IHRB in disarray over 'bombshell' relating to 'grave' financial matter with chief financial officer on voluntary leave

Irish racing’s regulatory board has been plunged into turmoil after its integrity and transparency were questioned at an explosive sitting of a key parliamentary committee on Thursday, as it heard of financial issues of “grave concern” and that the body’s finance chief was on “voluntary leave” with immediate effect. 

The financial governance surrounding the Irish Horseracing Regulatory Board appears to be in disarray after the Public Accounts Committee (PAC) hearing was told that CFO Donal O’Shea’s absence from the meeting was linked to “governance around financial transactions”.

Darragh O’Loughlin, the IHRB’s chief executive, made an intervention in his prepared opening statement before PAC to reveal that disclosures made to him in his preparations for the hearing had unearthed a matter of “grave concern”.

“Within the past 48 hours, in the course of preparing for this meeting, I became aware of a hitherto unknown issue that occurred in early 2022 which caused grave concern,” O’Loughlin told the cross-party committee.

“I immediately brought it to the attention of the chair of the audit and risk committee and the board of the IHRB. The board has commissioned a full review of the matter to be conducted by an independent firm. The preliminary facts, as they are known, have been disclosed to the relevant bodies, including the office of the comptroller and auditor general, Horse Racing Ireland, and the department of agriculture, food and the marine.

“The committee will appreciate that I am not in a position to give any further details on the matter, pending the outcome of the independent review.”

When pressed, O’Loughlin said: “Our chief financial officer is currently on voluntary leave, without prejudice to his position, since yesterday.”

Under duress from members of the committee, he then confirmed that the issue was “financial in nature” and related to “governance around financial transactions”.

He refused to answer whether O’Shea had been asked to take leave or volunteered to do so.

O’Loughlin, who said he became aware of the issue on Tuesday, told the committee it could take “a number of months” for the review to be completed. When it was put to him by Fianna Fail TD Cormac Devlin that the morning’s events equated to a “bombshell,” he replied: “I can fully appreciate the sentiments that the deputy is expressing and to describe it as a bombshell is not unreasonable in the circumstances.”

Later in the hearing, Horse Racing Ireland chief executive Suzanne Eade, who said she will be working through the matter with the IHRB, was asked if she felt there would be a criminal investigation arising out of the matter and responded that she did not know enough about it at this stage to speculate. When asked if she believed public funds had been misappropriated, she replied: “I don’t believe so from what I’ve heard so far.”

Denis Egan: took early retirement in the autumn of 2021Credit: Patrick McCann (racingpost.com/photos)

The Social Democrats TD Catherine Murphy moved on to the matter of the controversial payments made to the former IHRB chief executive Denis Egan, who took early retirement in the autumn of 2021.

In March, it was revealed Egan received an exit payment of €384,870, a figure that was 58 per cent above what he was entitled to under the terms of the redundancy scheme.

It emerged that the extra €140,000 was paid by the Turf Club and the Irish National Hunt Steeplechase Committee and did not come from public funds. O’Loughlin said an independent audit had shown that the payment was tax compliant.

Egan’s remuneration package had not previously been publicly disclosed despite it being funded by public money from HRI due to a derogation from the minister for agriculture, and a note in the 2021 financial statements – which PAC had convened to discuss – stated the IHRB did not comply with the minister’s request to include those details. O’Loughlin said that the minister wrote a letter to the IHRB in May 2022 advising that he was lifting the derogation.

“That placed us in a difficult position legally because the contract of employment of the individual in question didn’t contain any provisions providing for the publication of his terms and conditions," he said. "Under GDPR and the payment of wages legislation, individuals have a right to privacy save when they waive that right.”

Unpacking PAC: ten things we learned during an explosive hearing

• Financial issues of “grave concern” have been unearthed in the 2022 accounts
• IHRB chief executive Darragh O’Loughlin informed his board, the comptroller & auditor general (CA&G), HRI and the department of agriculture, food and the marine
• Independent investigation to be undertaken by accountancy firm but likely to take months
• Chief financial officer Donal O’Shea did not appear as scheduled and is on “voluntary leave” with immediate effect
• HRI boss Suzanne Eade suggests there has been no misappropriation of public money
• Former IHRB chief executive Denis Egan had no contract with his employer
• The contract provided to the CA&G was from 1997 during Egan’s time as chief financial officer with the Turf Club, which was superseded by the formation of the IHRB as a private limited company in 2018
• Ministerial request to publish Egan’s salary was ignored by IHRB
• Egan’s 2021 exit package totalled €384,870, 58 per cent more than he was entitled to under the redundancy scheme
• O’Loughlin says the decision to accept Turf Club’s donation of €140,000 to top up Egan’s golden handshake was not sanctioned at board level

However, the comptroller and auditor general Seamus McCarthy intervened to say that they had requested to see the contract but that it was not produced.

“The only contract that was available was for his appointment as CFO previously with the Turf Club, which dated back to 1997,” McCarthy said. “My understanding is that it doesn't exist. For an organisation not to have a contract of employment with its chief executive, or any employee, is a very significant matter.”

The creation of the IHRB – funded by HRI to the tune of €11.4 million in 2023 – as a limited company superseded the old Turf Club regime in 2018. When Murphy challenged Gordon Conroy, the department of agriculture’s chief financial officer, about the absence of a relevant contract for Egan, he said: “I guess that’s what we’ve been informed through HRI, which has governance over the IHRB, and we were satisfied with that explanation.”

McCarthy, who said he has "asked for the independent review to be conducted as soon as possible and consider all matters" then pointed out: “Since there isn’t a contract, there wasn’t an agreement not to disclose the figures. The other matter is the department raised the issue with HRI about the two disclosures in May of 2022, but the accounts weren’t actually signed off until December of 2022, so there was ample opportunity there to make the disclosure.”

“I think that speaks for it all,” Murphy responded, while also acknowledging O’Loughlin only began in his role 12 months ago.

“I’m reminded by the things you identified in your opening statement, and talk about integrity, and given this is the regulatory body, it certainly doesn’t align with how you would expect things to be conducted. You would not expect the minister to be ignored and you would expect contracts to be in place at the very least. I would have thought that was self-evident.”

The IHRB headquarters at the CurraghCredit: Patrick McCann (racingpost.com/photos)

Green Party TD Marc O’Cathasaigh probed a similar line. He observed that the IHRB had “stonewalled” on the issue of the publication of Egan’s salary despite no contract existing to that effect.

“In the absence of a contractual provision waiving the right to privacy and consenting to the publication of the salary, the advice we received is that we would find ourselves in breach of data protection and privacy law, and the payment of wages act,” O’Loughlin countered.

McCarthy then came back in. “Certainly the issue has arisen previously about disclosure of information for people who are paid out of public purses, and my understanding is that there is an expectation, particularly with the more senior people, that information should and can be provided.”

O’Cathasaigh responded in O’Loughlin’s direction: "I just find it difficult to reconcile this stonewalling of a request from the department when so much of the funding is derived from the department and your opening statement that the IHRB abides by the underlying principles of good governance, accountability, transparency and probity, and we’re just not seeing that transparency at all.”

When he pressed O’Loughlin on whether he had reviewed board meeting minutes pertaining to the Egan payment, he said he had not. “My understanding is the matter was raised at board level, but no decision I am aware of was minuted at board level,” O’Loughlin said.

O’Cathasaigh replied: "That is extraordinary. That a decision relating to correspondence from the minister of the department that provides the preponderance of your funding, a decision was taken in respect of that correspondence and no decision was recorded at board level, and minuted. I find that astonishing.”

An accountancy firm is expected to undertake the independent review, while various members of PAC expressed a desire to have the IHRB return for another hearing soon to clarify what had occurred.

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