Back in 2011, the 138-year-old Irish Nationwide Building Society failed due to really crappy loans in a really crappy economy. It was nationalized at a €5.4 billion ($7.35 bil USD) cost to taxpayers and unlike other "victims" of sloppy loans and irrational exuberance, everyone involved knew things were bad:
From the start of the millennium on, the problems of INBS were known, from its over-reliance on its domineering managing director Michael Fingleton to its poor documentation and highly unorthodox lending practices.
They were known not only to INBS’s board but also to the Central Bank and to its auditors KPMG.
In 2000, KPMG sent a warning shot to the board and the Central Bank stating in a report “there are no concentration limits applied to the components of the commercial (lending) portfolio in its entirety . . . the ongoing monitoring process of commercial loan facilities is not formalised and not documented.”
In 2005, KPMG stated the society's internal audit sucked and controls were awful (or, rather, insufficient, which for audit purposes might as well be the same thing).
So, basically, no one was watching the store. Why KPMG stayed on with evidence of such blatant bad client-ing is beyond me.
Now the issue is that KPMG is currently, with the help of the Central Bank, liquidating the carcass and needs to decide if it should sue itself. Seriously.
It is blackly hilarious that at the end of it all the Central Bank and KPMG, now as special liquidators of the society, have so far decided only to hold the society’s former board to account by either investigating them or suing them.
What happened is much bigger than one boardroom table, and as a result the defence of INBS’s former board will rely hugely on just how much the Central Bank and KPMG knew about what was going on.
KMPG [sic], after reports by The Irish Times and criticism from politicians such as Sinn Féin’s Pearse Doherty, has decided to conduct an external review of its actions as auditors, as it weighs up whether or not to sue itself.
The results of this report, KPMG says, are near. The Central Bank meanwhile remains unscathed by the debacle.
What's a few billion among friends? It's not like KPMG didn't try to warn them.
Recommended reading: KPMG wanted Fingleton back on INBS board in 2008
