Claims of conflict of interest in 1.46bn property development
Evidence that Docklands authority board members may have failed to meet statutory requirements and questions about the authority's involvement in a project for which it has a legal regulatory function. By Frank Connolly
There is evidence that members of the Dublin Docklands Development Authority (DDDA) may have failed to comply with statutory requirements to desist from any considerations of matters before the authority in which they may have a commercial interest.
According to minutes of DDDA board meetings obtained by Village, two directors, both of whom are board members of Anglo-Irish Bank, have participated in discussions on projects which their bank was financing. The DDDA board members are Sean FitzPatrick, who is chairman of Anglo Irish Bank, and Lar Bradshaw, a director of the bank, both members of the DDDA. These authority meetings concerned the development of the Spencer Dock site.
More recently, the DDDA has decided to support, through an investment, the development of the former Irish Glass Bottle site in Ringsend, with Bernard McNamara, the builder, and Derek Quinlan, a financier. Even this initiative is seen as hugely controversial because the DDDA has thereby involved itself in a major conflict of interest in that it is an investor in a project for which, legally, it has the sole power to grant planning approval.
Again Anglo Irish Bank are the bankers for this project, providing €1.4bn in loans for the development. Asked if Sean FitzPatrick and Lar Bradshaw absented themselves from the DDDA's discussions on the project and the DDDA investment, Village was informed on behalf of Sean Fitzpatrick that he absented himself “where appropriate”. Village understands the same response applies to Lar Bradshaw.
This development is expected to result in profits of several hundreds of millions of euro for the investors, who themselves are contributing only a small fraction of the financing from their own resources.
Bernard McNamara and Derek Quinlan are investing €103m into the scheme, the DDDA has invested €32.17m and Anglo Irish Bank is raising the balance of the total cost of €1.46bn. It is expected that the sale of the properties built on the site will raise some €1.76bn on completion. It has been reported that Bernard McNamara has invested just €5m of his own cash, with Davy Stockbrokers raising the balance of his contribution to the project.
Lar Bradshaw, another director of Anglo Irish Bank, is chairman of the DDDA. Like Sean FitzPatrick he too has significant personal shareholdings in Anglo Irish Bank. His involvement in the development, along with that of Sean FitzPatrick, has raised claims that they may have a conflict of interest.
On Tuesday 6 December, a senior source in Anglo Irish Bank told Village that Sean FitzPatrick stepped outside meetings about the Glass Bottle site development “where appropriate” in recent months. Under the code of conduct of the DDDA, board members should declare an interest and absent themselves where there is a potential conflict of interest.
A spokesman for the DDDA told Village: “For board meetings, there is a practice of board members excusing themselves from meetings where they perceive they have a direct conflict of interest. In other less significant cases, members advise of potential conflict so that the board is fully informed.”
However, the DDDA would not disclose what declarations of interest were made in respect of the recent decision of the authority to invest in the former Glass Bottle site or whether the two bank directors absented themselves from the sensitive discussions.
The Spencer Dock development
Anglo Irish Bank has funded many developers involved in the redevelopment of the docks along both banks of the Liffey over the past decade. Among the most important is the Spencer Dock development on the northside of the Liffey.
In October 2004, Anglo Irish Bank announced it was lending in excess of €300m to the Spencer Dock Development Company, a consortium led by Treasury Holdings.
The minutes of board meetings obtained by Village cover a period between September 2002 and June 2005 when the DDDA board discussed the Spencer Dock development and these minutes show that both Lar Bradshaw and Sean FitzPatrick were present for discussions on the scheme at a time when they were directors of the bank and when the bank was funding the project. According to these minutes, they did not declare any interest or step out of the meetings.
On 24 September 2002: the board discussed the development of offices at the Spencer Dock site on North Wall Quay.
On 13 November 2002: the board discussed the residential development at Spencer Dock.
On 5 December 2002: the board discussed an alternative location in relation to affordable housing on the scheme which has been the subject of recurring difficulties between the developers and local residents.
All three of these meetings were attended by Sean FitzPatrick, according to the minutes of the meetings obtained by Village. At that time, however, Anglo Irish Bank had not confirmed its direct financial interest in the Spencer Dock development.
On 9 January 2003: the board met to discuss the application for the proposed residential, office, retail and creche development at Spencer Dock.
At the meeting the board issued a certificate of compliance for the overall scheme under Section 25 of the DDDA Act 1997, which gives the authority power to issue development certificates – ie planning permissions which are not subject to appeal by residents or other parties. Sean FitzPatrick was not present for this meeting.
On 6 March 2003: the board met to discuss the National Conference Centre proposed for inclusion in the Spencer Dock development. It was decided that a certificate under Section 25 be issued to the applicants. Sean FitzPatrick was present for this meeting.
On 5 June 2003: the board met to consider a composite application for the development of the conference centre, hotel, offices and apartments in the Spencer Dock area. At the meeting, also attended by Sean FitzPatrick, it was decided that a Section 25 certificate be issued to the applicants.
On 12 February 2004: the board considered the social- and affordable-housing component of the scheme and another section 25 certificate was issued.
In October 2004: Anglo Irish confirmed it was to provide financing of €300m for the Spencer Dock development, half of the funding for the project. Clearly, the bank and the Spencer Dock Development Company had been in negotiations for some time before this announcement.
On 12 October 2004: Anglo-Irish bank announced that Lar Bradshaw had been appointed a non-executive director.
On 11 November 2004: an application for a change of use from hotel to apartments was considered. The board granted a certificate under Section 25 subject to certain conditions. Sean FitzPatrick was not present for this meeting but Lar Bradshaw was.
Lar Bradshaw purchased over 15,000 shares in the bank during this period.
On 2 June 2005: the board again considered the social and affordable aspects of the scheme at Spencer Dock and another Section 25 certificate was issued subject to certain conditions. Both Lar Bradshaw and Sean FitzPatrick were present for this meeting but the minutes do not indicate that either of them declared their direct interest in the project due to their dual membership of the board and of the project's main funding agency.
Neither do the minutes indicate that either Lar Bradshaw or Sean FitzPatrick absented themselves from the meeting as required under the code of conduct for the DDDA. By this time the DDDA also came under the provisions of the Standards in Public Office Commission (Sipo).
Conflict of interest
Tony Gregory TD told Village that he was concerned about a possible conflict of interest, which he first raised in a Dáil question in October 2004. At the time the Minister for the Environment, Dick Roche, defended Sean FitzPatrick's membership of the state board on the grounds of his considerable business experience.
“I think this is a matter which the Sipo might consider worthy of some investigation,” said Tony Gregory, who represents the Dublin Central constituency where the Spencer Dock project is located.
The term of office of the DDDA board expires early next year. Its members also include Donall Curtin, Angela Cavendish, Declan McCourt, Mary Moylan (a senior official with the Department of Environment), Joan O'Connor and Niamh O'Sullivan. Its chief executive, Paul Maloney, who was appointed in 2005, is a former official of Dublin City Council with responsibility for the city centre.π