CRIMINAL CAPITALI$M
Former Davy boss to reap €79m in sale of tainted firm
Brian McKiernan resigned in March after the Central Bank fined the firm over conflict of interest
Brian McKiernan, who quit as chief executive, is believed to be the biggest shareholder in Davy
Jon Ihle
July 23 2021
The former Davy CEO who was forced to resign over his role in a bond trading scandal at the firm is set to get paid nearly €79m for his stake in the stockbroker from its sale to Bank of Ireland.
The details of the deal also reveal that staff at the stockbroker will not be subject to pay caps and bonus bans that apply to bailed-out banks even after Bank of Ireland takes over in 2022.
Furthermore, up to 80 staff at the bank will transfer to Davy after the deal concludes, meaning they will also be in line for bonuses and escape the €500,000 a year pay ceiling. Up to 12 staff per annum can transfer after that.
The agreement is the same as AIB’s bonus carve-out for its €138m acquisition of Davy’s rival Goodbody, which was announced in early March amidst the fall-out from the bond scandal, except it allows many more bank employees to move over.
By letting this backdoor swing open so wide at Bank of Ireland, in which the State is the largest shareholder with a 14pc stake, Finance Minister Paschal Donohoe has effectively ended the decade-old ban on banker bonuses.
While the Government is gradually selling down its shareholding this year as part of a phased exit from Bank of Ireland, analysts expect the State to still own between 5pc and 10pc of the bank’s stock by the end of the year.
Brian McKiernan, who ran Davy Group from 2015 until March of this year, is understood to have a 13pc stake in the business, which is being sold to Bank of Ireland for €440m plus €125m in cash to be generated from the sale of Davy’s funds business.
Mr McKiernan resigned his role at the firm in early March, alongside several other senior figures, after the Central Bank fined Davy €4.13m - just one-eighth of 2020 profits - for breaching conflict of interest rules on a major bond transaction.
He was part of a group of 16 Davy employees behind a heavily discounted deal to sell €27m in Anglo Irish Bank bonds on behalf of Belfast businessman Patrick Kearney without telling him they were also the buyers. The Davy staff then sold the assets at a much higher price.
The disclosure of the details of the deal and the resulting reprimand and enforcement action by the Central Bank prompted a cascade of consequences for the firm, including the departures of Mr McKiernan and deputy chairman Kyran McLaughlin.
The National Treasury Management Agency fired Davy from its panel of primary dealers for Goverment bond sales. Interim CEO Bernard Byrne then shut down Davy’s bond desk, with the loss of four staff members who the firm said were involved in the inappropriate bond deal.
An independent review by consultants Alvarez & Marsal into staff dealing at Davy found that a small clique of employees were involved in a high frequency of trades for substantial amounts of money up until the end of last year. A&M recommended in its report that the “total value of trades being executed in staff accounts in future should be significantly less than values up to year end 2020”.
Five members of the Davy 16 – Mr McKiernan, Mr McLaughlin, former chief executive Tony Garry, former head of bonds Barry Nangle and former head of equities David Smith – are believed to own about a third of Davy Group between them.
Their stakes will now cash out at roughly €200m.
The rest of the proceeds of the sale will go to the large number of shareholders among its 700 staff and numerous ex-employees who held onto their stakes in the firm after departing for new jobs at other companies or retiring.
The deal is expected to conclude in early 2022, subject to regulatory approval, and will initially release 75pc of the sale price on completion.
The remainder is due to be paid in 2024, conditional on the performance of the business and “the management of risks or legal issues which might arise”, according to a Bank of Ireland spokesperson.
An additional €40m has been set aside by Bank of Ireland for the retention of key staff in the firm who hit “stretch performance” targets by 2025 and is not being distributed generally to all shareholders.
Jon Ihle
July 23 2021
The former Davy CEO who was forced to resign over his role in a bond trading scandal at the firm is set to get paid nearly €79m for his stake in the stockbroker from its sale to Bank of Ireland.
The details of the deal also reveal that staff at the stockbroker will not be subject to pay caps and bonus bans that apply to bailed-out banks even after Bank of Ireland takes over in 2022.
Furthermore, up to 80 staff at the bank will transfer to Davy after the deal concludes, meaning they will also be in line for bonuses and escape the €500,000 a year pay ceiling. Up to 12 staff per annum can transfer after that.
The agreement is the same as AIB’s bonus carve-out for its €138m acquisition of Davy’s rival Goodbody, which was announced in early March amidst the fall-out from the bond scandal, except it allows many more bank employees to move over.
By letting this backdoor swing open so wide at Bank of Ireland, in which the State is the largest shareholder with a 14pc stake, Finance Minister Paschal Donohoe has effectively ended the decade-old ban on banker bonuses.
While the Government is gradually selling down its shareholding this year as part of a phased exit from Bank of Ireland, analysts expect the State to still own between 5pc and 10pc of the bank’s stock by the end of the year.
Brian McKiernan, who ran Davy Group from 2015 until March of this year, is understood to have a 13pc stake in the business, which is being sold to Bank of Ireland for €440m plus €125m in cash to be generated from the sale of Davy’s funds business.
Mr McKiernan resigned his role at the firm in early March, alongside several other senior figures, after the Central Bank fined Davy €4.13m - just one-eighth of 2020 profits - for breaching conflict of interest rules on a major bond transaction.
He was part of a group of 16 Davy employees behind a heavily discounted deal to sell €27m in Anglo Irish Bank bonds on behalf of Belfast businessman Patrick Kearney without telling him they were also the buyers. The Davy staff then sold the assets at a much higher price.
The disclosure of the details of the deal and the resulting reprimand and enforcement action by the Central Bank prompted a cascade of consequences for the firm, including the departures of Mr McKiernan and deputy chairman Kyran McLaughlin.
The National Treasury Management Agency fired Davy from its panel of primary dealers for Goverment bond sales. Interim CEO Bernard Byrne then shut down Davy’s bond desk, with the loss of four staff members who the firm said were involved in the inappropriate bond deal.
An independent review by consultants Alvarez & Marsal into staff dealing at Davy found that a small clique of employees were involved in a high frequency of trades for substantial amounts of money up until the end of last year. A&M recommended in its report that the “total value of trades being executed in staff accounts in future should be significantly less than values up to year end 2020”.
Five members of the Davy 16 – Mr McKiernan, Mr McLaughlin, former chief executive Tony Garry, former head of bonds Barry Nangle and former head of equities David Smith – are believed to own about a third of Davy Group between them.
Their stakes will now cash out at roughly €200m.
The rest of the proceeds of the sale will go to the large number of shareholders among its 700 staff and numerous ex-employees who held onto their stakes in the firm after departing for new jobs at other companies or retiring.
The deal is expected to conclude in early 2022, subject to regulatory approval, and will initially release 75pc of the sale price on completion.
The remainder is due to be paid in 2024, conditional on the performance of the business and “the management of risks or legal issues which might arise”, according to a Bank of Ireland spokesperson.
An additional €40m has been set aside by Bank of Ireland for the retention of key staff in the firm who hit “stretch performance” targets by 2025 and is not being distributed generally to all shareholders.
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