by Shane Ross
Joyce had the last laugh when he was succeeded by Mark Moran, who had floated on to the EBS board in 2002 while chief executive of the Mater Private Hospital; Joyce himself had already done the double as chairman of the Mater and the EBS for seven years until 2006. A champion bridge player who twice captained the Irish team, Moran had made himself very rich by leading a management buyout of the Mater Private from the Sisters of Mercy for around €42 million in 2000; five years later he and his fellow shareholders sold the business for €350 million to CapVest, a UK-based private equity firm. Cruelly known by his enemies as ‘The Claw’ because he is missing a finger on one hand, Moran was a controversial choice, widely referred to as ‘son of Brian’. Joyce’s patronage of Moran and another director from the Mater Private, Jim Ruane, caused eyebrows to be raised, as few could see how – despite Ruane’s earlier career in banking – the Mater Private made a natural recruiting ground for directors of a building society.
Moran had no banking background. He left UCD with a degree in chemical engineering before heading for Smith-Kline Beecham in Cork. He followed SKB with a stint as a finance director at biopharma company Centocor and as managing director of a company reclaiming VAT for US and Japanese companies in Europe. In 1997 he applied for the job of managing director of the Mater Private.
Ethna Tinney was none too pleased by Joyce’s manoeuvring to land Moran in the chair, but eventually she reluctantly agreed not to oppose his accession to Joyce’s post and the outgoing chairman achieved a unanimous vote for his protégé. However, the experiment in corporate democracy had back-fired on the old guard: Tinney had not toed the line. The process of trying to remove her had already begun under Joyce. Two years earlier he had told her that her ‘performance’ on the board was below par.
Boards often practise internal self-evaluations. Once a year each director awards marks to the others in certain defined categories. They are totted up. If any board member does not cut the mustard, his or her colleagues sometimes suggest that the director stand down. In theory, this keeps directors on their toes. In practice, it usually allows cabals to congratulate each other or cliques to gang up against their opponents.
Tinney was singled out.
In February 2007 Mark Moran arranged a meeting with Tinney in the Castletroy Hotel in Limerick. Moran told her that the board wanted her head. Tinney refused to bow to the pressure.
A few weeks later, Tinney received a letter from Yvonne Scannell of the EBS nomination committee telling her that her ‘skills’ were no longer needed and that she would not receive EBS board support for her re-election that year.
There were two months between February and the members’ vote at the annual meeting. Tinney decided not to go quietly, but to stand and fight. The board was against her, but a few weapons were available to her: the media, the EBS members and her own gritty personality.
Battle was joined. Suddenly leaks about civil war at the EBS started to hit the press. Highly sensitive boardroom documents surfaced, revealing that the warring factions had been lining up for months. As the battle raged, I contacted Tinney. When I met her it became obvious within minutes that she had been a confounded nuisance to the troika of Joyce, Moran and McGovern. The last thing they wanted was an inquisitive woman challenging their business strategies. I urged her to take on the board and immediately began to seek postal votes for the annual general meeting in April 2007. We were going to appeal to the membership to vote for her over the heads of the directors. It was time to see how they felt about the treatment of Ethna Tinney.
The EBS board, led by Moran, employed public relations consultants Q4 at great expense to make their case. The campaign against Tinney was based on the whispered word that she was not ‘up to the job’.
In the Sunday Independent the day before the vote I anticipated a crushing defeat. One woman against an awesome machine was no contest. Yet we nurtured a faint hope of a good showing.
Building society elections are the most democratic in the corporate world. Each member has one vote, regardless of the size of their savings or borrowings in the society. The widow with a thousand euros has the same influence on the result as the rich man with half a million euros on deposit. (In public companies, by contrast, one share equals one vote, giving total dominance to the big shareholders.) Members of building societies can vote in person at the AGM or send in postal votes mandating a member attending the meeting to act as their proxy and vote on their behalf.
There was palpable tension at Dublin’s Burlington Hotel when over a thousand members gathered. Tinney was undoubtedly the star of the day. She carried the members in the hall with her by a distance. Journalist Sarah Carey, then of the Sunday Times, spoke eloquently about the society’s problems. Linda O’Shea Farren made a thinly disguised bid for a board place in the future, while I tried to make the best possible case for Tinney.
The platform looked sullen – none more so than the dour chief executive, Ted McGovern. The plump plutocrat with the €760,000 pay package fiddled with his moustache as speaker after speaker devoured him. Chairman Mark Moran sat beside him. Tinney was perched on the podium awaiting execution. Cathal Magee, who had finally sided with the board against Tinney, looked as though he would rather be in Siberia. McGovern loyalists, including Jim Ruane, the battle-hardened Barbara Patton, TCD law professor Yvonne Scannell and the tough, but attractive, company secretary Emer Finnan were in a clear majority. All afternoon the board was under siege from the membership in the hall. Tinney had the masses behind her, but far fewer votes in the ballot boxes.
Suddenly a well-groomed woman at the back of the hall stood up and began to speak. Ted McGovern beamed down on her from the platform.
This prosperous-looking, perfectly tailored member, who identified herself as Mary Caffrey, was no friend of Tinney’s. She supported the board and above all she admired McGovern.
‘Shane Ross,’ she thundered (apropos of nothing), ‘is a self-serving, publicity-seeking individual both as a journalist and a politician.’ I had no problem with that, but wondered who she was.
‘He is,’ she continued with venom, ‘campaign manager for Ms Tinney.’
But who was she?
She then dubbed me ‘a fantasist, an opponent of mutuality, a manipulator’. Quite a bit more bile followed from this seemingly ordinary EBS member. Ted McGovern’s smile widened further; the board nodded approvingly; chairman Mark Moran indulged Mary Caffrey’s rhetoric, where he had cut others short. The PR guys lurked in the background and smirked.
No one should blame Mark Moran for permitting this polemic. He had been given stick for a couple of hours; he was momentarily enjoying himself. Ted McGovern too was entitled to his surprise moment in the sun. But who was the well-manicured lady? EBS employees were conspicuous by their presence at the AGM, cheerleaders for the board in a room overwhelmingly opposed to it; perhaps she was one of their number, though she didn’t say so. The chairman allowed her to rabbit on.
When Mary Caffrey had finished, the ranks of the EBS employees at the back of the Burlington clapped. Ted McGovern grinned back benignly at the lady and his loyal staff.
I headed for the Gents. As I entered I felt a heavy hand thrusting a note into my pocket. The note was not signed. ‘The lady who insulted you personally,’ it read, ‘is the wife of EBS managing director Ted McGovern.’
EBS member Mary Caffrey was Mrs Ted McGovern, wife of Tinney’s arch-enemy. By the time this was made known to me she had presumably retreated to her upmarket Dalkey homestead. No wonder the employees at the back clapped as Ted eyed them from the platform. They were applauding the boss’s missus.
When challenged, Mark Moran maintained that he had no idea that the speaker was Ted McGovern’s wife. So the EBS chairman did not recognize the EBS chief executive’s spouse. An unusual, but not wholly implausible, state of affairs.
Later, very helpfully, Ted McGovern confirmed that Mary Caffrey was his wife. The serious Scot told me he saw no reason why she should identify her
self as such. She was a woman and an EBS member in her own right. She just happened to be married to the man living off the members’ €760,000 a year. No need to tell the members.
Ted’s own AGM performance was true to form. The boss said less than his missus. When a member asked chairman Mark Moran the cost of the failed effort to negotiate a merger with Rabobank, Mark hadn’t a clue. Ted himself did not have the figures ‘available at his fingertips’. ‘My best guess,’ he added pathetically, ‘it was €3.5 million.’
Tinney intervened. ‘Ted, it was €6 million.’ Bullseye for Ethna.
When the vote was taken the board came home by a whisker. Tinney was defeated by 10,252 to 9,417, a margin of 835 votes.
Mark Moran soon set about repairing the rift. He hoped to mend fences, make changes and repair the damage done to the building society. Less than three months later Mary Caffrey’s husband, Ted McGovern, was on the way out. He received an exit package of nearly €1.9 million that would have made even Michael Fingleton blush.
Moran set out in search of a new chief executive and board. He managed to recruit Liam Mulvihill, fresh from his spell as director general of the GAA, Pat McCann, just out of Jurys, and Philip Williamson, ex-CEO of the UK Nationwide Building Society. Moran was beefing up the board as a buffer against another assault from Tinney. His biggest fear was that the narrowly defeated Tinney would run a campaign among the membership to reverse the 2007 vote. Would she expose the board as out of touch with the membership by defeating their plans in a revenge putsch?
Meanwhile, EBS headquarters in Burlington Road was leaking like a sieve. Insiders there were ringing journalists to inform us of every move. Stories broke at various intervals in the Sunday Independent, where we were able to tell readers about McGovern’s enormous pay-off and to monitor the feverish but failed attempts to find a successor. Appetizing reports of internal witch-hunts and culls of key staff reached those hungry for news about the troubled outfit.
The executives were running around like headless chickens. Eventually in 2007 – after the departure of McGovern but before the appointment of a new chief executive, and with Moran acting as executive chairman – they decided to go further down the Fingleton road and expand their lending in the commercial property market. A lucky escape happened when the EBS bosses tried to link up in a joint mortgage venture with Britannia in the UK. EBS even flirted with the tempting sub-prime market.
Moran’s six-month tenure as temporary chief executive was calamitous. Not only did the society dig far too deep into commercial property at the peak of the market, but it also had a high-profile disaster when it lent to rogue solicitor Thomas Byrne and was forced to take a €15 million hit as a result; it was caught in the Icelandic bank meltdown after lending to the bankrupt, but later nationalized, Kaupthing bank; the EBS Haven Mortgages subsidiary, which separated out the society’s mortgage-broker business from mortgage lending (for no obvious reason and at huge set-up costs), failed to meet its targets. Almost everything Moran’s EBS touched turned to dust.
When I met Ethna Tinney in October 2007, she was indifferent to an attempt at a comeback. Moran had now slotted credible people on to the board. Liam Mulvihill’s GAA credentials were impeccable and Pat McCann had a good business record. But as December approached, she decided to run. Her nomination was lodged. Sources at the Burlington bunker reported that the board was preparing to man the ramparts. There were eight candidates for seven seats. Someone had to lose out.
This time it was not simply a vote of ‘Yes’ or ‘No’ to Tinney. She was pitched against other candidates. Predictably, after her speech at the previous AGM, outside candidate Linda O’Shea Farren was in the field. Board members offering themselves for re-election were secretary Emer Finnan, Philip Williamson, Cathal Magee, Liam Mulvihill, Pat McCann and Jim Ruane.
The tension carried all the way to the AGM. Anyone could have lost.
Ethna Tinney topped the poll. Jim Ruane of the Mater nearly lost his seat. O’Shea Farren lost out. The entire slate of sitting directors who had been put up for re-election, with the support of the board, came trotting in thousands of votes behind Tinney. It was sweet revenge for one who had been so cruelly humiliated just a year earlier. It was a sour rebuff to Mark Moran.
Meanwhile, Moran had recruited a new chief executive. Fergus Murphy was a former boss of Rabobank subsidiary ACC. He accepted Moran’s offer of the job and set about putting an end to commercial property lending. Murphy wanted to bury the past, to bite the bullet on the bad debts. And he wanted a new chairman.
He set about his task just as Irish banking entered its biggest-ever crisis. Unlike many of his peers, he insisted on making realistic write-offs of bad debts: in 2008 the EBS wrote off €110 million. It declared a loss of €38 million for that year, a far more realistic acknowledgement of the state of its business than was forthcoming from the big banks.
Fergus Murphy was the sole chief executive to survive the cull of bosses that followed the state’s guarantee of the six Irish banks and building societies. Moran was not so lucky. At the AGM of 2009 he resigned, admitting that he should be accountable for the mistakes made in his time as interim boss. His tenure had been a failure. He was accompanied into the wilderness by his able, but less lucky, finance director, Alan Merriman.
At the same AGM former assistant garda commissioner Martin Donnellan charged on to the board with 7,819 votes. He toppled long-time Ted McGovern loyalist Tony Moroney, the chief executive of Haven Mortgages. In the same vote O’Shea Farren finally made it on to the board.
The most significant result in 2009 was a ringing endorsement for Fergus Murphy, the new managing director, who had distanced himself from the old regime. Murphy topped the poll, well ahead of the field.
The McGovern legacy was obliterated within two years of his departure – the board had been turned inside out by the Tinney revolution.
I first met Michael Fingleton back in the eighties in Scruffy Murphy’s pub, just off Lower Mount Street in Dublin. At the time it was a watering hole for financiers, politicians, artists and journalists; among its regular denizens were Charlie Haughey’s closest adviser, P. J. Mara, and journalist Eamon Dunphy. Dermot Desmond and his NCB gang were regulars, as they had moved into offices next door. Fine Gael ‘national handlers’ Pat Heneghan, Enda Marren and Bill O’Herlihy (also a television football pundit) were good customers of the pub. Many of them were also good customers of Fingers.
Fingleton liked journalists and they liked him. He saw politicians as a means of getting things done. So Scruffy Murphy’s provided a useful network for him. Fingleton became a provider of mortgages to politicians, journalists and artistic types. He rarely gave them preferential terms, but he often arranged speedy loans for those with good political or journalistic connections. These relationships gave him access to the corridors of power and to the media.
In those days the mortgage provider was considered to be doing a favour for the customer. All sorts of conditions were imposed by lenders. They frequently forced hopeful borrowers to save specified sums with them for a set period before even considering them for a house loan. Fingleton was prepared to waive these niceties, helping him to multiply the mortgage business at the Irish Nationwide.
The novelist and ex-journalist Colm Tóibín is typical of customers given mortgages by Fingleton in those days. In April 2009 Tóibín told the Irish Times: ‘I was in the Conrad Hotel earlier this year and Michael Fingleton came in, alone. I was proud to stand up and shake his hand. He gave me my first mortgage when he mightn’t have, when I wasn’t the most solvent person in Ireland.’
Fingleton’s strategy of cultivating politicians and journalists worked. He secured wide media coverage, much of it identifying his personality with the building society. The two were inseparable. Both Fingleton and the Nationwide became household names. He was given publicity that no amount of advertising spend could buy.
At the same time he became a familiar figure in Leinster House. He had access
to politicians at the drop of a hat. He knew many of the top TDs, especially those in Fianna Fáil, on familiar terms. Later, the huge leap in his profits was partly due to his close connections with both Fianna Fáil and its builder friends. He was one of the initial beneficiaries of the property bubble.
Such high-flying connections were also to be his downfall.
Fingers had started from small beginnings. In the early seventies, when he took the reins of the Irish Industrial Building Society (renamed the Irish Nationwide in 1975), it had a staff of five and assets of just €2 million. By 2004 it had assets of €8.5 billion and profits of €135 million. In 2007 profits reached €391 million.
Fingleton travelled an unlikely route into Ireland’s financial world. The son of a garda from Tubercurry, Co. Sligo, he attended a seminary but eventually baulked at taking the vows. He then spent two years working for Concern, the Irish aid agency. A story is told that he was once stopped at customs in the Nigerian breakaway region of Biafra carrying £100,000 cash in his suitcase as bail for Irish priests who were being rounded up and imprisoned. Somehow he talked his way out of trouble.
When his two-year spell with Concern ended, he faced a choice between God and mammon. He was good at God but better at mammon, so mammon won. He had already done a spell at Allied Irish Finance in the early sixties and a commerce degree at UCD. He answered an advertisement to become general manager of the tiny Irish Industrial Building Society and was hired. In 1975 he qualified as a barrister. Among his classmates at the King’s Inns were future Attorney General Michael McDowell, future Supreme Court Judge Adrian Hardiman and future Labour Party leader Dick Spring. He recalls that he ‘sat at the back with Dick Spring; McDowell and Hardiman sat at the front’.
