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Unlike the UK’s DTI, Ireland’s ODCE has power to prosecute criminal offences – and law firms have been correspondingly busy, reports Brid Munnelly

A key weapon in the armoury of corporate law enforcers is the corporate investigation. Ireland has seen an increased focus on investigations into Irish companies and their management following various reports and inquiries by review groups, tribunals of inquiry and parliamentary committees. Irish law firms have seen a corresponding growth in the business of advising on corporate regulation, compliance, investigations and corporate defence.

High-profile cases
November marks the fifth anniversary of the founding of Ireland’s corporate watchdog, the Office of the Director of Corporate Enforcement (ODCE). A review of its 2005 annual report, published in May this year, highlighted the fact that recently there has been increased activity in corporate investigations, with the ODCE’s workload being driven primarily by mandatory reporting obligations. While many of the most high-profile cases arise from quite historical issues, much of the current work of the ODCE is ‘below the radar’ and may not come into the public domain for a considerable period of time.

The ODCE’s most high-profile work to date has involved taking action on the back of previous investigations that were either initiated by whistle-blowing or revelations that arose in tribunals or litigation about improprieties, many dating back up to 20 years. The ODCE is calling people to account now by initiating disqualification proceedings.

Last March, a senior official of Guinness and Mahon Bank was disqualified from acting as a director following the findings of a High Court investigation into Ansbacher (Cayman), which concluded that it had secretly operated in Ireland for more than 20 years and had also conducted business that contravened prevailing banking, tax, company and other legislation.

Similarly, current proceedings before the commercial court, a division of the High Court, for orders to disqualify nine former senior managers of National Irish Bank from acting as directors arose as a result of a High Court inspectors’ report into National Irish Bank and National Irish Bank Financial Services.

In August, the ODCE began disqualification proceedings in relation to Michael and Thomas Bailey, the directors of one of Ireland’s largest property companies, Bovale Developments, following the findings of a tribunal of inquiry into planning matters and payments that corrupt payments were made to a former minister for justice and a former planning official. The ODCE’s proceedings also follow the company’s settlement with the inland revenue for e22m (£14.84m) in June 2006.

Current ODCE investigations
Public knowledge of the ongoing work of the ODCE is limited to what is published or comes before the courts. In 2005 there were 37 ODCE-instigated investigations as outlined in the annual report. This is just a small percentage of the total number of 2,373 reports to the ODCE in 2005, the majority of which arose as a result of mandatory reports from auditors.

The 1,992 mandatory reports received in 2005 disclosed numerous instances of a range of offences under the Companies Acts, including: the suspected failure to file annual returns with the Companies Registration Office on time; the reported excessive use of company assets for the personal purposes of directors and connected persons; the suspected failure to keep proper books of accounts; the alleged failure of companies and their directors to hold an extraordinary general meeting where the company’s assets/liabilities ratio was reduced to 50 per cent or less; and the reported offence of there being no Irish-resident director.

Irish law firms are increasingly advising clients in circumstances where ODCE investigations are ongoing or impending – assisting, for example, with requests for information by the ODCE or advising companies on working with the ODCE to rectify shortcomings. This whole area is a relatively new but key part of a company’s risk-assessment process. Triggers that spark the ODCE’s interest
Regulators can share information where it is of relevance to the remit of another. Cooperation between the ODCE and other regulators has also led to the sharing of information and consequent corporate investigations and enforcement actions. In 2005 the Irish Stock Exchange submitted 13 reports of suspected breaches of the Companies Acts to the ODCE, many of which relate to missed notification deadlines involving share purchases or disposals by the directors of listed companies.

The ODCE also received 12 reports from the revenue commissioners in 2005 and a number of cases have led to contact with the financial regulator. Cooperation between the ODCE and the Garda Bureau of Fraud Investigation, the Companies Registration Office, the Pensions Ombudsman and the employment rights section of the Department of Enterprise Trade and Employment has also triggered the ODCE’s interest in various matters. The ODCE has also picked up on matters where issues have arisen in the Irish courts.

In its 2005 annual report, the ODCE stated that its consideration of the results of the financial regulator’s investigation into ineffective standards of governance and unacceptable behaviour and practices in AIB Investment Managers during the late 1980s and 1990s, was ongoing. The ODCE may well monitor the results of AIB’s internal investigation into foreign exchange overcharging, published in September 2006, where AIB is to repay e31.6m (£21.31m) to customers.

Recent ODCE prosecutions
Unlike the Companies Investigations branch of the Department of Trade and Industry in the UK, the ODCE has power to prosecute criminal offences. Last January the ODCE secured the first conviction under the Companies Act 1990 for the falsification of a book or document relating to the property or affairs of a company. In this case, a director of a company presented the financial statements to a company’s bank for the purpose of renewing an overdraft facility. The documents incorrectly represented to the bank that the financial statements had been audited by a firm of accountants, but the company was not a client of the audit firm and it denied the authenticity of the presented documents.

Earlier this year a former managing director of a UK plc, who was previously jailed for fraud and disqualified for seven years, was convicted of having since acted as a director of two Irish companies without having declared his status on appointment. In 2005, six restricted directors were convicted for acting as directors, with one being given a six-month sentence suspended for two years. These convictions carry disqualifications of five years.

Other actions taken by the ODCE include prosecutions for failing to keep proper books of accounts, acting as director while an undischarged bankrupt, excessive directors’ transactions, acting as auditor while unqualified, acting as auditor while disqualified and provision of false information to the Companies Registration Office.

Future practice
The ODCE continues to receive a large volume of new reports and complaints each year and has recently sought extra staff from the government including administrative staff, police and some specialist resources in order to carry out its work properly. Irish law firms can consequently expect a greater demand for advice on the whole spectrum of compliance standards and procedures and the complex issue of dealing with corporate investigations. n
Brid Munnelly is a partner at Matheson Ormsby Prentice