Connect Ireland row blows into a storm for IDA

When the five-year contract for the Succeed in Ireland initiative – run by Connect Ireland and overseen by IDA Ireland – came to an end in 2017, the details always had the potential to be a political hot potato.

Then minister for enterprise Mary Mitchell O’Connor published terms of reference for a review of the scheme and invited submissions from the public.

One of those – as yet unpublished – submissions, seen by the Sunday Independent, came from a North Carolina composites manufacturer brought to Ireland by the scheme for its first overseas expansion. It succinctly summed up the support many others expressed for the scheme.

“Mafic Black Basalt Ireland Ltd now provides 34 people with full-time, quality employment in Kells, Co Meath. If it was not for the Connect Ireland programme… these jobs would not be in Kells,” said the letter from the company.

“As a small company with an overseas headquarters, we are not eligible to qualify as an Enterprise Ireland client and have not been of a scale to warrant interest from IDA Ireland. As a consequence we have been grateful for the assistance and support of Connect Ireland in selecting Kells and ultimately hiring a local workforce.”

Mafic said that it wished to see the continuation of the programme because “there must be many other companies such as ours who ‘fall between the stools’ and would benefit from the Connect Ireland service”.

But from almost the beginning there had been friction around the Succeed in Ireland scheme.

It had been set up by entrepreneur Terry Clune in 2012 to tap into the Irish diaspora to connect with smaller companies overseas who might bring new jobs to Ireland.

Many saw it as a brilliant innovation to help tackle the jobs crisis. But some felt the IDA, with its stellar track record of bringing foreign direct investment to the country, should be left to do things its own way and Succeed in Ireland was a duplication and a distraction.

Connectors – of which there were thousands registered – received a payment of €1,500 for every job their lead generated, with Connect Ireland receiving a further €2,500.

Every lead had to be verified – or green lighted – by the IDA before it paid and if it could show that it was already in contact with the particular company then the contact was “red lighted”.

It was this process that led to a simmering row that has ultimately – a decade after it began – landed the scheme in a behind-closed-doors arbitration process.

Last month the Sunday Independent reported details that emerged during this arbitration process, including allegations detailed in the transcripts of the proceedings that some IDA executives had lied in order to steal leads and had falsified CRM records.

Mitchell O’Connor’s review of the scheme has never actually got beyond its terms of reference. Connect Ireland has written to Leo Varadkar regarding its concerns about what transpired in its relationship with IDA and is seeking an urgent meeting with him.

Asked about this, the Department of Enterprise response maintained the Tánaiste’s discrete distance from the row. “This arbitration process involving the IDA and Connect Ireland is ongoing. It would not be appropriate for the Tánaiste to interfere in it or try to circumvent it,” said a spokesperson.

‘If it was not for the Connect Ireland programme… these jobs would not be in Kells’

But the statement contained one final sentence that suggests IDA’s political masters are growing more concerned about a row that has moved from behind closed doors into the public arena in recent weeks. “The Tánaiste has asked for a full report from the IDA on the matter,” the statement concluded.​

The Arbitrator delivered his determination on the liability module in March 2022, finding the IDA to be in breach of its contractual obligations by wrongly blocking hundreds of Connect Ireland’s leads.

It is understood that in its contacts with both the department and the IDA, Connect Ireland has sought to have the jobs initiative restarted.

A flurry of correspondence has flown back and forth between the organisations ever since. Connect Ireland wrote to each individual IDA board member to outline what had unfolded in the arbitration proceedings to date.

Last week, Connect Ireland chairman Terry Clune appealed by letter to the newly appointed IDA interim CEO Mary Buckley to enter mediation, accusing the state body of “an attempt to whitewash the Arbitrator’s findings.”

“I wish to confirm Connect Ireland’s willingness to enter into a mediation in early course with the IDA with a view to resolving this dispute once and for all. I ask that you and the IDA’s board give serious consideration to that proposal.

“In doing so, I am conscious that multiple efforts at mediation and settlement were made in the past, all of which were unsuccessful. Connect Ireland has always felt that the IDA did not approach these efforts in a constructive manner. I am hopeful that the findings of contractual breach by the IDA, and your appointment as interim CEO, leads to a meaningful change to enable the IDA to re-engage with Connect Ireland with a genuine focus on resolving matters.

“This is the appropriate next step, in order to avoid further unnecessary costs to the taxpayer through further protracted legal proceedings and in light of the Arbitrator’s encouragement of engagement between the parties.”

In a statement to the Sunday Independent, the IDA again denied any financial liability to Connect Ireland under the contract. In the statement, a spokesman for the organisation said that it itself is in fact seeking payment in excess of €1.2m for jobs that Connect Ireland was paid for but which did not materialise or were not sustained – which is denied by Connect Ireland.

“The arbitration proceedings are ongoing,” said an IDA spokesman. “It is highly inappropriate for one party to such proceedings to seek to publicise selective extracts from the evidence rather than advance its claim through the arbitral process.

“As Connect Ireland commenced these proceedings, it is incumbent on it to adduce sufficient evidence proving any losses it claims to have suffered. It has refused to do so despite repeated requests. IDA Ireland rejects the narrative now put forward by Connect Ireland, which ignores the Arbitrator’s ‘overall conclusion from the documents and the evidence was that the IDA was acting honestly’.

‘This is the appropriate next step, in order to avoid further unnecessary costs to the taxpayer’

“In addition, the selective extracts make no reference to the numerous issues where the Arbitrator found against Connect Ireland. The parties have previously engaged in mediation but without success.”

For its part, the IDA has verified just 575 of these jobs but, in his letter to Buckley, Clune claimed that “thousands of potential jobs… were lost to Ireland by the IDA wrongfully blocking leads for jobs that ultimately went to other countries”.

“In addition, of those leads stolen by the IDA from Connect Ireland and the hundreds of people who provided those leads in good faith as connectors, the initiative in fact went on to create an estimated 7,328 jobs based on IDA announcements and publicly filed annual accounts,” he wrote.

“Clearly, many of those companies have continued to grow, demonstrating the enduring impact of the Initiative. However, the fact remains that hundreds of Connectors who provided the leads that ultimately led to the creation of these jobs were circumvented by IDA Ireland.”

Numerous connectors outlined their experience at the arbitration proceedings. Justin McInerney of Cork-based Accuflow Technologies, which trades as Smartzone, told the proceedings that his firm worked closely with a large American technology company and that through this relationship he had become aware in early 2016 that the US firm was looking for a European base.

“I felt I could assist and hopefully secure inward investment for Ireland,” said his witness statement.

He had first become aware of Connect Ireland when flying in and out of Cork Airport several times each week, where the jobs initiative had a prominent promotional presence.

“I was impressed with the concept of the Succeed in Ireland initiative, in particular as it created the impression that Connect Ireland was interested in hearing about any opportunity to attract investment into Ireland, regardless of size, whereas other Irish authorities were more focused on large scale projects. I believed the finder’s fee offered to Connectors also provided a clever incentive.”​

In May 2016 McInerney registered as a Connector with the Connect Ireland programme and registered the US company as the target. He understood the initiative was run in partnership with IDA and he contacted both it and Connect Ireland.

But, he told the Arbitration that “no real detail had been passed to the IDA about the project as yet” and that the IDA had not engaged with the US company.

Four days later McInerney was told that his lead had been “red lit” – in other words declared by the IDA to be ineligible for the €4,000 per job connector fee.

The red and green lighting of leads is at the very heart of the dispute.

McInerney told the arbitration hearing that it had been explained to him that “the IDA could only red light a submission if, at the time of the submission, they were in active dialogue with the target company about the project which was the subject of the submission. On this basis, it is my view that the… lead I submitted was wrongfully red lit by the IDA.

“My introduction of this opportunity to both Connect Ireland and the IDA was effectively simultaneous. While I sent an email introducing the IDA to the opportunity on 4 May 2016, I did not speak with anyone in the IDA about the project until 5 May 2016, the same day as my registration with Connect Ireland.

“As the Succeed in Ireland programme was a joint initiative run by both Connect Ireland and the IDA, I did not place any significance in whether I chose to contact one party before the other. In any event, the opportunity was properly introduced to both parties on the same day, 5 May 2016. I therefore fail to understand how the IDA can maintain a position that it could validly red light the lead on the basis that it was already in active discussions with the target about the project.

“In addition, I do not believe that the IDA was in fact in discussion with [the US company] at the time I registered it as a lead with Connect Ireland,” he told the hearing.

“I had to explain the nature of the project to the IDA in a phone call with them on 5 May. Furthermore, the IDA relied on my assistance to arrange a meeting with [the US company] on 17 May 2016, which was, I believe, the first genuine instance of engagement between the IDA and [the US company] about this project, 12 days after my registration as a Connector and 11 days after the red light.”​

McInerney shared a series of emails with the arbitration hearing in which an IDA executive asked him for contact details for the US company and other details a number of days after the connection had been red lit.

The wording, he claimed in his witness statement, confirmed the lack of engagement between the IDA and the US company prior to a meeting he had arranged between them the following week.

“The email reflects the fact that…the relevant IDA executive in this instance, had never met the company before and that it was at this introductory meeting that she, and by extension the IDA, learned about [the US company]. These emails confirm that the IDA was not already engaged with the company about this project when it decided to red light the lead. On the contrary, the IDA only really learned about the project almost two weeks after the red light through a meeting which the IDA relied on me to arrange,” said McInerney.

“Disappointingly, the IDA ultimately failed to secure this project for Ireland and [the US company] ended up choosing the Netherlands as the location for its European base. I believe this was a missed opportunity for Ireland as I understood at the time that Ireland was under serious consideration…but the IDA did not capitalise on the opportunity.”

In the wider sense, no one could seriously question the overall achievements of the IDA when it comes to job creation.

But when it comes to the specific matter of its oversight of the Connect Ireland contract, the report it prepares for the Tánaiste should make for very interesting reading indeed. 

Reporting: The Irish Independent