Siteserv Figures Had Undisclosed Compromises With O’Brien, Draft Report Shows

Key Siteserv figures had close undisclosed engagements with Denis O’Brien and his manager before the businessman’s disputed deal to buy the company, a preliminary report on the matter shows.

The draft, drawn up by High Court Judge Brian Cregan, follows a seven-year investigation into a hastily struck deal just before St. Patrick’s Day in 2012, when Siteserv was in danger of collapsing due to the financial crisis.

A decade later, the lengthy document sets out behind-the-scenes events when Siteserv struck a deal with Mr. O’Brien to save the business and more than 2,000 jobs. Mr. O’Brien’s bid was favored despite the prospect of a higher price from rival bidder Anchorage, and the judge’s draft is highly critical of the decision to enter into exclusive talks with him.

The decision to deal only with O’Brien was critical to the sale process and gave him a significant advantage, the draft says. The move was made without contacting Anchorage or giving him the opportunity to follow Mr. O’Brien to advance to the top of his offer range. The bank’s approval of that decision “was based on misleading and incomplete information,” says the judge.

ski trip

Among the events that took place before that decision was a “boot camp” in January in St. Moritz, Switzerland, that was organized by Niall McFadden, a Siteserv co-founder who was advising CEO Brian Harvey. Also present for the ski and fitness trip were Mr. O’Brien and Robert Dix, Senior Independent Director of Siteserv and Chairman of the Sales Sub-Committee.

Mr. O’Brien ended up leaving early due to injury. The draft says O’Brien was “not at fault” for making the trip, adds that he and Dix did not discuss any offer from Siteserv, and says there was “no evidence” that O’Brien attempted to discuss it while they were away together.

But the draft shows how McFadden and O’Brien discussed Siteserv over breakfast one morning, discussing “the size of the shareholding” that Harvey and McFadden could acquire in O’Brien’s new company if he won their bid. “At this meeting, they agreed that Mr. Harvey and Mr. McFadden could get up to 15 per cent between them in the new company. Mr. McFadden telephoned Mr. Harvey to tell him this shortly after.”

The judge criticizes Dix in the draft for not disclosing the trip to the Siteserv board, saying that prevented the board from considering whether the integrity of the sale process was compromised. The draft goes on to say that the trip’s failure to disclose to Irish Bank Resolution Company (IBRC), the former Anglo Irish Bank, and its outside observer of the deal, Walter Hobbs, prevented the bank from ensuring that Siteserv was handling it fairly. and impartial. process.

‘judgment error’

“Mr. Dix accepted that he should have disclosed his trip to training camp and that it was an error of judgment not to have done so,” the draft report reads.

“The commission found that Mr. Dix’s relationship with Mr. O’Brien and Mr. McFadden and their trip to boot camp, had they met at the time, would have given rise to the perception by one person reasonable and factual evidence that Mr. Dix was not impartial in his role as chairman of the sales subcommittee.”

Dix declined to comment. Many witnesses are known to argue that there were no irregularities and that the treatment was good.

The judge’s draft also describes how Mr. McFadden sought to negotiate for Mr. O’Brien or his new company to purchase Mr. Harvey’s loan from IBRC or assist him in discussions with the bank about the loan. The judge makes it clear that Mr. O’Brien did not purchase the loan or “offer to do so or lead Mr. Harvey to believe that he would.”

But the draft sets out other arrangements that led to Harvey and McFadden having a combined 15 percent in O’Brien’s new company, saying such matters affected the commercial strength of the transaction.

‘Free Actions’

The draft describes Mr. McFadden negotiating for Mr. Harvey that Mr. Harvey would receive 600 “free shares” or 6 percent in Mr. O’Brien’s new company if O’Brien won. He also negotiated a scheme known as “bonus swap” whereby Mr Harvey could exchange a Siteserv bonus of €350,000 for 3 per cent in Mr O’Brien’s new company and “avoid tax”, which the draft report describes as a “significant incentive”. to back Mr O’Brien.

“The commission concluded that these were all highly significant inducements for Mr Harvey to unduly favor Mr O’Brien’s bid over Anchorage’s higher bid, at the expense of the bank and ultimately the Irish taxpayer,” the draft says.

For his part, the draft says, Mr. McFadden agreed with Mr. O’Brien and his representative that Mr. McFadden would be paid a “search fee” of 1 percent of the value of the transaction (€480,000). and would receive payment in shares constituting a 4 percent interest in Mr. O’Brien’s new company.

The draft’s findings are sure to be challenged in strong terms when key witnesses respond. But the judge is clear in his assessment, at least in this latest draft, that the Siteserv deal was not commercially sound.

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