UD2189/2011

EMPLOYMENT APPEALS TRIBUNAL

CLAIM OF:                                                                                                       CASE NO.

Declan Maher

- claimant                                                                                                   UD2189/2011

against

Allied Irish Banks PLC

- respondent

Under

UNFAIR DISMISSALS ACTS, 1977 TO 2007

I certify that the Tribunal

(Division of Tribunal)

Chairman:   Mr S. Mahon

Members:     Mr. W. O'Carroll

                    Ms H. Murphy

heard this claim at Galway on 28th January and 29th January 2014 and 7^th 8^th and

9^th of July 2014.

Representation:

_______________

Claimant:       In Person

Respondent: Mr. Tom Mallon BL instructed by Ms. Lynne Martin, Employment Lawyer,

                     Office of the Group Law Agent, AIB PLC, Bankcentre, Ballsbridge, Dublin 4

Respondent’s Case

The claimant commenced working for the respondent bank in 1982. He worked in a number of branches throughout the country and at the time of his dismissal in 2011 was employed as a branch manager in a town in rural Ireland. Following a number of newspaper articles in August/September 2009, a number of possible irregularities/conflicts of interest involving the claimant, came to the attention of the bank. An investigation commenced into circumstances surrounding the claimant’s involvement in a local partnership (“the partnership) of which he was part ownerand any other related partnerships/companies and the consequences for the bank and to determine what other unauthorised commitments the claimant may have entered into.

The Tribunal heard evidence from the former manager of the special investigations unit, now retired, known as (MrG) that he was appointed to carry out the investigation. He gave evidence that he compiled the terms of reference for the investigation, a copy of which was opened to the Tribunal. He could not confirm that the terms of reference were provided to the claimant.

The purpose of the investigation was to gather information and facts and to deliver a formal report to the General Manager of the bank. He was supplied with supporting documentation to assist him in carrying out the investigation. He gave evidence that he is not a lending expert but took advice from experienced lending bank officials during the course of the investigation. The primary focus of his investigation centred around a letter written by the claimant as Branch Manager to Mr (K), of the Partnershipon 21 April 2005 which stated inter alia “I refer to your recent application, on behalf of (the) Partnership-Consortium 1, to borrow $60m….…I can confirm we are agreeable in principle to advance these funds to your group, subject to the following……”. This letter was used in court proceedings in the USA. Other issues examined in the course of the investigation revolved around possible conflicts of interest in relation to the purchase and letting of a local hotel from a customer of the bank by the claimant. The final matter under investigation related to three complaints made by customers of the bank.

The witness had a number of meetings with the claimant during the course of the investigation and undertook a full review of the branch files in the bank as part of the investigation. In that regard he gave evidence that the branch moved premises between 2005 and 2009 and all documentation could not be found following the move. He accepted that documents could be misfiled or lost. He told the Tribunal that the claimant explained his reason for writing the letter of 21 April 2005 as trying to get business for the bank from people who had business interests in Florida. He did not speak with these people as it was an internal bank investigation. He told the Tribunal that following his review of files in the branch he could find no evidence of any application for the aforementioned $60m million loan application. He could find no file in relation to the Partnership. He accepted that bank officials are allowed to have outside business interests provided that these interests do not interfere with bank business. Upon completion of his investigation he prepared a report for the bank and included various appendices in hisreport(“the first report”).He concluded in his summary report that if the aforementioned letter of 21 April 2005 written by the claimant is considered as a letter of sanction in principle there is no doubt that the claimant clearly breached the lending authority granted to him by his line management. Following the presentation of his report to the General Manager he retired from the bank with immediate effect as he was due to retire. It was a quick report, a brief summary and conclusion. It contained no findings that the claimant should be subjected to a disciplinary process. He had no further involvement in the matter and it was his understanding that a different person would complete the final report. He expressed surprise that the final report was accredited to him and he is not aware of who completed the final report (the final report).

The next witness known as (D) gave evidence that he was the General Manager of Operations in the bank in 2010 and he was asked by the Head of Staff Resolution hereinafter known as (MC) to review the case and come to a decision in the matter. In this regard he relied upon the final report of the investigation, a copy of a letter dated 5 May 2010 from (M) to the claimant outlining seven allegations against the claimant and a detailed letter/submission from the claimant dated 19 July 2010. He considered the documentation and came to his own decision on the matter interacting with (MC) during the process in relation only to administrative issues. He did not meet with the claimant during the process. He told the Tribunal that it was his belief that the letter of 21 April 2005 written by the claimant to his business partner amounted to a letter of sanction in principle. He described such a letter as a positive response to an application for funding provided specific conditions were met. It moves to a binding document when the specific conditions are met. It is his belief that the letter is much more than an expression of interest letter. He told the Tribunal that a credit professional supported this understanding.

He issued his report by way of letter dated 6 August 2010. He upheld five of the seven allegations and was satisfied that the claimant did issue a letter agreeing in principle on behalf of the bank to sanction a loan of $60m without going through the normal decisioning process and therefore without the prior approval of the appropriate lending authority. He concluded in his summary remarks that the claimant-

• engaged in unauthorised departures from the accepted operations and/or procedures of the bank;
• breached his duty of trust and fidelity to the bank;
• irreparably injured the relationship of trust required between himself and his employer;
• exposed the bank to reputational damage; and
• exposed the bank to potential financial loss.

He concluded that the claimant should be dismissed with immediate effect subject to the payment of 12 week’s salary in lieu of his contractual notice entitlement. The claimant was afforded the right of appeal of this decision.

The next witness known as (P) gave evidence that he is head of credit sanctioning and has been employed by the bank since 1982. He has been involved in lending since the 1980’s. He described to the Tribunal the process of loan approvals which are quantum driven. Approvals can be granted at branch level progressing to area and onto group level depending on the quantum involved. The claimant’s level of discretion in granting a loan application was maximised at €160,000. There is a higher level of due diligence required as the amount of a loan increases and the level of documentation required would vary depending on the risk involved and the size of the loan. The bank may require knowledge of the borrower, purpose of the loan, the mixture of equity and debt, the inherent risks in the development, details of cash flows. The degrees of due diligence would increase as a project progresses.

He described to the Tribunal the difference between a letter of sanction in principle and a letter of interest and the types of letters issued by the bank (expression of interest, heads of terms, letter of sanction in principle, letter of offer). He stated that a letter of sanction in principle is conditional whereas a letter of sanction is a formal letter and is legally binding. He told the Tribunal that the bank did not have a template letter for a letter of sanction in principle in place at the time as it depended on circumstances. The bank has such a template letter in place now. He classified the claimant’s letter of 21 April 2005 as a letter of sanction in principle letter and not a marketing letter. It was a formal letter issued by the most senior person in the branch with a clear inference that the bank was agreeable to advance funds if the client delivered on the conditions specified. He stated that the recipient of the letter would have a reasonable expectation that the bank had considered the application and were agreeable in principle to provide the funds. The issuing of a letter of sanction in principle pre-supposes that an application has been lodged and such a letter would not issue without due diligence having been carried out.

He gave further evidence that the claimant, as the author of the letter and part owner of (the partnership), the recipient of the letter, should have made the bank aware that he had a conflict of interest. It was inappropriate for him to have considered the loan application and he should have absented himself when he had a conflict of interest. He should never have written the letter and should have had no role in the matter whatsoever because of his conflict of interest.

The former General Manager in transaction bankinggave evidence he worked for the respondent bank for 40 years spending his entire career in frontline business. He was appointed area director in 2002 having responsibility for the branch where the claimant was employed as manager. He met with the claimant two or three times per year and also at conference for all managers.

Arising from a newspaper publication and the web site of (the partnership) he had a discussion with the claimant on 10 August 2005 concerning his involvement with the partnership. He told the Tribunal that he needed to understand the nature of this relationship and he then wrote to the claimant by way of letter dated 10 August 2005 asking a series of questions relating to the claimant’s involvement in the aforementioned partnership. The letter stated inter alia “I need to understand your involvement and the Bank’s involvement fully, in order that we can establish to what extent an existing or potential conflict exists.” He received a reply dated 11 August 2005 from the claimant and on the basis of that response wrote to the claimant by way of letter dated 12 August 2005, a copy of which was opened to the Tribunal. The claimant further replied to this letter by way of letter dated 31 August 2005 stating inter alia that ….” it is my opinion that a conflict of interest has not arisen in this matter”. The witness accepted this reply and that was the end of the exchange of correspondence.

He gave evidence that some further issues arose in 2008 concerning the claimant’s involvement in the purchase of a local hotel. He was assured that this was a purely family investment through a company known as (T) holdings. He questioned the claimant’s judgement in relation to this project and instructed that any future transactions/projects in the area receive prior approval from the claimant’s direct boss known as (J). He had no further issues or interaction with the claimant thereafter as he (the witness) moved to a different area.

He told the Tribunal that he absolutely refuted any suggestion that he was ‘out to get the claimant’. He had no influence in relation to the investigation/disciplinary process. In retrospect he believes that the claimant’s answers to the questions raised in his letter of 10August 2005 were disingenuous. He is of the view that the claimant did not fully advise him of his involvement and the claimant should have told him about the existence of the letter of 21 April 2005. Given that the claimant was a partner in (the partnership) it was never appropriate for him to write such a letter and in effect he was writing to himself. He told the Tribunal that the said letter of 21 April 2005 is a letter of sanction in principle.

The witness accepted that the team in the branch concerned delivered results under the claimant’s leadership and the claimant was a very fine branch manager in terms of results. The bank had a recording mechanism for contacting customers and the percentage base content at the claimant’s branch was in excess of the average. He stated that while there were no guidelines available to managers concerning the issuance of letters of interest there were codes of ethics, codes of leadership behaviour and customer service codes that would dictate how you related with customers.

SA was an agreed agent to act as the final internal appeals officer. He told the Tribunal that on foot of the information received and the historical background he insisted that his hearing of events be de novo. He set out terms of reference and considered the onus on the bank to prove that dismissal was the appropriate sanction. The hearing was done over two days with both parties having solicitors and counsel present. He took some time in generating his findings (which amounted to 31 pages and was read into evidence) and told the Tribunal that his decision was made exclusively on the evidence adduced before him.

SA said that he in no way was bound by the decision made by Mr G in his letter of 6^th August 2010 or influenced by the Final Report. He considered the sanctions and upheld the decision to dismiss being in no doubt that the letter of April 2005 was a letter of sanction in principle and a total conflict of interest by the claimant. Other allegations were of a lesser nature. He was satisfied that the letter was intended to convey to those to whom it was intended, that the bank having considered the application was, in principle, agreeable to make such an advance. It was calculated to encourage investment in a project which the claimant was personally involved and promoting through (the partnership). He concluded that the claimant used his position to advance his personal interests and therefore exposed the respondent to a risk of damage, he wholly and irrevocable undermined the trust and confidence which he said was the cornerstone of his employment relationship. He therefore, without reservation, upheld the dismissal.

Under cross examination he agreed that he was making a decision on behalf of the bank. It was the last stage of procedure as per the claimant’s contract. He was happy that he spoke to all relevant parties and did not speak with Mr G, the author of the final report.

Claimant’s case:

The claimant called a witness JC a building contractor/investor to provide evidence of travelling to visit the proposed development along with other potential investors. He told the Tribunal that he was not a customer of the claimant’s bank in 2005 and had no relationship with the claimant that could have influenced him, one way or another. The claimants business partner told him that funding was available through (another named bank) and said that he never seen the so called “letter of application” in 2005, he first seen it when the claimant brought it to his attention earlier this year.

The claimant himself gave evidence of having worked in numerous branches of the bank throughout his career. He was ambitious and applied for many positions, some successfully and some not. He dedicated a large part of his life to developing his career and worked very hard for the respondent. He said that his dismissal had been both financially and psychologically devastating for him and any employer who dismisses an employee after 28 years of loyal service needs to be 100% sure that they are correct, and have proof in their accusations.

He outlined the seven charges as put to him in the letter of 5^th May from MC and went through them for the Tribunal. He stated that, as per his written reply to the respondent, he did not write any letter agreeing in principle to sanction a loan of $60million. It was an expression of interest in a business deal and as such it did not require a decisioning process or approval. He did not exceed his authorised lending discretion as it was not an agreement to advance monies.      

The claimant was of the view that if he could get his employer in on the deal it would be good for his career. He considered the deal in Florida was something you would never come across and of course he was hoping to get his employer into the ring. If he landed it, his supervisors could never ignore him again.  

He did ring the respondents branch in America, tell them a deal was being put together and ask

if they might be interested. He asked, why would he do that?, if he didn’t want anybody to know or was trying to hide anything. The letter of 21^st April was to benefit the respondent and hopefully his career. It was to say we are here, we want your business, keep us in mind.

The claimant added that the respondent was struggling hugely at the time, looking for product offers for its customers. Managers were always being asked to try find suitable investment opportunities or ventures that might be profitable, so what he was doing at this time was very much with his respondent’s hat on. The respondent and other institutions weren’t coming on board so his business partner went out and got investors. Some of them would have had the cash or have had assets and other would need to borrow. He was looking down the line and thought the respondent would still be, or have some part, to play in the process.

Regarding his appeal, the claimant told the Tribunal that SA saw what he saw without any evidence. Such a big deal was made about the letter of 21^st April 2005 yet non on the investors were asked if they had seen it. He concluded that if he had to write the letter again today he, of course, would be much more careful with the wording he used but never thought for a moment that it would be twisted and turned around as had happened.        

Determination:

The Tribunal having heard the evidence of the various witnesses is of the view that the initial

disciplinary finding was flawed in circumstances where it was grounded on the Final Report

without its provenance having been disclosed. Its authorship and conclusions were ascribed to

Mr. G in circumstances where the Final Report borne no relationship to the Initial Report prepared by Mr. G and more importantly Mr. G came to significantly different conclusions.

The fact that he came to different conclusions and that the Initial Report was not disclosed tainted the process that followed thereafter. The evidence of SA that he was not swayed by the

content of the Final Report or its conclusions may be, in fact, the case but the Tribunal is concerned that the procedures must be seen to be fair and balanced.

The non disclosure of the Initial Report and the presentation of the Final Report as the report of Mr. G (in circumstances where it was not his report) has tainted the entire disciplinary process and the appeals thereafter. The Banks internal processes provided for an internal investigation followed by a disciplinary process with Appeals therefrom. The process was very comprehensive. Where a process is prescribed and that process is not implemented then there are potential consequences that flow from such failure to implement the prescribed process.

The Tribunal has not been persuaded that the letter issued constituted a letter of sanction. The

issue of the letter was entirely inappropriate and more so when it was issued to an entity of which the claimant had an interest. Irrespective of the contention of the claimant that he was

encouraged to go out and seek business, the issuance of the letter to an associated entity warranted a significant sanction. In considering the sanctions available to the Bank for breach

of the Bank’s ethical guidelines the Tribunal is mindful of the Bank’s application of such ethical guidelines in general. The guidelines cannot be ignored generally and invoked in specific cases to sanction employees.

The determination of the Tribunal is that the sanction imposed was excessive for the breach of trust committed by the claimant that the more appropriate sanction would have been to demote the claimant. The Tribunal is not satisfied that the Bank was exposed to reputational damage or exposed to potential financial loss.

The Tribunal is satisfied that the breach of trust and the clear conflict of interest warranted a serious sanction, but not dismissal. It is the finding of the Tribunal that the claimant was unfairly dismissed but that his behaviour was so egregious and of such a contributing factor as to warrant a significant reduction in the level of compensation payable. The Tribunal awards the claimant €25,000.00.

Sealed with the Seal of the

Employment Appeals Tribunal

This ________________________

(Sgd.) ________________________

     (CHAIRMAN)