IFA to draw on reserve fund to settle Smith case
Total cost of package for former general secretary will be in excess of €2m
THE IRISH Farmers’ Association will be forced to dip into its special reserve fund to pay a settlement to former general secretary Pat Smith. The final cost is expected to be in excess of €2m including legal fees.
Mr Smith is to receive €1.55m for his severance claim and €350,000 in relation to his defamation claim after the case was settled on the steps of the High Court.
The controversy over pay at the IFA saw Mr Smith leave his post as general secretary in November 2015.
The IFA has net assets of €16.3m, but the full financial fall-out of the controversy will be felt for years to come as European involvement fund levies — an important source of income for the IFA — have declined sharply in the last two years.
Levies have fallen from €4.18m in 2016 to €2.95m last year, with the IFA instructing ABP to suspend the collection of levies after the processor announced plans to introduce an ‘opt-in’ model for farmers.
However, the IFA maintains that the number of farmers declining to pay mem- bership and levies has stabilised in the two years since the controversy.
The Association does not yet know the full cost of the legal fees for the case, but estimates are that the costs could approach €500,000, which pushes the total cost of the settlement well beyond the €2m mark. The fees from Mr Smith’s legal team will be sent to the Taxing Master at the High Court for assessment.
Professional fees
The IFA accounts show professional fees last year amounted to over €977,000.
“IFA has a special reserve fund in place which has been built up over a number of years,” a spokesman told the Farming Independent. “Regrettably, some funds from this reserve will have to be used.”
The accounts state that the special reserve fund of €12.4m should only be drawn down under ‘exceptional circumstances’.
However, the IFA may have recorded an operating loss of €1.4m last year but it is well funded with the value of its financial investments increasing from €13.4m in 2016 to €15.8m in 2017. The bulk of which forms a special reserve fund.
The National Council passed a resolution in March 2017 to enter into mediation with Mr Smith and his legal advisors.
In 2015, Mr Smith said his agreement with the IFA on his exit consisted of a €1m exit package and a further €1m in yearly €100,000 instalments.
He said the €2m exit package was agreed with former IFA president Eddie Downey, who later stepped down from his position. The exit package for Mr Smith was vetoed by the IFA council in 2015 when the association stated that it would explore all legal options to challenge Mr Smith’s severance package.
Mr Downey met the IFA’s national officers on Thursday and made his views known to them, according to a source. “It is understood he was happy for the IFA that it was concluded and feels vindicated by the actions he took for the organisation. However, he feels there are unresolved matters in the way he was treated,” a source said.
ASKED why it has taken until now to settle, the IFA stated that negotiations have been ongoing since last March with the National Officers Committee. “However, it was only this week that a settlement was arrived at which was agreeable to both parties,” the IFA stated.
At the time, Mr Smith, who had received a total remuneration package of almost €1m over two years, had said he wanted half of the severance package to go to charity. However, a spokesman for Mr Smith yesterday said he would make “no further comment” after questions were put to him in relation to whether a €1m donation would still be made out of the €1.9m settlement.
In the court, a statement was read out that stated the action for breach of contract and separate defamation case had been settled. “The IFA accepts that Mr Smith was a highly effective, hardworking and dedicated executive of the Association who provided solid and professional leadership for farmers,” it stated. “IFA accepts that it made certain statements in the media at the time which were defamatory of Mr Smith and regrets the damage caused to his reputation.”
Mr Smith stated he was “proud” of the organisation he left behind and his record of delivery and the innovations during his career with the IFA will be a “lasting positive legacy” for the association.
He said it had been a great honour to work for Irish farmers and he looked forward to developing a successful future with his new renewable energy sector business.
The issues over pay emerged following questions by whistleblower and then Carlow IFA chair Derek Deane over the general secretary’s remuneration package.
It had followed former IFA economist Con Lucey resigning from the IFA audit committee and highlighting that a remuneration committee, excluding the president and general secretary, should be established which would set pay for the top office holders.
Mr Smith had stated in a letter from his solicitor to a review by Mr Lucey that his pay excluding pension for 2014 and 2015 was “very significantly less” than the salary and bonus paid to his predecessor Michael Berkery in 2007 and 2008. It pointed out the IFA had a net balance sheet value of €19m when Mr Smith left.
The review carried out by Mr Lucey stated Mr Smith had been paid €2.4m between 2009 and 2015, including bonuses, telecom fees and use of a company car. It found his total remuneration was €542,634 in 2013 and €452,484 in 2014. It pointed out Mr Smith received over €1m into his pension pot.
A salary of €185,000 was agreed for the new director general Damian McDonald, while the president Joe Healy receives €120,000. The latest accounts show the executive management receive €830,000 including compensation and labour cover, with average remuneration for the top 15 staff at €125,556.