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In 2015, RTÉ Investigates uncovered the bribery of two managers at St Vincent’s University Hospital (SVUH) in Dublin, both of whom received expensive gifts and holidays from Eurosurgical, a Dublin-based surgical supplies company.
The managers in question were immediately suspended and Health Secretary Leo Varadkar said HSE-funded hospitals would stop paying invoices to the company until investigations were completed.
However, within three weeks, well before the inquiries in question were due to close, the HSE reversed the ban on payments and actually increased spending with the firm.
According to figures released under Freedom of Information, the HSE’s purchases from Eurosurgical increased by 15% year-on-year in the six months after RTÉ Investigates uncovered the bribery of contracts manager David Byrne and his boss Ger Russell.
Byrne and Russell, who also provided confidential business information to the company, including competitor price lists, were eventually fired. And in a case unrelated to Eurosurgical, Russell was recently given a three-year suspended prison sentence for stealing from SVUH.
In a statement to RTÉ Investigates, the HSE said it was contractually bound to continue buying from Eurosurgical and that it had “found no evidence to support the allegations at this time to justify discharging the company”.
John Devitt, chief executive of Transparency International’s Irish operations, said the HSE’s continued purchases were surprising.
“It’s unbelievable [the HSE] would award new contracts to a company … that poses such a risk to the reputation of a public body, let alone the health service more generally,” he told RTÉ Investigates.
The HSE’s chief procurement officer, John Swords, told the Oireachtas Public Accounts Committee three months after the report that while he found the revelations “shocking”, the HSE had “taken all necessary steps to thoroughly investigate the incidents”.
“However, we have nothing but accusations,” he added.
So what were these “necessary steps”?
Documents released to RTÉ Investigates under Freedom of Information show that the HSE completed four internal reviews of various hospitals in connection with Eurosurgical, which found no evidence of fraud.
However, the HSE commissioned only one external investigation, which was carried out by financial consultancy Deloitte. The authors of the Deloitte report highlighted significant limitations placed on them by the HSE, in particular that the authors of the report were limited to the responses provided by Eurosurgical.
“The HSE has not asked us to review any contracts between Eurosurgical or correspondence between Eurosurgical and the hospitals named in the report … our report is limited to the responses provided by Eurosurgical,” the authors wrote.
“Had we met with the hospitals named in this report or received information or explanations from them, this may have resulted in the content of this report being different from the content currently presented,” it said.
“The idea that Deloitte felt the need to specify that we were only relying on information from one side … from Eurosurgical is completely extraordinary,” said Philip Gavin, an academic who specializes in corporate governance at University of Technology Dublin.
“It’s so surprising, especially because we know we can’t trust what’s coming out of Eurosurgical.”
Meanwhile, Mr Devitt said it was “remarkable” that Deloitte was only allowed to interview executives and directors of a company that had been the subject of allegations, comparing it to a police investigation which was only allowed to interview a suspect in a crime.
RTÉ Investigates asked the HSE why it was imposing such restrictions on the Deloitte investigation. In a statement, she did not answer that question, but said: “As this was the supplier in question, the HSE reviewed this company’s procurement and processes.”
How about St Vincent’s University Hospital? She fired her two managers who took the bribes and passed on confidential information to Eurosurgical. But it also continued to do business with the company that bribed them.
Just before the 2015 report, St Vincent’s University Hospital told RTÉ Investigates that it would be “investigating all aspects of the hospital’s relationship with the supplier company involved in the issues now raised by you”.
In early 2021, under Freedom of Information, RTÉ Investigates requested “a copy of reports produced as a result of investigations commissioned by or produced by SVUH into matters highlighted by an RTÉ Investigates broadcast on 16 July 2015 which considered Eurosurgical practices’.
The request was denied on the grounds that “records do not exist.”
However, SVUH provided RTÉ Investigates with a general report on the procurement that began after the revelations. But that report doesn’t even mention Eurosurgical.
And how about some garda investigation into Eurosurgical? A day after the RTÉ Investigates report, the Garda press office said the investigation was continuing.
Mr Varadkar even cited the garda investigation when commenting on the allegations, noting there were limits on what he could say while it was ongoing.
However, RTÉ Investigates has since learned that there was no police investigation. Rather, there were police checks, which are pre-trial proceedings.
“Inquiries have been made into the matter by the Garda National Economic Crime Bureau. No evidence of criminal activity was found,” the Garda Press Office told RTÉ Investigates.
Indeed, in a memo written ten months after the RTÉ Investigates report, the HSE’s national director of audit, Michael Flynn, stated that “we had no reason to make a formal complaint to [Garda bureau of Fraud investigation]”.
While the HSE continued and even increased business with family-run Eurosurgical following the report, the Revenue Commissioners vigorously pursued the company and its directors. Just as the Revenue was about to issue a tax claim for over €3.4m, Eurosurgical was placed into voluntary liquidation.
The liquidator subsequently brought proceedings in the High Court to disqualify the directors of Eurosurgical.
“It is quite rare for liquidators to pursue directors for disqualification,” said Professor Deirdre Ahern, a corporate governance expert at TCD’s law school.
“This has to be very, very serious behavior,” she said.
“Here the liquidator clearly looked at the sums and decided that this was a useful exercise in terms of the sums involved and also the scale and nature of the outrageous conduct.”
In ruling on the case earlier this year, High Court judge Senan Allen said Allen, Gary, Alison and Ray Kane senior, Eurosurgical directors, had used millions of euros of company cash to pay personal expenses.
In total, the judge said, “just over €13 million was robbed from the company” over a period of 11 years. The company under-declared its tax liability by around €5 million, which in turn resulted in an interest and penalty liability of a further €7 million, the judge said.
The judgment relates to company cash being used to buy gifts for procurement officials, make payments to fictitious employees linked to the Kane family, as well as payments to houses, cash purchases and to directors and other personal expenses.
“The directors failed to act in the best interests of the company … the most fundamental duty of company directors,” Prof Ahern said.
“They failed to act in the best interests of the company because they acted in their own self-interest. They were essentially extracting assets from the company,” by taking huge sums of money out of the company for personal expenses such as holidays, she added.
It was “a truly egregious breach of duty to act in the best interests of the company and of accepted standards and commercial morality,” she said.
The High Court decision also covered another twist in the history of Eurosurgical and the HSE.
After it became clear that the Revenue would seek to close the company down due to unpaid taxes, Gary, Alison and Alan Kane sold most of its business to a new company called Gemini Surgical Innovations, where they were employed.
Significantly, the judge found that this was done at an “understatement” which deprived Eurosurgical of funds to pay its tax liabilities.
Kane’s actions mean the new Bray-based company could extract value from Eurosurgical.
It “made a mockery of compliance with the tax code and the company code,” Prof Ahern said.
The judge said the transfer of Eurosurgical’s assets to Gemini Surgical Innovations had cost Eurosurgical’s creditors, including the Revenue Commissioners, more than €1.6 million and that Gary, Alison and Alan Kane “brought with them nearly three-quarters of the value of the company’s business with a view at least to preserving or replacing their jobs’.
The transfer of Eurosurgical’s business to Gemini Surgical Innovations was canceled by a High Court decision in early 2018, almost two years after the original deal.
However, this does not seem to have affected his business with the HSE, especially during the pandemic.
In the six months from 7 April to 30 September 2020, its sales to HSE-run hospitals jumped to almost €11 million – a 3,100% increase on the same period a year earlier, according to HSE figures provided to RTÉ Investigates.
During this period, Gary Kane was the sole director of Gemini Surgical Innovations. He resigned as a director shortly before he was disqualified by the Supreme Court.
The HSE told RTÉ Investigates that “due diligence was applied” in accordance with “EU and national procurement rules” when awarding business to Gemini Surgical Innovations and that “there are no grounds for this company to be excluded from HSE tenders”. .
While Gary Kane enjoyed continued success with the HSE, he had less luck with the High Court. In January, Judge Allen disqualified him as a director.
The judge said Ray Kane Sr and his children Alan, Gary and Alison were “guilty of fraud” and that “their conduct was such that they were unfit to be involved in the management of a company”.
Judge Allen imposed lengthy bans on filmmakers. Alison Kane was disqualified for almost ten years, her brothers Gary and Alan for more than 14 years and Ray Kane Sr. for 15 years.
“Usually a disqualification of anything over ten years is reserved for the most serious cases,” Mr Gavin said.
“The directors here have breached their responsibilities in many ways. They have committed fraud, breached their duties to the company and are generally just unfit for office,” he said.
“Each of these would be sufficient on its own to disqualify a director.”
RTÉ Investigates requested interviews with Ray Kane senior, who founded Eurosurgical in 1987, and his children Gary, Alison and Alan Kane, but none accepted.
We have also repeatedly asked St Vincent’s University Hospital and the HSE to provide a representative to be interviewed for this report. They refused.
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