Fingers Read online

  CONTENTS

  Cover

  Title page

  Prologue: Fingers and the prince

  Chapter 1: Fingleton: Champion of law and order

  Chapter 2: From Tobercurry to the top floor

  Chapter 3: A glimpse of the big money

  Chapter 4: Seeing off the regulators and the rebels

  Chapter 5: They haven’t gone away: Fingleton, Burgess and the regulator

  Chapter 6: Four years that primed the bomb (2003–7)

  Chapter 7: Portrait of a lender destined for disaster

  Chapter 8: Too late for halleluyah: From failed sale to state bail-out (January–November 2008)

  Chapter 9: Fingers waves goodbye

  Chapter 10: I’m keeping the €1 million (April–December 2009)

  Chapter 11: Sifting through the wreckage (December 2009 to May 2010)

  Chapter 12: The forensic accountants move in: The Ernst and Young report

  Chapter 13: Living the life of Fingers

  Chapter 14: Think of a number: The losses rack up

  Chapter 15: From the Mafia Coast to Co. Cavan

  Chapter 16: Fingers

  Images

  Acknowledgements

  Copyright

  About the Authors

  About Gill & Macmillan

  PROLOGUE

  Fingers and the Prince

  Prince Albert of Monaco and his fiancée, Charlene Wittstock, were used to turning heads. Wittstock, a stunning South African former Olympic swimmer, would have attracted attention anywhere, even if she was not accompanied by a minor European royal who was the son of the late American actor Grace Kelly.

  However, at a private dinner in the K Club at Straffan, Co. Kildare, on the night of Sunday 3 April 2011 it wasn’t the soon-to-be-royal who caused eyebrows to be raised: instead it was the sight of a neatly dressed 73-year-old gentleman who sat down with her for a jovial dinner. This was Michael Fingleton, the old boss of Irish Nationwide Building Society, who regaled the prince and his glamorous bride-to-be as if his society had never collapsed at a cost of €5.4 billion to the taxpayer.

  The dinner, on the first floor of the Palmer Smurfit Clubhouse, was in the elegant surroundings of the Kwam Suk-Royal Thai and oriental restaurant, which was celebrating its opening weekend. The owner of the resort, the multi-millionaire paper and packaging tycoon Michael Smurfit, was hosting the soirée.

  Fingleton, known as ‘Fingers’, was among the twenty or so guests invited to the exclusive gathering. For four decades he had ruled his small building society with an iron fist. His nickname reflected his shrewdness, his love of power and his immense greed. Unlike Smurfit, whose father had been a successful businessman, Fingleton was an entirely self-made man. He was a gossip, who could be good company, but he was also a man with a controlling and even vindictive side to his character, which was capable of keeping many secrets.

  Fingleton prided himself on always having the inside track. This allowed him to mix with minor European royalty as easily as he had with the elite of boom-time Ireland, who had got ahead sometimes by what they knew but other times only by who they knew.

  By 2011, however, this was no longer enough. The tide of public opinion had turned against men like Fingers. He was no longer an influential figure, someone to be feared, but was instead being hunted by the media, which blamed him—not entirely unreasonably—for being one of those who caused Ireland’s economic collapse.

  The fall of Fingleton’s beloved building society came after Ireland’s property bubble burst spectacularly. The taxpayer has had to foot the bill of €5.4 billion, at the cost of drastic cut-backs in public services.

  From the wreckage of his fiefdom Fingleton had walked away with a bonus of €1 million and a pension fund worth at its peak €27 million. He had received more than €11 million in pay, bonuses and benefits in the six years before he left the society. He had helped impoverish a nation, but he still enjoyed a life of holidays abroad, giving him a slight tan behind his trademark goatee beard.

  Sitting near Fingleton was Michael Lowry, the scandal-dogged Tipperary politician who still managed to top the poll. Only the previous month Lowry had been accused by a tribunal of inquiry of having a ‘profoundly corrupt’ relationship with Ben Dunne, scion of the wealthy retail family. On top of that, the tribunal concluded that he had improperly ‘delivered’ a valuable mobile phone licence to a young entrepreneur, Denis O’Brien, who later became Ireland’s richest man.

  None of the twenty guests at the dinner cared a jot about either Fingleton’s or Lowry’s fall into disgrace but were happy to dine with both men. The meal was a pleasant and cordial affair, preceding an official visit by Prince Albert to Ireland, a country that had once been compared to his wealthy principality. Now, however, Ireland had fallen a long way from being considered one of the wealthiest countries in the world. Instead it was lumped in with Greece, deemed a disaster area and a beggar reliant on hand-outs from its wealthier euro-zone partners, such as Germany and France.

  News of the dinner caused a minor diplomatic incident, with the Tánaiste and Minister for Foreign Affairs, Éamon Gilmore, insisting that ‘we had nothing to do with it. It was a private dinner.’ Both Fingleton and Lowry refused to comment or even confirm that they had been in attendance.

  Smurfit, Ireland’s honorary consul for life in Monaco, was a vastly wealthy man who had done it all in business. He didn’t give a fig about public opinion when it came to old friends. Later, in October 2011, an indignant Smurfit would tell Justine McCarthy in the Sunday Times that he believed both Fingleton and Lowry were innocent men. Fingleton, he suggested, was simply a scapegoat for others eager to assign blame for Ireland’s loss of economic sovereignty when its banking collapse forced it to seek a joint EU-IMF bail-out. ‘People will always look for somebody to hang because of what’s happened. That, of course, is way over-exaggerated and totally unjustified in relation to Fingleton, as far as I’m concerned,’ Smurfit said.

  The truth, as uncovered in forensic detail in this book, is that when it comes to Fingleton, his rise and fall, along with his toxic building society, in a sense Smurfit is right. The twisted tale of unchecked personal ambition and greed that is Fingleton’s story could never have happened for so many decades without many willing, and some unwitting, accomplices.

  Irish Nationwide is the second-largest corporate failure in Irish history, after Anglo Irish Bank. Despite the scale of its losses, relatively little is known about its inner workings. This is the tale of the men in suits, in banking, politics, the bond market and regulation, who allowed Fingleton to run so recklessly that he cost every citizen dearly. He could not have done it alone.

  Irish Nationwide, relative to its size, is the worst bank in the country, with hidden secrets that even five years into financial crisis remain unknown to a public who have nonetheless been forced to pick up the enormous bill for its collapse.

  This book looks at both Fingers the man and the financial institution he created. It examines the reasons for the society’s failure and Fingleton’s direct and indirect role in it and brings the situation regarding both the banker and his society up to the present.

  It exposes for the first time the way in which Fingleton was allowed to operate at will around the board table at Irish Nationwide, despite the society being chaired by an eminent professor of banking and being regularly micro-managed by the state’s banking watchdog. It shows how the Financial Regulator knew about colossal failings in the society from 2000 but failed to really do anything about it. It publishes for the first time the details of the Ernst and Young report, commissioned by the Central Bank to examine what was going on in the society in regard to failings of corporate governance.

  It names the clients of Irish Nationwide who ended u
p as beneficiaries of those failings, and it examines their relationship with Fingleton.

  It divulges what life was like inside Irish Nationwide for those working under Michael Fingleton.

  It delves into the culture of the company and the management style of the man who brought it down.

  It examines the role of Fingleton’s family: his son Michael junior, who helped run the British and European lending operations, and the British law firm at which his daughter works, which acted on both sides of property deals (for the society and the client). It also raises the issue of his other son’s mysterious Chinese property venture, into which funds from Irish Nationwide’s biggest borrower were paid.

  The book looks at Fingleton’s appetite for financing lavish projects, such as the €50 million renovation of the yacht Christina O, Updown Court (the most expensive house in Britain), the Kilternan Hotel (loans of €150 million for a hotel project Fingleton never even went to see), and the Provençal Hotel renovation in the French Riviera that has never been finished, among many other deals.

  It also looks at the life of Michael Fingleton, from early beginnings working for charity in Nigeria to his social life, his friends, his lavish expenses, and how in the end he blew his fortune and ended up as part of a small group of pariah figures, blamed for costing Irish citizens billions.

  Fingleton’s closeness to politicians—usually as a lender but also as a business partner—is also analysed. We look at the extraordinary deal he believed he had struck with the government as he walked out of the ruins of his building society. We also uncover the top borrowers from the society near the peak of the boom and reveal some of the many well-known names from politics, business and the media who he favoured. And we report on how the taxpayer was forced into paying the bill when the music stopped.

  The book also reveals the mistakes made by the Irish Nationwide board, the government and the regulator in allowing this failure to happen over many decades. And it looks forward to what is likely to happen now in follow-up legal actions against Fingleton and other board members.

  Fingleton had many contradictions, and he often had two sides. He was capable of being generous but could also be a bully. He knew everybody but was in many ways a loner. He had huge appetites for the high life but was obsessed with driving down costs. He was a perfectionist but with huge personal flaws. His character is more intriguing and complex than that of other bankers.

  In the end, what was it within him that drove him to ultimately give two fingers to the Irish people, despite the horrendous cost of his greed and lust for power?

  Michael Fingleton’s survival for decades as a rogue banker in charge of a toxic building society goes to the heart of the dark side of the ‘Celtic Tiger’, which would eventually kill it. The implosion of Irish Nationwide was not an isolated incident among Irish lenders: others collapsed, or would have collapsed if not for the intervention of the state. But Irish Nationwide was not quite like the others. This was a building society dominated by one man for more than thirty-seven years. Its mistakes were his mistakes. Its failings were his failings.

  The Central Bank had the information and the powers needed to force the society to change direction. It knew what was going on but failed to take real action. The other banks were a calamity that would always have happened when the property bubble burst; Irish Nationwide was a financial disaster waiting to happen. For many years in plain view.

  Chapter 1

  FINGLETON: CHAMPION OF LAW AND ORDER

  On 5 July 1983 Michael Fingleton took the stand in Dublin’s daunting Circuit Criminal Court. Outside, the dark River Liffey flowed on a bright Tuesday afternoon. Smartly dressed, with his trademark dark goatee neatly clipped, Fingleton cut a dapper figure. The respected boss of Irish Nationwide—the up-and-coming building society beloved of the media—was comfortable as he slid into the witness box.

  He was the first witness in what promised to be the explosive trial of Alex Tarbett, former chief executive of Concern, the country’s biggest overseas aid agency. Fingleton had the rather delicate task of outlining the evidence in the criminal prosecution of a former friend who faced both ruin and imprisonment.

  In the confined space of the courtroom Fingleton could see Tarbett, only yards from him. Their eyes met. Tarbett, a smooth-talking and accomplished businessman who lived in an expensive suburb of south Co. Dublin, was not the court’s typical accused. He looked a sorry sight. Despite his wealthy background he had suffered the indignity of having his assets frozen by the court, so he could not afford his own lawyers. The only concession made to his former position in the establishment was that Judge John Gleeson granted leave for his distraught wife, Mary, to sit beside him throughout the trial.

  A 54-year old father of six children, Tarbett was a friend of cardinals and bishops. He had mixed in the highest levels of Irish business, even working for a time as lieutenant of Michael Smurfit, the packaging tycoon and one of the country’s richest men. Now he was far from high society and was instead facing ten charges of embezzling £240,000. This was a colossal sum, equivalent to more than €1 million today. The money that was allegedly taken had been collected from the public and the Church to help the poorest of the poor in Africa and Asia over a period of three years, up to the time he left the charity in 1981. All the alleged fraud had taken place under Fingleton’s nose as chairman of the charity from the end of 1977. It was embarrassing for Fingleton, who prided himself on his canniness and ability to judge people. Now the newspapers were all over the story, and Concern’s hard-earned reputation was threatened.

  Maurice Gaffney, senior counsel for the prosecution, began his questioning. He had already described to the jury how the prosecution’s case was that Tarbett had repeatedly moved large sums out of Concern’s bank accounts into his personal account and how he had managed to siphon off big cheques made out to Concern for his own benefit.

  It was up to Fingleton—a trained barrister and accountant—who had personally led Concern’s internal investigation into the affair, to fill in the damning detail.

  Fingleton was a credible and steely witness, who showed little sentiment for Tarbett’s predicament. He began his evidence by describing how Concern’s main bank account in 1978 was in the College Green branch of Bank of Ireland, but it also had several other accounts, including one with AIB in Baggot Street. At that time, Fingleton said, everybody trusted Tarbett and nobody suspected him of wrongdoing.

  As chief executive of Concern, Tarbett earned a modest salary of £4,000 a year, but he appeared to be independently wealthy, as he also ran his own publishing company. There was no reason to believe he would need to top up his earnings by stealing from Concern.

  Unknown to Concern, however, Fingleton stated that in 1978 Tarbett had set up a new bank account in AIB, Baggot Street, in his own name. He told the court that two signatures were required for withdrawing any money from Concern’s accounts, but somehow Tarbett had got around this and managed to move money around on the strength of his sole signature.

  Tarbett had explained his actions to AIB by saying it was to cover his personal expenses as he jetted around the world’s disaster zones and went on epic fund-raising drives. As a result he had managed to use Concern’s bank account as his personal piggy-bank, to be tapped into at will.

  Fingleton told the court that Concern had found out what was really going on only after Tarbett left the charity when his contract expired in September 1981. In November 1981, he said, questions suddenly emerged about where large sums of money from donors had gone. The Bishop of Orange County, California, Dr William Johnson, had set alarm bells ringing by asking how his donation had been spent. He said his parish had given a donation of $85,500 to Concern that nobody in Concern knew about. About the same time Concern also found out that a cheque for £20,000 from its Cork branch had gone missing.

  The organisation quickly began a review, led by Fingleton, into what began to look like fraud on a grand scale. Fingleton summoned Tarbett to exp
lain himself at a specially called meeting of the executive committee in Dublin. ‘I interviewed him and put it to him that the auditors had discovered that cheques sent to Concern seemed to have been lodged in his account,’ Fingleton said. Tarbett seemed surprised at this news. He promised Fingleton that he would investigate it immediately and return that afternoon with a full explanation.

  Later that day Tarbett rang back. He said he’d been delayed and asked for the meeting to be deferred until the following day.

  Under questioning from a now deeply suspicious Fingleton, Tarbett admitted that he’d found two missing cheques for smaller sums in his bank account. He also said he’d uncovered a cheque to Concern for £4,000 that he had forgotten about. As for the cheque for £20,000 from the Cork branch of Concern, he said he had no idea where it was now.

  Under pressure from Fingleton, Tarbett admitted that the money must somehow have ended up in his personal bank account. This was an ‘error’, he insisted.

  Fingleton then raised the issue of the $85,500 from the bishop in California—a huge donation at the time. Tarbett admitted he had got the cheque but said he’d decided to hang on to it while he waited for a better exchange rate between the American dollar and the Irish pound. When he finally got around to cashing it he said he’d noticed for the first time that the cheque was not signed. ‘He said he’d sent it back to the Bishop of Orange for signature,’ Fingleton said. Somehow the cheque had then got lost, Tarbett suggested rather implausibly.

  Fingleton openly disbelieved him. He told Tarbett he needed to come up with a much better explanation to account for the missing cheques. He demanded that Tarbett give Concern a letter authorising him to look inside his bank accounts. Under pressure, Tarbett had little choice but to give his consent.

  Once the bank details were handed over, Fingleton could see big sums intended for the charity somehow ending up with Tarbett, who was spending large sums every month. Fingleton told the court that he was satisfied that none of these movements were legitimate.