patrick Hanratty SC, for the Tribunal, that Fingleton was ‘cavalier in the extreme,’ in his attitude to it. Their statement said that Fingleton was due to retire in January 2004 and, having by now driven out Maurice Harte, had no potential successor.
The two men dragged up other dirt from the society’s murky depths. In August 1999 Judge Peter Kelly had threatened to jail Fingleton and sequester the society’s assets for contempt of court in a case involving the alleged wrongful dismissal of the manager of the society’s Cavan branch, Seán Martin. Martin had obtained an order preventing his dismissal from Judge Fidelma Macken on 8 March until his case could be heard. The society sacked him anyway on 18 June, claiming he had carried out alternative employment as an auctioneer and in any event, it claimed, was under-achieving as a manager.
Martin had appealed against his dismissal before even being given a chance to argue his case in court before Judge Kelly, who said he was prepared to jail Fingleton for doing so. A stay had been put on his order when counsel for the society gave an unequivocal undertaking that Martin could continue in his job. The society claimed that the judge had only made an order for them not to sack Martin; this, it believed, did not prevent them carrying out further internal disciplinary procedures. When Martin failed to co-operate with these inquiries, it said, it felt entitled to dismiss him.
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