by Shane Ross
The warriors included Bernard McNamara, a former Fianna Fáil councillor and 1981 general election candidate; Sean Dunne, a close neighbour of Bertie’s moneybags, Des Richardson, before Dunne moved to his Shrewsbury Road pile; and Seamus Ross, the biggest house-builder in Ireland, who had crossed paths with the late Fianna Fáil TD Liam Lawlor over housing deals. Ross told the Mahon Tribunal that he had paid Lawlor over £40,000 to change the postal address of one of his estates from ‘Clondalkin’ to ‘Lucan’. As a result he was able to charge £5,000 extra for each house. He was reported in Frank McDonald and Kathy Sheridan’s book The Builders to have the ear of Finance Minister Brian Lenihan, Ross’s local TD in Castleknock.
Johnny Ronan of Treasury Holdings has multiple ties to Fianna Fáil. Ronan’s Treasury Building in Dublin’s Grand Canal Street was used as the Fianna Fáil party’s campaign headquarters in the 2002 and 2007 general elections. It was nicknamed ‘Tora Bora’ by P. J. Mara, likening Fianna Fáil’s zealots to the fanatics holed up in Osama bin Laden’s cave.
Ronan also employed Paddy Teahon, the former secretary general of the Department of the Taoiseach, as a director and a consultant. Teahon was forced to stand down as head of the Campus Stadium Ireland project – aka the ‘Bertie Bowl’ – in 2002 in a row over the award of contracts. Unsurprisingly, Teahon moved into banking and property development after leaving the Taoiseach’s department, joining former financial regulator Liam O’Reilly on the board of Merrill Lynch International Bank. At the Leopardstown Races in 2007 he told Michael O’Regan of the Irish Times, ‘I must be the most occupied non-executive director of all time.’
One of the curious features of the property boom was the extraordinary ability of the internal Fianna Fáil magazine, The Nation, to attract advertising. The Nation included the sort of dull articles you’d expect in such a publication – ‘A day in the life of a Taoiseach’, notices about party matters, functions and fund-raisers. Few niche magazines of this sort achieve much advertising, but The Nation was an exception. It was overflowing with advertisements. Launched in November 2003, it was edited by Conor Lenihan, later to become a junior minister under Bertie Ahern. In its second edition, thirty out of sixty advertisements were from builders and developers. The familiar old names were there – Mick Bailey’s Bovale, Paddy Kelly’s Redquartz, Johnny Ronan’s Treasury Holdings, Sean Mulryan’s Ballymore, Gerry Whelan’s Maple-wood and Jim Mansfield’s Citywest Hotel. The two building societies, Michael Fingleton’s Irish Nationwide and the Fianna Fáil-leaning EBS, also took space. Some developers advertised in The Nation; some gave donations; some headed for the Galway tent. But all roads led to Fianna Fáil.
The Club
The K Club in Straffan, Co. Kildare, competed with the Galway tent as a playground for Ireland’s rich builders. Here a wider set of developers could be found networking at the Smurfit-owned hotel and golf club. A number of them were so close-knit that they opted to live together – for part of the time at least – as neighbours, buying multimillion-euro second homes in the K Club complex.
Michael Smurfit himself led the way with a magnificent mansion built in the grounds of the Smurfit ‘Village’. K Club part-owner and property tycoon Gerry Gannon followed suit. Gannon, who owns vast swathes of land in north and south Dublin, is a Fianna Fáil supporter. In early 2009 he was named by the Sunday Times as one of the ten members of the ‘Golden Circle’ who were lent money by Anglo Irish Bank in order to buy the troubled bank’s shares after Sean Quinn’s vast shareholding was unwound.
Purchasing houses within the K Club complex became a status symbol, almost a rite of passage among the Smurfit set. One owner told me that, ‘If you didn’t have one you were not really on the inside track.’
A second member of the Anglo ten named by the Sunday Independent, Paddy McKillen, also bought a K Club trophy house and numbers among a growing group of residents who do not even play golf. McKillen, like so many builders and developers, left school in his teens. After working in the family business, DC Exhausts, he became wealthy in property and established good Fianna Fáil connections, being appointed in 1989 by Minister for the Environment Pádraig Flynn to the board of the Construction Industry Development Board at the age of just thirty-four.
His first really big property break was his purchase of Dublin’s Jervis Hospital site in 1992 for €5.7 million. He built a shopping centre on the location, greatly assisted by the grant of urban renewal status in 1994 by a Fianna Fáil administration. The incentives attached to the status allowed McKillen to write off the capital he spent on construction against income he received from rents. He coined it when the new shopping centre took off and rents rocketed. In September 2008 the Irish Times valued his investment at €400 million.
McKillen’s property interests are global. He has quietly bought up properties in Japan, Vietnam and France. He is believed to own a vineyard in France and several buildings in Paris. In 2008 he paid €38 million for a prime investment site on Oxford Street. He is part-owner of the Clarence Hotel on Dublin’s quays along with Bono, the Edge and Derek Quinlan, and lives in a massive modern house in Dublin’s Foxrock. He is a non-drinker with huge energy for work, but is no puritan. He drives a Mercedes and is married to a glamorous former model, Maura McMenamin.
Seamus Ross, a third member of the Anglo Golden Circle named by the Sunday Times and a K Club neighbour of Gannon and McKillen, was yet another to leave school in his teens. He finished his formal education in Ballinamuck, Co. Longford, and went to work as a carpenter. Like McKillen, he is not known for his golfing prowess – but he knew the value of tickets to the Ryder Cup when the event was held at the K Club in 2006, offering tickets to every member of South Dublin County Council. All the councillors, bar one Fianna Fáil member (who later had a change of heart), turned them down, sensing they might be compromised by accepting a gift from a property developer.
After Tiarnan O’Mahoney lost the battle to succeed Sean FitzPatrick as Anglo’s chief executive, he set up a specialist lending outfit called ISTC and sought investors. According to the Sunday Times, Ross entrusted €10 million to O’Mahoney, who promptly lost the lot.
Seamus Ross was not alone in putting his faith in O’Mahoney’s new venture. Other high-profile clients of Anglo backed the bank’s former Treasury chief with minimum investments of €2 million. These included Sean FitzPatrick himself, billionaire businessman Sean Quinn, telecoms king Denis O’Brien, Smurfits’ Gary McGann, and builder Paddy Kelly. O’Mahoney’s enterprise borrowed money in the international debt markets, invested in complex credit products and lent the money on as capital to banks. It also brokered and managed debt transactions for financial institutions. In 2007 it was caught in the credit crunch when it was forced to sell some of its loans at deep discounts. Barely two years old, ISTC fell into examinership, losing €850 million – the largest cash loss in Irish corporate history.
Sean Mulryan, another Fianna Fáil supporter with a K Club home, plays a good game of golf and, in a rare corporate coup, managed to persuade its owner Michael Smurfit to sit on the board of Ballymore. Trained as a stonemason in Roscommon, Mulryan moved to Dublin in his early twenties and funded his first project with the sale of his own house. He has since gone on to develop a seriously international profile as a developer, with major projects in London’s docklands and Eastern Europe. He has a genuine interest in horses, owning the 350-acre Ardenode Stud in Ballymore Eustace, Co. Kildare, where he is reputed to hold lavish parties. Numbered among the guests are many of the great and the good in Ireland’s political and banking world, including Michael Fingleton and Sean FitzPatrick. He counts Brian Cowen among his friends.
In the 2009 Sunday Times Irish Rich List, Mulryan was ranked in 18th place with a personal wealth of €363 million despite a loss of over €230 million in just one year; he and his wife Bernardine suddenly sold off half of their fifty racehorses.
Other property developers with K Club houses include Noel Smyth and Bernard McNamara. Sean FitzPatrick is
among the most prominent members of the K Club who have resisted any pressure to buy one of the plush residences. FitzPatrick’s Anglo lent money to McNamara, Gannon, Mulryan, McKillen, Ross and Smyth. He knew them all. He preferred the golf course at Druid’s Glen in his home county of Wicklow but he kept Anglo’s profile high in Straffan – where both of his major competitors, Bank of Ireland and AIB, had taken out corporate memberships. Anglo needed a watchful presence there.
The Incentives
Why were the developers so keen to support Fianna Fáil?
Naturally enough, they wanted access to the party that seemed to be permanently in power. They needed influence at the top to grease the skids on their speculative activities. Starting in the late 1990s, Fianna Fáil brought in a number of measures – many relating to the tax code – that encouraged a frenzy of development and debt.
Early in his tenure as Finance Minister, Charlie McCreevy, a true believer in the ideology of the free market, halved capital gains tax, reduced capital acquisitions tax, brought corporate taxes lower and introduced a series of income tax cuts which meant that every citizen began to see more in his or her weekly pay packet. Spending power increased, including the ability to pay more for houses and repay more on mortgages. McCreevy’s reduction of capital gains tax from 40 per cent to 20 per cent in 1997 released assets that had been paralysed for decades. Perhaps most significantly, the taxes on profits from residential development and on development land were both halved to 20 per cent, in 1998 and 1999 respectively.
In addition – and far more controversially – Bertie’s government created a number of tax breaks that built a Utopia for the construction boys. Some of them were extremely grateful – none more so than Bernard McNamara, who told Ivor Kenny in his book Leaders that his move into property ‘largely came about from the capacity to use tax breaks’.
McNamara may have moved beyond his Fianna Fáil electoral ambitions, but he always maintained his political contacts. He is a close friend of Tony Killeen, the Fianna Fáil junior minister from his native Clare, and he employed Fianna Fáil follower Jim Nugent – one of six pals of Bertie Ahern who gave the soon-to-be-Taoiseach a ‘dig-out’ in 1993 – as an industrial relations adviser. McNamara told Ivor Kenny that confronted with a five-week bricklayers’ strike, Nugent advised him to send the brickies’ last ten payslips to their wives; shocked to learn how much they were earning, the brickies’ wives had them back on site within ten days.
McNamara’s good standing within Fianna Fáil was reflected by his appointment to numerous state boards, including the Great Southern Hotels Group (before it was privatized) and the National Roads Authority. John O’Donoghue, then Arts Minister, made McNamara a director of the National Gallery in 2003, two years after McNamara built the gallery’s €25 million Millennium Wing.
Tax breaks sprouted up everywhere in the Fianna Fáil years. Capital allowances were on offer for hotels, holiday camps and holiday cottages, sports injury clinics, third-level education buildings, student accommodation, multi-storey car parks, park and ride facilities, crèches, private hospitals and nursing homes. Running parallel with these tax breaks were rural, urban and town renewal designations, which targeted certain specific areas as suitable for development and allowed for up to 100 per cent of the costs of construction of a building to be deducted from the owner’s tax bill over a number of years.
These measures gave an early lift-off to the ambitions of developers, and had the effect of tilting the entire national economy: by 2006, 24 per cent of gross national product was accounted for by the construction industry.
McNamara was typical of his breed. He saw all the angles. Borrowing money from indulgent banks, he built hotels, hospitals, car parks and student accommodation. McNamara borrowed from Bank of Ireland, Ulster Bank, IIB, AIB, HBOS and, above all, Anglo. They were all screaming for McNamara’s business; they would have stabbed each other for it.
McNamara seized the opportunity to build an empire. Flagship buildings included Dublin’s redeveloped Shelbourne Hotel, the Donnybrook Burlington (financed with a €288 million debt from HBOS), the Radisson in Galway, and Bertie’s favourite hotel, the Parknasilla in Co. Kerry. He had also constructed a string of private hospitals, including the Galway Clinic and the Hermitage in Lucan.
McNamara was only one of many with a sharp eye for the tax breaks. Another was Derek Quinlan, McNamara’s partner in the old Glass Bottle site in Dublin’s Ringsend. Along with the controversial Dublin Docks Development Authority (DDDA), the two bought the site for €411 million.
Quinlan, a tax expert turned property developer, was ideally placed to take advantage of all the incentives provided by Fianna Fáil. He had been educated at UCD, taken a BComm and qualified as an accountant with Coopers & Lybrand before joining the investigation branch of the Revenue. Quinlan was a skilful gamekeeper turned poacher. He formed Quinlan Private in 1989 as a humble tax consultancy before converting it into a go-go property investment company. He enlisted some of the richest people in Ireland on to his books as clients, building his assets under management up to over €1 billion. In 2000 he led a consortium of big business names into a project funding Dublin’s Four Seasons Hotel. He used his expertise from his Revenue days to exploit many of the government’s tax incentives, particularly the break for car parks.
Unlike most of the other developers, he would not have been seen dead in the Galway tent. Quinlan was the son of an army officer from Kerry. He attended Blackrock College, where he formed a lifelong friendship with Dermot Gleeson, later to become AIB chairman; today the two are neighbours in Shrewsbury Road, Dublin’s most expensive avenue. When Quinlan assembled the consortium to bring the Four Seasons Hotel to Dublin’s Ballsbridge, he enlisted Gleeson as an investor.
Quinlan may have exploited the openings offered at home, but his most sensational deal was undoubtedly his 2004 purchase of the Savoy group of hotels, which includes the Savoy, the Berkeley, the Connaught and Claridge’s, for £750 million. The deal caught the Irish public’s imagination as it represented a sensational success for an Irish property mogul in England. He managed a quick turn from the deal, selling the Savoy alone to a Saudi prince for over £200 million within a few months.
While the tax breaks were giving a boost to the construction industry, political criticism was intensifying. Stories were emerging in the media about how many of Ireland’s richest men were not paying a cent in taxes. In September 2004 Brian Cowen took over from Charlie McCreevy as Minister for Finance. In his December Budget he announced a review of tax incentives. Indecon Consultants, a consultancy group, was commissioned by the Fianna Fáil government to conduct the review.
The choice of Indecon was important. Indecon was not one of those consultancies whose arm could be twisted to reach a conclusion convenient to the clients. They were in no one’s pocket. Their conclusions would be independent and might not suit the government or its builder friends. They were thorough. They had an international reputation. At the same time Goodbody Economic Consultants was appointed to report on urban and rural renewal schemes.
Was Cowen suddenly serious? Had he realized that the balloon might go up? Did he want cover for necessary measures certain to alienate party supporters? Perhaps he wanted a robust analysis? There was a crying need for it. Incredibly, no one in the Department of Finance knew how much the property-related tax breaks had cost the Exchequer. Nor was there any data on what impact the tax breaks had had on property or land prices. Indecon found that they had increased both. Perhaps more alarming was Indecon’s finding that all financial institutions agreed this to be the case. They had done nothing about it – except lend more money, further inflaming the market.
Political opponents regarded Cowen’s decision to seek a consultant’s opinion as a delaying tactic. The extra time needed to report would give the builders further breathing space. And more profits. In a Dáil exchange on 7 February 2006 Labour leader Pat Rabbitte clashed with Taoiseach Bertie Ahern over the tax breaks. Rabbitte p
redicted that ‘the property-based schemes will not finish until after the general election, when we will have a whole new situation’. The Labour leader saw property breaks as a purely party issue for Fianna Fáil: they would keep Fianna Fáil’s building buddies featherbedded in exchange for political funding.
Bertie replied by insisting that the tax breaks had been introduced for the good of the nation, maintaining that if there had been no incentives for property developers ‘this country would still be a basket case’. Fianna Fáil had put the incentives in place for the good of the state, to bring jobs and prosperity to Ireland.
Rabbitte was right in at least one respect. It took until after the general election of 2007 for anything concrete to be done about the property tax breaks. They were terminated in July 2008. By then, of course, it was far too late. The economy had overheated, and then it had turned. The property market was heading over the precipice. Builders were being badly stung. The bankers had been rumbled.
But by that time it didn’t matter to Fianna Fáil. They had won the general election, with a little help from their builder friends.
The car-park tax incentive had stirred calm thoughtful Brian Carey, business editor of the Sunday Tribune, into uncharacteristic anger. As early as January 2003 he wrote that:
Quinlan’s meteoric rise is one of the most tangible manifestations of the government’s Faustian pact with the country’s high rollers. When funds were scarce and tax breaks were plentiful, government was happy to allow generous reliefs to high-net-worth individuals in return for a flood of investments in car parks, hotels and urban regeneration projects.
John FitzGerald of the Economic and Social Research Institute had given early warnings of the fundamental dangers inherent in the tax breaks. Despite being the son of former Taoiseach Garret and the husband of former Labour minister Eithne, John FitzGerald did not bang on about a few Fianna Fáil cowboys becoming billionaires. Instead, he made the more telling point that the incentives for property developers threatened the whole economy. At the time of the Indecon report, he told the Sunday Times that the tax reliefs had made ‘a hard landing more likely. Even if tax incentives were not behind the building of your house or the one next door, they have driven the construction boom and allowed builders to put up prices.’
