Six former PMS directors facing disqualification identified

As previously noted, the Northern Ireland Department of Enterprise, Trade and Industry had written to six directors of the [in adminstration] Presbyterian Mutual Society [PMS] to inform them that the department has decided “that it is in the public interest to seek disqualification orders” against them.

And as I said then.

A sceptic might ask whether the disqualifications are connected to the announcement by the UK Chancellor in October of a £25million grant and a £175million loan to the NI Executive for the PMS [reg may be required].

And whether any action will be taken against Departmental civil servants [or the Minister]?

No answers to those questions, but the News Letter follows up on their earlier report to identify the six former PMS directors contacted by DETI.

The former PMS directors being prosecuted are the former company secretary Colin Ferguson, Philip D Black and David James Clements (both accountants), Presbyterian ministers the Rev David McConaghy and the Rev Sidlow Samuel McFarland and church elder Albert McCormick. Aside from Mr Ferguson and Mr Black, the other four respondants are understood to be retirees in their seventies.

The News Letter report adds

However, one independent expert in the field last night questioned the context of the prosecutions.

“It would appear that the same legal test which these former PMS directors are alleged to have failed has also been failed by other banks and buildings societies in the UK,” he said.

“However it appears it may have been decided for reasons of political expediency not to take action in those cases for fear those banks might relocate out of of the UK. But the fact that the regulatory systems for Industrial and Provident Societies [like the PMS] in Northern Ireland have now been brought into line with Great Britain implies an admission of culpability by government.”

The News Letter yesterday asked the Financial Services Authority if any action was being taken against directors in any other British-based bank, regarding matters occurring since 2008. The FSA declined to comment.

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  • jthree

    ‘However, one independent expert in the field last night questioned the context of the prosecutions.’

    Pure whataboutery.

    The PMS was an out-and-out dog. To an extent that some people still seem unaware of.

    I invite people to look at the society’s filings, freely available on the Deti website.

    They show that the PMS loan book was an absolute shocker.

    At Anglo – the developers bank – they had an informal policy of trying to keep development (as opposed to investment) loans to 15% of the book. By the end they’d thoroughly breached that and development land was about 25% of the book. Not good.

    We turn to the PMS. A little table in the administrators report tells us their total book at the end was £184m. The column for ‘building sites and development land’ reads £85m.

    That’s fully 46% of the book accounted for by development land.

    But there’s more. Another £26m was loaned for Buy To Let -14% of the book. A further £17m for commercial property – 9%.

    However, only £12m was loaned to congregations (7%) and £11m for own homes (6%).

    The people investing in the PMS probably didn’t know it but the directors had built a mono-line property lender with a whopping exposure to undeveloped land.

    In terms of crazy property exposures the PMS was worse than either Anglo or BoSI.

    Also have a look at the way that in latter years the balance sheet was ballooning in a way that was utterly imprudent and unsustainable. Even if there hadn’t been a liqudity crisis there would soon have been a solvency crisis.

    And that’s without even mentioning the fact that the FSA have already found the whole outfit was basically an illegal bank.

  • Cynic2

    Wasn’t it also alleged to be operating as a bank without a banking licence?

  • Old Mortality

    J3
    A possible explanation for the large buy-to-let book is that they were loans to ministers enabling them to buy a property for retirement which they could let out in the interim. Clergy have been known to whinge about having to live in tied accommodation rather than their own homes.
    And it’s easy to criticise the general exposure to property with the benefit of hindsight without considering that the typical saver/investor would have seen property as a reassuringly safe asset.
    As far as I know the PMS’s objective was to obtain a better return than their generally unsophisticated and risk-averse members would have achieved, most likely in savings accounts with local banks. It has been suggested that the rumours which led to the run on the PMS were inspired by the banks, possibly irritated by the loss of cheap deposits.

  • jthree

    “The typical saver/investor would have seen property as a reassuringly safe asset.”

    But it was the director’s job to manage the risk and leaving the portfolio so hideously exposed to one asset class was reckless.

    “As far as I know the PMS’s objective was to obtain a better return than their generally unsophisticated and risk-averse members would have achieved, most likely in savings accounts with local banks.”

    Were people explicitly warned that a higher return meant a higher risk?

    “It has been suggested that the rumours which led to the run on the PMS were inspired by the banks, possibly irritated by the loss of cheap deposits.”

    That is neither here nor there – even if there hadn’t been a liquidity crisis there was still going to be a solvency crisis given the composition of the book.

  • Procrasnow

    If it had been run as a credit union it would still be in business today but then they would not have had the preferential returns they wanted

    If the greedy members who caused the run on it had not done so it would still have been in business today, you never hear about these or who they are. Anyone asking these to share THEIR rewards with the rest who were not so greedy?

    Has any members of the stormont executive who have lobbied for a bail out been affected by the crash of PMS?

    What about the other companies that have failed here, not by bad practice but by the financial crisis? any help for these?

    It boils down to the collapse of this private members club caused by the run on it to get cash out by its own members and no other reason

  • Hi, Pete Baker,

    Thanks for that tale. It was very entertaining and a mine of useful enlightening information. An object lesson in what good reporting and investigative journalism is all about, methinks.

    With regard to “A sceptic might ask whether the disqualifications are connected to the announcement by the UK Chancellor in October of a £25million grant and a £175million loan to the NI Executive for the PMS [reg may be required].” ….. Presumably a UK Chancellor £175million loan to the NI Executive for the PMS, will carry a quite an obscene and burdensome interest charge. Who is paying that and/or where is that coming from?

    Thanks in anticipation.

  • Pete Baker

    amanfromMars

    As I understand it, the £175million was loaned by the UK Treasury to the NI Executive under the Reinvestment and Reform Initiative (RRI) borrowing facility – which was designed to allow for the improvement of infrastructure here. Probably at better than market rates.

    That £175million, along with £25million from the NI Executive, is then loaned to the PMS fund – original terms indicated that loan was to be “at commercial rates”.

    I’m not entirely sure who the other £25million the UK Treasury provided was actually granted to. Let’s assume, for the sake of argument, it’s granted to the PMS fund.

    In effect, the NI Executive becomes the creditor of the PMS fund to be repaid out of the sale of the PMS assets. All £200million plus interest.

    I suspect any shortfall would have to be borne by the NI Executive.

    And they will have to find the money to repay the original £175million loan, plus interest, back to the Treasury.

  • aquifer

    Our executive are expert at shovelling money out the door

  • Thanks for the detailed reply, Pete Baker [21 March 2011 at 8:23 pm] which really tells us of a NI Executive takeover of the failed PMS with the supply of £200million of credit, charging commercial rates, and all loaned against known PMS assets which presumably are nowhere near being worth £200million and probably losing even more market value in these austere times, whilst interest being charged at commercial rates is increasing the amount to be repaid.

    And is that really thought to be a good deal, whenever what is expected to be repaid will be nowhere near what can be repaid from assets pledged? Who in charge thinks that is an equitable solution?

    “I suspect any shortfall would have to be borne by the NI Executive.” ………. Is that a way of saying taxpayer money, without actually revealing to the taxpayer that it will be their hard-earned money which will be used to pay for the losses incurred by disastrous and renegade speculative forays into the markets by PMS directors, presumably with them acting in a capacity wholly at odds with their remit, and effectively gambling with and losing money which wasn’t theirs to gamble with and lose in the speculative market place in the first place.

    That is a distinctly odd, sweet deal with a very sour taste indeed, methinks, for it is not afforded across the board and would appear to be available to only a very select few? What parameters have to met to qualify for such extraordinarily generous help [effectively an all expenses paid bailout] if the taxpayer is billed for a dodgy failed private excursion into a shark infested poll of a gambling arena/veritable den of iniquity?

  • Greenflag

    martian ,

    ‘if the taxpayer is billed for a dodgy failed private excursion into a shark infested poll of a gambling arena/veritable den of iniquity?’

    So only Presbyterian ‘taxpayers ‘ will be billed for the eh gambling activities of the PMS board of directors . Well thats fair enough then . Surely they don’t expect Catholics and Anglicans and Methodists and Atheists and Jews and Moslems to cough up -do they ?

    ‘What parameters have to met to qualify for such extraordinarily generous help’

    The same as those that applied to Bank of America , Goldman Sachs , Citigroup , Northern Rock , Royal Bank of Scotland , Bank of Ireland , Allied Irish , Anglo Irish , the Icelandic Banks etc etc etc .

    It’s just a matter of the ‘relativities ‘ In the NI context the PMS is just another special case just like the RC Curch was a special case in the Republic when our ‘crooked ‘ government handed over 100 million to that Church to help them pay for their ‘criminal ‘ activities .So we have learned that the sober Presbyterian board of directors have been found ‘gambling ‘ with their depositors funds ?

    Nothing new there . Look around . Banks have been doing that for the last 20 and probably closer to 30 years and this is why the world has had stock and property bubbles with more to come and why ‘taxpayers ‘ the world over are being gouged by the banksters with the aiding and abetting by the elected politicians of all parties 🙁

  • Greenflag

    @ aquifer,

    ‘Our executive are expert at shovelling money out the door’

    Expert ? hardly . They are only aping the behaviour of governments all over the western world who have been shovelling taxpayer’s monies out the door of the real economy into the magic paper world of banksters in the vain hope that somehow the banksters will not bring the roof down on the eh ‘sovereign ‘ economies of these governments -sorry elected banking representatives 🙁

  • With an upcoming election, Greenflag, now is an excellent time to discover the views of government hopefuls on the right or wrong of such actions, which without punitive personal censure and/order criminal proceedings against guilty parties, with a view to exemplary and fair prosecution and a sojourn at HM’s pleasure in one of her secured environments, would have the system complicit in and as accessories after the fact to the fact in what may be tantamount to those arranging the rescue being considered as being instrumental in committing another crime also, with the misuse of public monies and abuse of public office.

    Or is that not the case on the facts that are in this particular case.

    Perhaps someone could point out where the facts would not support the above, so that the notion of systemic wrongdoing for personal gain can be dismissed and rendered unfounded and unproven.

  • A little something for the biggest show in the country perhaps just so that the electorate are kept uptodate and fully aware of what is going on behind the closed doors of Stormont at the expense of the public purse.

  • Nunoftheabove

    Goodness me, imagine that, Christian waywardness with managing wealth…. whatever next ?

    Were the good Reverends not obliged to sign some form of spiritual conflict of interest declaration when they took the gig on re. Matthew 6:19-21,24 ?

    Well, many Christians are fond (indeed proud) of considering themselves members of a flock. Now they know what being fleeced feels like and they can hold their very own shepherds, among others, directly personally accountable for it.

    Presbyterians Do It… Off Balance Sheet 🙂

  • And theres a bigger a story yet to come !!

  • And theres a bigger a story yet to come !!…. belfastjj
    22 March 2011 at 9:09 pm

    Indeed there is, and isn’t it sweet that it is always at the most inconvenient of opportune times, belfastjj.

    The calm before the storm always has the truth ready to aid and excuse the strong in the weakest links, rather than allow past dodgy shenanigans in the thrall of others to ensure that they take the heaviest of falls to shield and set free the guilty. Nowadays there is nowhere to hide if information in power is abused and misused.

    The truth sets you free and keeps you free and safe from future harm.