Public Accounts Committee Hearing | January 16, 2014
Mr. Brian Conlan, former CEO, Central Remedial Clinic, called and examined.
(Also in attendance: Barry O'Brien, Head of Human Resources, HSE; Dr. Geraldine Smith from the internal audit and author of the audit report; Ms Paula Lawler, senior manager in HR; Mr. Peter Brazel from Dept of Public Expenditure and Reform.
"We are dealing with a twisted web.
Deputy John Deasy: I keep going back to one thing. You were part of the recruitment of a new chief executive of the CRC but you were interested in the job.
Brian Conlan (right): At the time that I was part of the recruitment, I was not interested in the job. It was not until much later, after the appointment of Amrop Strategis-----
Conlan: It was not until I saw that the internal advertisement when the job spec-----
Deasy: You have got to be kidding me. It was not until you saw the internal advertisement-----
Conlan: The job spec.
Deasy: You were the person who was putting that together.
Conlan: Not me.
Deasy: You were part of the recruitment team.
Conlan: That was put together by Amrop Strategis. I had no hand or part in the recruitment of Amrop.
Deasy: Can someone tell me who made up the remuneration sub-committee?
Chairman (John McGuinness): Mr. Goulding, Mr. Martin and Mr. Nugent.
Deasy: Okay. At your meetings with MERC, did you discuss pay?
Deasy: You did not discuss pay at all - no salary? So you went to a recruitment company and you did not discuss pay? You did not mention the salary of the incoming chief executive at all? That is unbelievable.
Conlan: The meeting with MERC was to establish whether it would be suitable to recruit the CEO. That was the substance of the meeting.
Deasy: You did not get into pay or salary at all?
Conlan: Not that I can recall.
Deasy: What is the HSE going to do about the money that has not been disclosed to date, which found out about in its investigation with the interim administrator? What decision has the HSE taken with regard to the moneys that have been given to Mr. Kiely of which it was not aware?
Barry O'Brien: First, I want to make reference to the recruitment process and draw the Deputy's attention to a letter we previously put on the record that was dated 24 April 2013. It was a letter from the then chairman, Mr. Ham Goulding, to Ms Laverne McGuinness, national director of the HSE, stating: "In accordance with the terms of our Memorandum and Articles of Association we are commencing a recruitment programme to find his replacement." This refers to the CEO. It goes on to state: We have signed a contract with Amrop Strategis to handle the recruitment on our behalf and they have started the Executive Search process which will be carried out by reference to their contacts and database and by newspaper advertisement. We would like to have the new executive in place by the end of June[.]
The next thing we heard about it in the HSE was when the appointment was then made by way of an internal competition. So, with reference to Deputy Deasy's second question, what we are now saying is what our internal administrator stated in a letter to the committee:
At this stage it is necessary for the CRC to satisfy itself that the payments made/benefits conferred are reasonable and proper (in the context of its memorandum of association) and that any amounts paid were correctly calculated and authorised.
In the event of there being a loss to the CRC (or the Friends and Supporters of the CRC), steps to make good that loss [and deal with other consequential issues] will require to be taken.
Deasy: What is Mr. O'Brien's opinion? Were they reasonable and proper?
O'Brien: No. The Deputy is asking my opinion. Quite clearly, we already heard at a previous hearing that the then CEO was part of a private pension scheme whose terms and conditions he would benefit from. I also think it is hugely erroneous for the CRC to make reference to a package which was available in 2010 in the HSE when in fact Mr. Kiely chose to retire in June 2013 when no such package was available. To use that as a basis for calculating or as a methodology to award benefits--
Deasy: You are talking about the HSE's early retirement scheme.
O'Brien: In 2010 only.
Deasy: That is grand. Thank you very much. Again, I go back to page 2 of the minutes, which talks about the package being in line with the recommendation of the remuneration sub-committee. Could Mr. O'Brien tell me if there is any documentation as to whether a recommendation was circulated to members, or was this just brought up at this board meeting?
O'Brien: For the record-----
O'Brien: As the Deputy asked the question about 20 minutes ago, I have been advised that there are only minutes of one meeting, which was the one we have provided to the committee, and that no minutes can be located for the remuneration sub-committee.
Deasy: No minutes?
O'Brien: That is to the end of March.
Deasy: So you do not have any paper trail with regard to that particular sub-committee meeting?
O'Brien: That is the most up-to-date position, Deputy. They are not available.
Deasy: And you are not aware of any recommendation in writing that was circulated to members from that sub-committee meeting?
O'Brien: No, we are not.
Deasy: When you go through page 1 of the letter and get to the last paragraph, it talks about the moneys paid by Friends and Supporters of the Central Remedial Clinic that was described in the draft internal accounts as a donation.
I ask Dr. Smith, who is an auditor, whether that is falsification of accounts.
Dr. Geraldine Smith: The wording is important. The documents states "draft internal accounts". Obviously they have not been subjected to an audit. One would expect that reference would be made in the final accounts to the purpose of the donation but it is also interesting to note that in the previous accounts the word "donation" was also used between 2010 and 2012, as well as the draft accounts for 2013. There was no reference to what the donation was in respect of-----
Deasy: Can one do that, professionally?
Dr. Smith: I always read accounts from the perspective of the man in the street. Any individual taking up a set of audited accounts should be able to assume that the accounts provide full information so that he or she can get a full understanding of the transactions involved.
Deputy John Deasy: It is misleading, is it not?
Dr. Smith: One would certainly expect more information.
Deasy: Is it not misleading?
Dr. Smith: I have been informed by the Chair that I can say it is misleading.
Chairman: It is also misleading in regard to the payments to the Mater hospital, which were described as a fee. There was not a fee.
Dr. Smith: No, there was not a fee.
Chairman: The auditors also have questions to answer in regard to the description of these sums.
Deasy: The terms are misleading. One could go so far as to say there was falsification. I am not accountant or an auditor. I do not have any great expertise in this area but, as Dr. Smith noted, the accounts should be written so that the ordinary man in the street can understand them. When I look at this and the interim administrator's account of it, I would go so far as to say it was done to deceive. That is very serious. This is the point he is making in the last paragraph, because he singles out the word "donation". It was not a donation in any sense of that word.
I ask the HSE about its guidelines on lump sums - I touched on this issue at the last meeting - and its interaction with Mr. Kiely in early 2013. Did it put the scare on him? What led to this? Was it in contact with the CRC and Mr. Kiely about his salary in early 2013? I do not know whether Ms Lawlor was involved.
O'Brien: From mid-2013 we were in contact with every section 38 agency and we asked the same questions, specifically about compliance with public pay policy, Department of Health consolidated salary scales and whether additional payments were being made.
Deasy: What contact did HSE make with Mr. Kiely and the CRC regarding Mr. Kiely's salary in the time leading up to his resignation?
Dr. Smith: Perhaps the most significant aspect was the communications from me in regard to the audit. As I informed the committee previously, I built on information provided by the CRC to the HSE in regard to various questions that had arisen around public pay policy, members of boards, fees being paid, etc. It is perhaps possible that the interaction from audit to seek clarification of the information already provided, an assurance that the information was accurate and correct and other information on directors' fees, pension payments to private funds - I do not think that had been asked previously - was a significant factor.
Deasy: It might have been a significant factor.
Dr. Smith: I do not know what factors determined Mr. Kiely's decision to reply. The audit report issued in March 2013, and perhaps that was the culmination of the issues.
When Mr. Conlan resigned from the Mater hospital, what kind of retirement package did he receive?
Conlan: I retired under the cost neutral early retirement scheme.
Deasy: What does that mean?
Conlan: It means that someone who is over 55 years of age can avail of the VHSS retirement scheme. I retired under that.
Deasy: Are all those details with the HSE?
O'Brien: The distinction between retiring on a cost neutral basis and what was available in 2010 for enhanced early retirement was that in the former case an actuarial adjustment was applied to the value of the number of years an individual missed for full service, whereas there was no actuarial adjustment on the years of service in 2010.
Deasy: I said I would revisit the issue of the early retirement scheme. Earlier I used the word "deception". The interim administrator's letter makes reference to a statement that the proposed package was considerably less beneficial to Mr. Kiely than these terms and refers to the HSE early retirement scheme of December 2010, for which Mr. Kiely was ineligible. That is untrue, is it not?
O'Brien: Mr. Kiely was never eligible for that scheme because he was not a member of the scheme. He was always a member of a private scheme. He was one of the CRC staff who were in the Irish Pensions Trust scheme.
Deasy: I ask for clarification on the interim administrator's letter, which states that the chairman, in outlining the details of this package, intimated that the proposed package was considerably less beneficial to Mr. Kiely when compared with the terms of the HSE's early retirement scheme. Is that true?
O'Brien: Yes, he was not entitled to it but the proposed package was considerably less beneficial to Mr. Kiely.
Deasy: This is made up. He could not have been entitled to it.
O'Brien: That is correct.
Deasy: It is an absolute falsification. Is that not the case?
O'Brien: It is not correct, yes.
Deasy: Yes, it is misleading information, disinformation, misinformation.
O'Brien: It has no bearing on what Mr. Kiely was or was not entitled to.
Deasy: It has no bearing on any fact at all. It is a complete fabrication. Is that right?
O'Brien: It has no bearing on Mr. Kiely's entitlements in the pension scheme of which he was a member.
Deasy: We are dealing with a twisted web. We are just clipping the tip of this iceberg. I have been introduced to much of this only today. Things have been constructed by members of the board. I will use my words carefully. It seems to me that what was constructed was disingenuous at the very least. I go so far as to say that the details and reasons given for this were completely false in some cases and there is an element of deception here. The donation and how it was regarded within the accounts is a serious matter. I am unsure how we should proceed. Do we bring in members of the board again and ask them what they knew and did not know? My guess is that people will deny they knew anything. There must be some accountability here. I have asked the HSE how it intends to proceed. If Mr. O'Brien accepts what I am saying, and he seems to, the HSE administers and polices this area. I ask again, what does he propose to do regarding this entire situation?
O'Brien: Delivery of the services remains our primary focus. When we have all the facts and information before us we will take whatever steps are necessary to ensure there is appropriate probity and governance, and if that includes seeking assistance from another statutory agency in finding the best way to proceed, we will do that with the sole interest of the integrity of CRC.
Deasy: To what statutory agency is Mr. O'Brien referring?
O'Brien: It may be necessary, depending on the information that arises, to seek the assistance of the Garda Síochána.
Deasy: Fine. I thank Mr. O'Brien.