AG Report On Campus Stadium Ireland 2002

REPORT OF THE ATTORNEY GENERAL
ON THE
AWARD OF THE OPERATOR CONTRACT
FOR THE
AQUATIC AND LEISURE CENTRE
CAMPUS STADIUM IRELAND LTD
March 2002
1
{AG's\Reports\agr250302 }
Contents
Page No.
Introduction 5
Key Dates 6
Aquatic and Leisure Centre - Chronology 8
Narrative of Events 15
Analysis 29
Annexes 45
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List of Annexes
Annex A Government Decision 25 January 2000 Memorandum for Government
Annex B Government Decision 12 July 2000 Memorandum for Government 11 July

2000 (includes Pricewaterhouse Coopers Outline design specification 28
June 2000)
Annex C Government Decision and Memorandum for Government 19 December

2000
Annex D Government Decision 23 January 2002 Memorandum for Government

December 2001
Annex E Letter dated 24 August 2000 from Keith Palmer, Waterworld (UK) Limited
to Frank Pollachi, S&P (Ireland) Limited 24 August 2000
Annex F Letter dated 9 October 2000 from S&P (Ireland) Ltd to Donagh Morgan,
CSID
Annex G PwC analysis of ownership of Waterworld (UK) Limited, participation of

Mark Potiriadis, ownership of NBGS (UK) Limited, and Bad-Schloss Inc.
with map of company connections
Annex H Manuscript spreadsheet at preliminary expression of interest stage
Annex I Pricewaterhouse Cooper internal memo, 18 December 2000
Annex J Pricewaterhouse Cooper internal memo, 19 December 2000
Annex K Fax from Dervla McCormack, PwC to Una Carmody, CSID, 20 December
2000
Annex L Extract from Articles 24 and 26 of Directive 93/37/EEC
Annex M Letter dated 11 March 2002 from Dublin Waterworld (John Moriarty) to
Paddy Teahon, CSID re Waterworld (UK) Limited
Annex N Letter dated 13 March 2002 from McCann Fitzgerald Solicitors (Kevin
Kelly) to Paddy Teahon, CSID
Annex O Letter dated 2 February 2001 from Waterworld (UK) Ltd (Roger Currie) to
Una Carmody, CSID
Annex P Kit Campbell and Associates Operational Assessment for three tenders
Annex Q Kit Campbell and Associates Written Review of tenders prepared for CSID
Contd…
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List of Annexes
Annex R Handwritten memo of a meeting of 19 December 2000
Annex S Questionnaire for Board members and replies
Annex T Questionnaire for Assessment Panel and replies
Annex U Letter dated 22 January 2001 from Waterworld (UK) Limited (Roger Currie)
to McCann Fitzgerald Solicitors
Annex V Letter of 23 August to CSID
Annex W Response to Draft Report from CSID and comments of Attorney General
Annex X Report from the board of CSID for Minister for Tourism, Sport and
Recreation
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Introduction
This report is concerned with issues arising out of the proposal to award the contract to
operate the Aquatic and Leisure Centre to Waterworld Dublin Limited.
The report is primarily concerned with issues regarding corporate governance and the legal
obligations or liabilities of the State.
This report is not concerned in any way with the underlying policy issues regarding the
building of a national stadium and sports campus at Abbotstown or with any public
controversies associated with those issues.
The report is based on material in the Attorney General’s Office’s own file and material
supplied to the Attorney General’s Office by:
• Campus Stadium Ireland Limited (CSID)

• Department of Tourism, Sport and Recreation
• Department of the Taoiseach
• PricewaterhouseCoopers (PwC)
• McCann FitzGerald Solicitors
• Office of Public Works
In addition, a written questionnaire was issued by the Attorney General’s Office to

members of both the board of CSID and the Assessment Panel which considered the bids of
the competing consortia in late 2000.
The texts of the questionnaires in question are set out at Appendix S and T respectively
together with the replies received.
It should be stressed that this report does not purport to resolve any conflicts of fact or
recollection or to pass any final judgement on the merits or demerits of the behaviour of
any individual or company.
On the contrary, the purpose of this report is, as requested by the Government, to provide it
with a analysis of the issues and to highlight some features of the matters dealt with so as to
be of assistance to the Government.
In accordance with established practice, I will not be including in the portion of the Report
which may be published any confidential advice to the Government on legal liability
arising from the events and issues referred to in the Report.
5
Key Dates
12 July 2000 Government decision for the development of the Aquatic and Leisure
Centre
28 July 2000 Advertisement by CSID in Official Journal
25 August 2000 Closing date for Expressions of Interest
9 October 2000 Closing date for receipt of Outline Bids
22 November 2000 Due diligence searches requested of PwC
15 December 2000 Closing date for detailed bids
18 December 2000 Preliminary PwC due diligence report received by CSID
19 December 2000 Rohcon/Waterworld selected as preferred bidder by Assessment
Panel
19 December 2000 Government agreed that CSID sign heads of agreement with
preferred bidder and lodge planning application
21 December 2000 Completed PwC due diligence received by CSID
21 December 2000 Letter to Rohcon, Waterworld UK and S&P Ireland stating CSID’s
intention to appoint the consortium as the preferred bidder subject to
certain conditions including financial guarantees
22 December 2000 Final date identified by CSID for lodging of planning permission
application in order to meet Special Olympics deadline
24 February 2001 Heads of agreement between CSID and preferred bidder signed
28 March 2001 Planning permission received
23 January 2002 Terms of contract approved by Government
7 February 2002 Contract between Rohcon, Waterworld UK, Dublin Waterworld and
CSID
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7 March 2002 Letter from Chairman CSID to Minister TSR explaining
circumstances surrounding selection of dormant company on 19
December 2002
The Aquatic and Leisure Centre has been the subject matter of four Memoranda for
Government on the following dates: 27 January 2000, 12 July 2000, 19 December 2000 and
23 January 2002.
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Aquatic and Leisure Centre – Chronology
1. Establishment of CSID: 25 January 2000
The Government in accepting the recommendations of the Stadium steering

Committee agreed to the establishment of a “Development entity to drive the design
and construction of the Stadium taking into account the relevant recommendations
of the feasibility study ‘A Stadium for a New Century’ ”.
2. Development of ALC Agreed: 12 July 2000
On 12 July 2000, the Government agreed to the development of the Aquatic and
Leisure Centre at the SCI site at Abbotstown. It was agreed that CSID would
advertise the request for proposals to design, build, finance, operate and maintain
the ALC. It was specified that the successful tenderer would operate the Centre for
30 years and would receive a capital contribution from CSID. The Taoiseach
obtained Government approval for a capital contribution of up to £30m recognising
that CSID would proceed with the lowest capital contribution tendered consistent
with an acceptable quality of technical capacity.
3. Invitation to Tender: 17 July 2000
CSID sent to the Official Journal of the European Communities an advertisement

for a contract to design, build, finance, operate and maintain an Aquatic and Leisure
Centre. Criteria were laid down in the advertisement, including sufficient financial
and economic standing and sufficient technical knowledge and ability to DBFOM
an Aquatic and Leisure Centre of the size, nature and complexity of the project. In
particular participants will have to demonstrate that they meet the requisite
standards in each of the areas of DBFOM and that they have the financial and
economic standing to finance a substantial part of the development.
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4. Expression of Interest: 28 August 2000
Expressions of Interest were received from 8 consortia, comprising more than

twenty companies. Those expressions of interest were assessed on Monday 28
August 2000 by a panel consisting of senior CSID and OPW personnel, with
technical and legal support. The Expressions of Interest were received from (1)
Linteum Leisure, (2) Michael McNamara & Co., (3) The Stanza Group, (4)
Takenaka, (5) Integrated Sports and Leisure, (6) Dublin International Arena Ltd, (7)
Prospero and (8) Multi-Development Corporation (MDC). The submission
indicated that a Contractor had yet to be selected.
The assessors examined all the original information furnished by the different
consortia, including financial and economic information received. In the view of
the panel of assessors five consortia qualified for the next stage.
Waterworld (UK) Ltd, was described at that stage as closely linked to one of the
world’s leading aquatic operators (Schlitterbahn) and manufacturers of leisure pool
attractions (NBGS). They outlined in their submission that the operation of the pool
at Abbotstown was well-matched to their portfolio and capability and that NBGS
would offer site planning and patented attractions. This was signed by Keith
Palmer, director of Waterworld (UK) Ltd.
5. Outline Bid Stage
The Assessment Panel of the Expression of Interest Stage (composed of Paddy

Teahon, CSID, Sean Benton, OPW, Laura Magahy, EST, and as advisors Kevin
Connolly, OPW, Kevin Kelly, McCann FitzGerald, and Una Carmody, EST)
shortlisted 5 consortia to submit Outline Bids, i.e., (1) Michael McNamara and Co.,
(2) Integrated Sports and Leisure, (3) Dublin International Arena Ltd, (4) Prospero
and (5) M.D.C.
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6. Three Outline Bids Received: 9 October 2000
Three Bids were received on foot of the Outline Bid document on 9 October 2000.
The Bids received were from (1) Waterworld (including Rohcon, S & P Architects
etc.), (2) Dublin International Arena Ltd, (D.I.A.L.) and (3) Prospero. The
Assessment Panel (CSID, OPW, ISC, Fingal County Council with technical and
legal assistance) was advised by CSID that Multi-Development Corporation BV had
withdrawn from the competition. Rohcon Ltd, replaced MDC. CSID have asserted
that this change took place prior to the consortium making an outline bid. The
replacement was accepted on the basis that the consortium would have pre-qualified
had Rohcon been party to the original consortium, and that a replacement was
allowed under EU procurement rules on that basis. CSID sought and received legal
advice to this effect.
The outline bid in respect of the consortium which now included Rohcon made it
clear that Waterworld (UK) Ltd, were closely linked to NBGS International, a US
company with many years of design, manufacturing and consulting in the waterpark
industry “the NBGS executive management team has decades of experience in
building and operating waterparks”. NBGS provided a client list which included
Disney (MGM Studios and Tokyo Disneyland) Butlins in the UK and
approximately 45 other waterparks. In addition, details were provided on the
associate company Schlitterbahn, which is owned by NBGS and their waterpark
operation.
The Assessment Panel at Outline Bid Stage consisted of Paddy Teahon, CSID, Sean
Benton, OPW, John Treacy, ISC, Laura Magahy, CSID, and David O’Connor,
Fingal County Council. At the conclusion of the Assessment Panel’s deliberations
on 11 October, it was decided to seek clarification on certain elements of the Bids
received from all three consortia. On receipt of the clarifications sought and
following a further Assessment Panel meeting on the 27 October 2000, detailed
Proposals were sought from all three consortia.
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7. Due Diligence Reports
Meanwhile, as part of normal diligence, CSID commissioned Pricewaterhouse

Coopers to carry out a detailed review of the many different companies involved in
all of the bidding consortia. These searches were requested orally on 22 November
2000 and commenced on 30 November 2000.
The design, cost etc., elements of each of the Bidder’s proposals were subject to
ongoing review by OPW and CSID together with Quantity Surveyors, Seamus
Monahan and Partners, financial advisers PwC etc., prior to receipt of Detailed
Proposals. As part of this ongoing review, two teams – Design and Cost – were
established.
8. Detailed Proposals Stage: 15 December 2000
Detailed Proposals for the design, construction, financing, operation and

maintenance of the Aquatic and Leisure Centre were received on Friday 15
December 2000 from all three Bidders viz (1) Rohcon-Waterworld (UK), (2) DIAL
and (3) Prospero.
A two day technical analysis was carried out on behalf of the Assessment Panel by
technical and financial advisors. This analysis was considered by the Assessment
Panel consisting of representatives of CSID, the OPW, Fingal County Council, the
Irish Sports Council and the National Coaching and Training Centre in Limerick.
The assessment of the Detailed Proposals included a full examination of Bills of

Quantities by Seamus Monahan and Partners, Architectural, Maintenance and
Services evaluations by OPW and Financial/Operations analyses by PwC and other
advisers from CSID.
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9. CSID alerted by PwC: 18 December 2000
CSID received a preliminary report by fax from PwC on Monday 18 December,

described as a work in progress, of its review of the companies involved in the
different consortia. CSID’s executives were now aware that Waterworld (UK) Ltd
required further investigation as it appeared to be a dormant company.
10. Decision of Assessment Panel: 19 December 2000
The Assessment Panel (including OPW representatives) met on Tuesday 19

December 2000 and decided that the proposal from the Waterworld/Rohcon
consortium merited overall top ranking; the total capital costs of the 3 proposals
were Rohcon/Waterworld £53m, DIAL £64.6m and Prospero £69.99m.
The Assessment Panel made its decision based on the criterion in the bid
documentation of “most economically advantageous proposal”. The detailed
proposal from the Rohcon/Waterworld consortium provided for a special purpose
company to be established to operate the centre. All the other bids did the same.
The proposed managers, their track record and experience, and a detailed
operational plan were included in the bid and considered by both the technical
advisors and the Assessment Panel in their deliberations.
On 7 March 2002, the Executive Chairman informed his Board that he did not
believe it necessary to inform them or the Assessment Panel at that time of the
information received about the status of Waterworld (UK), or of his judgement in
this regard.
At the same meeting on 7 March 2002, the Board considered that the Executive
Chairman should have informed them of this information and his proposed
judgement in advance. However, the Board was satisfied, on the basis of legal
advice that this issue did not impact on the integrity and validity of the award of the
contract and were satisfied that EU Procurement procedures were properly
implemented.
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11. Government Decision: 19 December 2000
On foot of a Memorandum to the Government from the Department of the

Taoiseach, it was agreed on 19 December 2000 to proceed with the development of
the ALC at a maximum cost to the Exchequer of £52.5m, that CSID should sign
Heads of Agreement with the preferred bidder and lodge a planning application for
ALC on Friday 22 December 2000. The Memo stated that it was crucial that this
deadline be met so that the target of having the Centre in place for the Special
Olympics can be reached.
(A draft of the Memo was faxed to the Department of the Taoiseach from the
Offices of CSID).
12. Further financial report by PWC: 22 December 2000
A full report by PWC of its review of the companies involved in the different
consortia was received by CSID on Thursday 21 December 2000. This confirmed
that Waterworld (UK) was a dormant company.
CSID received legal advice that, notwithstanding its “dormant” status Waterworld
(UK) Ltd, was entitled, under EU Procurement Rules to proceed as part of the bid,
provided it was in a position to satisfy CSID that it had available to it the resources
from a third party or parties on which it could rely in the performance of the
contract (if awarded).
CSID sought on 21 December 2000, unequivocal comfort from the members of the
consortium as to their financial standing.
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13. Planning Application: 22 December 2000
A Planning Application was lodged by CSID with Fingal County Council on Friday
22 December 2000.
14. Willingness to Provide a Guarantee: 7 February 2001
On 7 February 2001, CSID received a letter of comfort from Anglo Irish Bank
stating they were satisfied to provide a £3 million guarantee subject to:
(a) receiving full details of same and

(b) the facility being secured by way of a legal charge over the assets of John
Moriarty and Company.
CSID had previously received a draft parent company guarantee of Rohcon Ltd.
15. Heads of Agreement signed: 22 February 2001
Heads of Agreement were signed between CSID and Rohcon Ltd and Waterworld
(UK) on 22 February 2001.
Detailed negotiations of the terms of the contract then commenced.
16. Agreement of the Board: 12 April 2001

The Board of CSID sanctioned entering into the contract, (the Project Agreement)
with the Consortium, which was the preferred Bidder at its meeting of 12 April
2001, subject only to the approval of the Department of Tourism, Sport and
Recreation.
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Narrative of Events
The following is a account of Waterworld (UK) Ltd (the Company) and its role in the
consortium selected to design, build, finance, operate and manage the Aquatic and Leisure
Centre, with particular focus on the financial status represented by the company, the fact
and knowledge of the Company being a dormant entity and the subsequent measures taken
to ensure the dormant company had sufficient backing and to ensure that there were
sufficient guarantees to meet the requirements of the heads of agreement.
On 25 January 2000, the Government decided (S130/08/05/0001K) that the feasibility of

developing an aquatic centre as part of Sports Campus Ireland should be actively
considered by Campus and Stadium Ireland Development Ltd (CSID). Following a
benchmark option prepared by PwC the Government decided on the 12 July
(S130/08/05/0001N) to proceed with the development of the Aquatic and Leisure Centre.
Following this decision CSID placed a notice with the Official Journal of the European
Communities on 18 July 2000 (2000/S142-093359). Paragraph nine of the said notice
required that participants should demonstrate the financial and economic standing to
design, build, finance, operate and maintain the Aquatic and Leisure Centre and
demonstrate the financial and economic standing to finance a substantial part of the
development. Further, the participants were to furnish the records and information
contained in Articles 24, 26 & 27 of Council Directive 93/37/C.
One of the consortia was led by Multi-Development Corporation International BV. This
expression of interest was by letter dated 23 August 2000 and stated that the Company were
to be the operators and were “one of Europe’s leading waterpark operators with
approximately 20 years’ experience operating and managing some of the most popular and
successful resorts.” (Annex V) The architects for the consortium were S & P Architects
and a letter dated 24 August, 2000 from Mr Frank Pollacchi of S & P was enclosed. Mr
Keith Palmer, on behalf of the Company wrote expressing its interest in undertaking the
operation of the complex. This letter speaks of the Company’s “connection to one of the
world’s leading aquatic leisure operators (Schlitterbahn) and manufactures of leisure pool
15
attractions (NBGS)”. This letter was written after the Company’s name had been submitted
as part of the consortium.
An Assessment Panel consisting of Paddy Teahon (CSID), Sean Benton (OPW), Laura
Magahy (CSID), Kevin Connelly (OPW), Kevin Kelly (McCann FitzGerald), as legal
adviser, & Una Carmody (CSID) in attendance evaluated the eight expressions of interest
and short-listed five consortia to submit outline bids by 9 October, 2000. At a board
meeting of CSID on 11 September, 2000 the board were advised of the competition for the
Aquatic and Leisure Centre and the three part process involved in reaching a preferred
bidder, and that it was intended for heads of agreement with the developer to be reached by
the end of 2000.
At the outline bid stage Multi-Development Corporation BV had withdrawn and been
replaced by Rohcon Ltd. Legal advice was sought and received that a replacement in the
consortium could take place. The outline bid received was described as the “Waterworld
Consortium Outline Bid” and reiterated the link between the Company and Schlitterbahn
and NBGS.
The Assessment Panel deliberated on 11 October 2000 and decided that clarification of the
three outline bids received should be sought.
At a board meeting of CSID on 12 October 2000 an Aquatic and Leisure Centre update was
circulated to the board.
The next stage was the meeting of the Assessment Panel on 27 October 2000 at which a
report from Kit Campbell and Associates was circulated which reviewed the three
remaining consortia, Dublin International Arena Ltd, Prospero and the Company. The
Report makes mention of two relevant factors,
1) That “CSID should be satisfied that S & P is financially stable”, and

2) Kit Campbell Associates had no knowledge of NBGS.
Subsequently, the Assessment Panel determined that the detailed proposals by the three
consortia were to be received by 15 December 2000 and, in the interim, design and cost
16
review teams were established which met with representatives from the three consortia
throughout November and December 2000. CSID commissioned PwC to carry out a
review of the different companies involved in each of the bidding consortia. This
commenced on the 30 November 2000. At a board meeting of CSID on 14 December 2000
the board was again updated in respect of the Aquatic and Leisure Centre and was informed
that the Assessment Panel would meet on 19 December 2000 and that following this
assessment the Government would be asked to agree to CSID signing heads of agreement
with the preferred bidder. It was outlined to the board that subject to a positive
Government decision, a planning application for the Aquatic and Leisure Centre would be
lodged on 22 December 2000 and that this deadline was crucial so that the target of having
the Aquatic and Leisure Centre completed for the Special Olympics in 2003 could be
achieved.
CSID on 15 December 2000 received the final bid from the Waterworld Consortium which
again mentioned the Company’s link with Schlitterbahn and NBGS. The final bid also
mentioned the Company’s two representatives in Ireland being Kieran Rutledge and Liam
Bohan who were to be involved in the management of the Centre.
Monday, 18 December 2000

Meetings to review the bids took place. During this CSID received from PwC information
on the various companies involved in the consortia. The information revealed that
Waterworld UK was a dormant company and that “the lack of material information on the
enterprise has resulted in searches to determine if the Directors [of the Company] hold
directorships in other companies”. A business report was faxed by Experian Business Line
to PwC on 18 December 2000 at 5.30pm. The business report showed Mr Roger Currie
holding directorships in Waterworld UK and Royson Ltd whilst Mr Keith Palmer held
directorships in Waterworld UK and NBGS UK Ltd. The Experian business report showed
Waterworld UK as being incorporated on 8 May 1997 and with issued capital of £4 sterling
with the four £1 shares being held by the Ealing Trading Corporation. As the Company
had not traded in the accounting year up to 31 May 1999, there was insufficient basis to
assign it a credit figure according to the business report. The business report further
outlined that NBGS UK Ltd had been incorporated on 5 January 1998, has issued capital of
£100 sterling and with a negative net worth of £67,738 sterling. The parent company of
NBGS UK Ltd was stated as being NBGS International Inc and that the balance sheet
17
indicated “ . . . it is inadvisable to proceed with unsecured dealings without prior referral to
the parent company.” Finally, the Business Report gave details in respect of S & P Ltd
which had issued capital of £110 sterling and a net worth of £1164 sterling but that “ . . . It
is suggested that interested parties should not proceed with unsecured dealings without first
obtaining a directors guarantee”.
It would seem that this business report was not available to PwC until late on Monday 18
December but in an internal PwC memo dated 18 December 2000, Aidan Walsh of PwC
highlighted to Una Carmody of CSID that Waterworld UK “ . . .did not identify who
specifically the contracting party would be and highlighted to her that Waterworld UK Ltd
is a £4 company which has not commenced trading according to their last annual return.”
Mr Walsh further stated “ . . . I stressed to [Una Carmody] that it would be essential to
properly understand how they would finance the construction, manage it and deal with all
the necessary operating risks.” Mr Walsh then spoke of going through the draft heads of
agreement with Una Carmody and Kevin Kelly (of McCann FitzGerald, Solicitors) again
stressing to both of them that in the event that the special purpose vehicle not having any
substantive equity in it in reality, [the special purpose vehicle] would turn to CSID in the
event of significant problems or unforeseen costs. Mr Walsh’s memo mentions a meeting
during the Monday afternoon with Una Carmody, Kevin Kelly and including
representatives of the Waterworld consortium. The proposed new company to operate the
Aquatic and Leisure Centre, Waterworld Ireland Ltd, would have a share capital of
IR£500,000. It appears that Keith Palmer of Waterworld UK outlined that Kieran Rutledge
and Liam Bohan would carry the responsibility for day to day operation. At this meeting,
Mr Palmer outlined the position between Waterworld UK and NBGS International.
Tuesday, 19 December 2000

An Assessment Panel consisting of Paddy Teahon, Laura Magahy, David O’Connor (Fingal
Co. Council), Sean Benton (OPW), John Treacy and Pat Duffy (NCTC Limerick) met on
19 December 2000. The following advisers also attended: Keith Milson (OPW), Una
Carmody, Kit Campbell, Sean Boyle (Seamus Monahan & Partners), Kevin Connelly
18
(OPW), Aidan Walsh (PwC), Dervla McCormack (PwC), both in attendance as financial
advisers, Kieran Magahon (OPW), and Kevin Kelly, in attendance as legal adviser, met and
were given presentations on the various elements of the bids made by the three consortia.
Kit Campbell, in a review of the Waterworld consortium commented “ This is a design led
scheme with long term operation to be entrusted to a new company which will be set up for
the purpose. This company is unlikely to have significant reserves in the event of income
shortfall, creating considerable risk for the Government which should ideally be minimised
by a bond from the operating company or consortium”. Whilst the minutes of the
Assessment Panel make no mention of discussion regarding the resources of Waterworld
UK, a memo compiled by Aidan Walsh states “ . . .Paddy Teahon commented during the
course of the meeting that the Waterworld proposal was not the best funded and that there
were issues to be resolved, particularly in this area with them.” Further, a hand written note
of the meeting (from the PwC papers) outlines the following:
“PT - Waterworld appears favourable - could then go back to other two and ask them both
to keep their bids open.
SB - Most likely they will lose interest.
PT - Nervousness/slight concern about Waterworld/Rohcon backing and their ability to
have deep pockets.”
After the Assessment Panel meeting Laura Magahy met with Kevin Kelly and Aidan Walsh
and discussed the equity position in the Waterworld consortium and that it had not been
properly formed yet. Kevin Kelly and Aidan Walsh agreed to work with Una Carmody to
draft a letter to the Company seeking clarification on the parent company guarantee,
presentation of parent company financial statements, details of their plans to have adequate
banking in place and direct confirmation from Ascon/Rohcon that they are willing to enter
a fixed price design and build contract with the Waterworld special purpose vehicle. This
meeting between Laura Magahy, Aidan Walsh and Kevin Kelly is detailed in a PwC memo
which goes on to indicate that Laura Magahy commented on the situation whereby they
were now faced with a “contracting entity that has no substance.” Kevin Kelly apparently
remarked “It would be normal to enter into contractual arrangements with a special purpose
vehicle set up for the purposes of this particular contract and that these would have been
19
backed by necessary parent company guarantees and an adequate amount of equity in the
company.” As it was felt these matters had to be resolved with the consortium, a meeting
for Thursday, 21 December 2000, was targeted between the consortium and Una Carmody.
During the morning of 19 December 2000 a fax was received by CSID from the Company
which set out that NBGS International had been contacted by Mr Palmer and “[NBGS
International] have confirmed their support for the project.” This fax further says Rohcon
would be bonding the construction part of the project and that Waterworld Ireland would
capitalise at £500,000. Further indication that the backing for the Company was discussed
is an e-mail from McCann FitzGerald to Una Carmody enclosing a draft parent company
guarantee.
Finally, by a letter sent on 19 December 2000 to the Company, further clarification was
sought and confirmation on various matters including that the obligations of the special
purpose company would be guaranteed by the consortium members (or parent organisations
as approved by CSID) in the format of the draft guarantee which was attached (presumably
the parent guarantee e-mailed by McCann FitzGerald); that CSID required satisfactory
financial information of the standing of NBGS in the United States and their agreement to
guarantee Waterworld for the purpose of operating; and finally that the Company would
furnish satisfactory details for the financing of any cash flow required and would include a
letter from the Company’s bank that payments would be funded. The Company was
informed that the heads of agreement would be finalised on Thursday, 21 December 2000.
A copy of this letter from CSID to the Company was copied to S & P Architects, Rohcon
Ltd and Sean Benton at the OPW. By Government Decision S180/29/20/0001 of 19
December it was decided to proceed with the Aquatic and Leisure Centre with the
Company being accepted as the preferred bidder.
20 December 2000
PwC faxed further corporate information in respect of S & P (Ireland) Ltd, Mark Potiriadis
Ltd (Mark Potiriadis was the principal of S & P Architects) and NBGS International Inc.
This fax went on to state that “initial indications are that the financial information available
20
on NBGS will be limited and consequently you should continue to request detailed
financial information from the Waterworld consortium.”
21 December 2000
PwC, in essence closing the request from CSID on 22 November 2000 to review the bona
fides of the corporate parties involved in the consortia, faxed to Laura Magahy, the various
company searches, business reports and other information which had been received by PwC
on 18 and 19 December 2000. This documentation also seems to have included details on
the ownership on the Company and details of the corporate bodies behind and connected to
the company and NBGS. Thereafter, heads of agreement were signed on 21 December
2000 whereby each member of the consortium was to provide to CSID a guarantee of the
members obligations to be executed by the parent company or organisation approved by
CSID along with satisfactory financial information of the standing of the parent company
which information was to be provided by no later than 23 January 2001, upon compliance
of which CSID would appoint the consortium as the preferred bidder for the contract to
design, build, finance, operate and maintain the Aquatic and Leisure Centre.
22 December 2000
Further fax from PwC to Una Carmody marked “Urgent” regarding NBGS international
Inc. which showed that for the last available fiscal year December 31st 1993 NBGS had a
net profit of approximately $66,000 and sales just over $5 million. Partial estimates dated 2
November 2000 had been submitted showing sales of $25 million for 1999.
2001
On 11 January 2001 the board of CSID met and were informed that the contract for the
pool was to be finalised by the end of January and the financial proposals for the pool were
outlined to the board. In the handwritten manuscripts of the board meeting of 11 January
2001 details are given of a discussion by the board on the decision-making process which
would appear to be in the context of the decision in respect of the Aquatic and Leisure
Centre with the remark by Tom Kiernan “what if the pool was £70 million are you left with
fait accompli”.
21
On 15 January 2001, Waterworld UK were written to by McCann FitzGerald who referred
to the letter of intent dated 21 December 2000 and that CSID was anxious to receive the
required information and the Company were requested to immediately forward same.
Waterworld UK responded on 16 January confirming that NBGS International USA would
enter into the parent company guarantees for the Company and NBGS UK and enclosed
profit and loss accounts for NBGS International to year end 30 November 2000 (showing
net profit of just over $1/2 million), a balance sheet for NBGS International, a letter dated
10 January 2001 from NBGS International in which they confirm they would act as
guarantors along with a proposed alternative parent company guarantee. This material was
forwarded on to CSID and on 17 January Una Carmody e-mailed Kevin Kelly asking if he
had any comments specifically on the proposed parent company guarantee. The material
received from the company was also forwarded to PwC where Dervla McCormack of PwC
compiled a review on same. In conclusion PwC felt that given the large liability in respect
of inter-company payables in respect of NBGS International it would be important to
ascertain that NBGS International was the ultimate holding company within the group, as it
would be the ultimate holding company who should be giving the guarantee. PwC also
pointed out that NBGS should provide financial statements for the three years prior to 2000
which should be signed by an auditor, something which the accounts as furnished by the
company on 16 January did not include. The PwC comments were forwarded on to Kevin
Kelly.
McCann FitzGerald faxed the Company on 19 January seeking further written clarification
from NBGS including that it was the ultimate holding company of group, that it would
provide accounts for a minimum of two and preferably three years and finally enquiring
whether NBGS International had any projections/assumptions in respect of operating
deficits which might arise and how they would be met by them.
In a fax from CSID to Waterworld UK dated 22 January the Company were again asked to
provide financial details including confirmation that the ultimate holding company making
up NBGS, Schlitterbahn and Waterworld were the guarantors of the Company’s
obligations, that the parent company guarantee in the form attached to the letter of intent
would be signed containing clauses 2 and 3, as these were especially critical in
circumstances where the Company had no share capital, a letter from the group’s bankers
22
stating that they were prepared to advance credit for operational and other liabilities, and
finally details of the operational bond to be taken out.
On the 22 January CSID received from Rohcon Ltd the information sought at item 3 of the
letter of intent including a guarantee by HBG Ascon Ltd, the parent company of Rohcon
Ltd.
Further, a fax received after the close of business on the 22 January from Waterworld UK
to McCann FitzGerald set out that NBGS International was the parent company of the
named businesses involved in negotiation with CSID and was the ultimate holding
company. It offered the required guarantees, that the request for additional financial
information from CSID had been forwarded to NBGS International and that a purpose
made company, Waterworld Ireland, was intended to be formed to operate the aquatic
centre and that this company would be capitalised to £1/2 million. This letter from the
company, signed by Roger Currie, director of Waterworld (UK) Ltd, enclosed details in
respect of Mr Currie and Keith Palmer. A copy of this letter from the company was
forwarded by Kevin Kelly to Una Carmody, Laura Magahy and Paddy Teahon.
On the 26 January Kevin Kelly e-mailed Paddy Teahon and Laura Magahy with the draft
heads of agreement with the comment that PwC should advise on the financial obligations
implementation schedule for the Company but that if satisfactory guarantees were in place
the implementation schedule might not be necessary.
An update was received from the Company on 29 January by Una Carmody giving the
updated position in respect of the documentation sought and on 30 January a further fax
from the company included a draft letter from Chase Bank to CSID.
However, by letter dated 2 February to Una Carmody the Company set out that “taking into
account the on-going issues arising from the heads of agreement and the yet as unknown
implications of the lease, NBGS is unable to provide the various guarantees and securities
in the form and content currently required by CSID.” The letter further indicated that given
the level of operating return being indicated the degree of risk and security being requested
was not justified. The letter refers to investigations of other models as to how a viable
operation could be secured. Then on 7 February the Company wrote to Una Carmody at
23
CSID referring to “our discussions on providing an alternative and equivalent form of
guarantee to expedite the current situation, I can advise that we have secured a direct £3
million letter of guarantee, raised through the Anglo Irish Bank.” The Company was
making arrangements for the bank’s letter to be available at the next Thursday’s meeting.
This letter ended that as there had been difficulties in registering the preferred name of
Waterworld (Dublin) Ltd. A shelf company, Tearton Buildings Ltd had been purchased
and name would be changed to Waterworld Operations (Dublin) Ltd.
On 7 February 2001 a letter addressed to Mr John Moriarty from the Anglo Irish Bank
indicated that the bank on request and subject to receiving full details was satisfied to
provided a £3 million guarantee to Waterworld UK Ltd., secured by way of a legal charge
over the assets of John Moriarty & Co. which the bank was satisfied were available at that
time. This letter was forwarded to Kevin Kelly on 14 February.
The next relevant correspondence is a letter of 2 March to Kieran Rutledge c/o Tralee
Aquadome mentioning the fact of the heads of agreement being signed (which was on 24
February 2001) but referring to the “critical issues which remain to be resolved” including
the guarantee structure to be put in place by Dublin Waterworld Ltd to satisfy the
requirements of CSID and looking forward to receiving proposals on this structure. By an
undated reply Kieran Rutledge set out details concerning Dublin Waterworld Ltd and in
respect of the guarantee the directors of Dublin Waterworld Ltd., having considered the
matter in detail, were suggesting “that in lieu of this guarantee Dublin Waterworld Ltd will
commit a sum of £1.25 million to cover the cost of the consortium contribution (£500,000)
and estimated pre-opening costs of £750,000.” A hand written note on this letter states that
John Moriarty was contacted on 29 March and he was to revert with new proposal.
On 10 April 2001 a letter was sent to Una Carmody by John Moriarty enclosing a draft
guarantee from the Anglo Irish Bank which stated that Anglo Irish Bank will forward
£250,000 to Waterworld Dublin on demand from Waterworld Dublin or CSID. The
guarantee would be secured on the assets of Waterworld Dublin or other Security provided
by Waterworld Dublin or it’s directors. John Moriarty again wrote to Una Carmody on 12
April following a meeting the day before, where in it was felt that with regard to the draft
guarantee that the wording was appropriate and there would be no increase in the amount.
24
In a relatively detailed e-mailed sent by Kevin Kelly to Una Carmody on 11 April, the
security and bond position with the Company were outlined with Mr Kelly concluding that
he “cannot recommend the arrangement suggested by Waterworld (on the guarantee and
performance bond) and it is not one which is provided for under the heads of agreement or
indeed under the draft project agreement.”
A board meeting of CSID on 12 April 2001 was furnished with a draft contract for the
Aquatic and Leisure Centre with the board sanctioning entering into contract for the
design, build, finance, operation and maintenance of the pool subject to the approval of the
DTSR.
On 18 April Una Carmody faxed Kevin Kelly comments made by Aidan Walsh at PwC
(dated 10 April) on the draft agreements. Aidan Walsh stated “is not clear to me how any
risks associated with the commissioning of the Aquatic and Leisure Centre will rest with
the bidding consortium.” The concerns of PwC were set out in a letter to Una Carmody on
the 19 April stating in light of the low level of equity in Waterworld Ireland the amount of
any guarantee needed to be sufficient to cover operating losses and the cost of any renewals
and with a guarantee level of IR£250,000 would cover approximately 2 months’ operating
costs. PwC were of the view that a guarantee be not less than 6 months operating costs,
though no comfort could be given that this amount would be adequate. A suggestion was
made that the amount of the third party security could be reduced over time as track record
and accumulated reserves were built up. A hand written note by Una Carmody on this
letter states that she had asked Dublin Waterworld “for new guarantees etc based on this
letter 24/4/01” Also on 24 April CSID wrote to the two unsuccessful consortia for the
Aquatic and Leisure Centre indicating that the four month period of keeping their bids open
had expired and thanking them for their co-operation.
On 25 April Kevin Kelly dealt with Aidan Walsh’s e-mailed comments of 10 April 2001.
Mr Kelly set out in this letter the interplay between the operational bond on which CSID
could rely to make good any default by the operator and further the guarantee from Anglo
Irish Bank being another source for CSID to make good any financial loss associated with
default by the operator as long as such guarantee were directed to CSID. Mr, Kelly felt the
25
position should be clarified in respect of the cover in place for CSID vis-à-vis the operator
and whether or not the guarantee could be drawn down by CSID in the first instance or
simply was it in the nature of a facility for the operator.
On 3 May 2001 CSID wrote to John Moriarty reiterating the obligation under the heads of
agreement for Dublin Waterworld to provide guarantee documentation along with, inter
alia, confirmation from the bank on the level of the guarantee and the bank’s willingness to
provide it. John Moriarty faxed Una Carmody on 4 May enclosing a letter from the Anglo
Irish Bank and his accountant where-by a guarantee of IR£360,000 along with a statement
by Anglo Irish Bank that Dublin Waterworld will be in a position to meet it’s financial
obligations.
PwC e-mailed Una Carmody on 16 May 2001 having reviewed the documentation in which
they stated that they understood the guarantee was to be in lieu of paid up share capital and
that in the circumstances the guarantee should remain until the share capital reaches the
amount of the guarantee or until such time as the retained reserves of the operator were
adequate to meet the ongoing requirements of the operator. A further e-mail to Una
Carmody on 24 May 2001 stated that Dervla McCormack and Aidan Walsh had spoken
with Kevin Kelly with their comments on the guarantee and that they had been taken on
board. Kevin Kelly in a letter of 25 May set out his advices on the documentation and the
options available. On 7 June 2001 Kevin Kelly wrote to Ronan Daly Jermyn, Solicitors for
the Anglo Irish Bank, enclosing a draft revised guarantee which was to be on a reducing
basis and in the amount of IR£360,000.
At a board meeting of CSID on 11 October, 2001 the board were advised that the contract
for the pool was close to finalisation though satisfactory resolution of the joint and several
liability between the contractor and operator was required. Laura Magahy was concerned
that the contract had not been executed and the project was proceeding on the basis of a
letter of intent, which had been extended, and that there was an associated risk as a
construction bond was not yet in place. A letter was sent to John Moriarty on 24 October
2001 regarding the resolution of the outstanding issues and intimating the intention for the
contract to go to Government on 1 November. In a fax from CSID of 25 October to John
26
Moriarty proposed amendments to the project agreement were set out including a joint and
several guarantee between Rochan Ltd and John Moriarty for a five year period from the
date of the granting of the lease, such guarantee being capped at IR£850,000. Further,
Dublin Waterworld Ltd was to pay IR£500,000 to CSID on the granting of the lease with
such payment deferred for five years from that date and these arrangements were to be put
in place for the first five years instead of the operators bond of IR£1 million.
At the board meeting of 9 November, 2001 it was outlined that the work was still
proceeding under the letter of intent and that the contract negotiations had re-opened owing
to the instance of DTSR and the Office of the Attorney General that a joint and several
liability be included in the contract.
The draft minutes of the board meeting of 4 February 2002 do not refer to the contract for
the Aquatic Centre but a further amendment to these draft minutes was circulated to the
members of the board subsequent to the meeting. The amendment noted that the contract
for the Aquatic and Leisure Centre had been approved by Government on 23 January 2002
and outlined that a measure of joint and several liability rested with the contractor and
operator for the operator’s obligations with the said liability being IR£250,000 until
practical completion rising to IR£750,000 in the first year of operation and thereafter falling
by IR£150,000 each year until the end of the fifth year. The contractor’s liability for the
operator’s obligations expires after five years after practical completion. Further, a
personal guarantees of John Moriarty on the signing of the project agreement in favour of
CSID for the operator’s obligations was capped at IR£250,000. Finally on the execution of
the lease, the operator (Dublin Waterworld Ltd) was to furnish a guarantee in the amount of
IR£750,000 again falling by IR£150,000 each subsequent year. It was stated that the
guarantees of John Moriarty and Rohcon’s parent company were to be furnished at the time
of the project agreement. Some members of the board have raised objections to the text of
the amendment as not reflecting the discussion at the meeting on 4 February and the matter
27
remains unresolved. The manuscript note kept by the Secretary to CSID records the
following:
"C Government cleared contract for Pool. Terms of guarantee was £750,000 issue
is if cl be read as £1.5m In touch with Dept. whether letter of clarification.
LM Read out clause 77"
Finally, there is a letter dated 5 March 2002 from NBGS wherein it states that it remained
involved in the project through NBGS UK and that it continued to endorse and support
Dublin Waterworld/Waterworld UK.
28
Analysis
Corporate structure of CSID
CSID is a private company formed under the Companies Acts and limited by shares. Its
shareholders are the Taoiseach, the Minister for Finance and the Minister for Tourism,
Sport and Recreation. The only member of the board who has executive functions is the
Executive Chairperson, Mr Paddy Teahon.
Function of Assessment Panel

Mr Paddy Teahon explained the function of the Assessment Panel in his letter, dated 7
March 2002, to the Minister for Tourism, Sport and Recreation as follows:
“The Assessment Panels at Outline Bid and Detailed Proposal stage were convened
to assess the quality of the bids under the criteria set out, not the financial and
economic standing of the consortia and their members. That assessment had been
carried out at pre-qualification stage. The quality of the bids concerned itself with
the design merits, building merits, operational merits, financial and maintenance
proposals for the Aquatic and Leisure Centre. The bid received at Detailed
Proposal stage from the consortium made up of Rohcon Ltd. and Waterworld (UK)
Ltd. provided for a company to be set up specifically to run the Aquatic and Leisure
Centre. All of the Bids received provided for the establishment of similar special
purpose companies. The Bid from the successful consortium named the individuals
who would manage the Aquatic and Leisure Centre, and outlined their track record.
The company has been set up as provided for in the Bid with the named
management as Directors. That company is Dublin Waterworld Ltd.”
Special Olympics
In order to have the Aquatic and Leisure Centre available for the Special Olympics in 2003
there were certain absolute time constraints for all phases of the project which had to be
met. In particular, there was a requirement to have the designs finalised and the planning
application lodged by 22 December 2002.
29
Requirements specified in the advertisement for tenders – “Financial and economic
standing” and “technical knowledge and ability”
Persons tendering were required to demonstrate that they had “financial and economic
standing and the technical knowledge and ability to design, build, finance, operate and
maintain” the Aquatic and Leisure Centre. Participants had to show a track record for
similar projects. Participants were required to provide financial and other documentation as
set out in Council Directive 93/37/EEC.
Information supplied in respect of Waterworld

Waterworld indicated that they had a connection with “one of the world’s leading aquatic
leisure operators (Schlitterbahn) and manufacturers of leisure pool attractions (NGBS)”. In
its initial letter of 23 August 2000 MDC, the predecessors of Rohcon wrote to Donagh
Morgan, CSID Secretary, stating that Waterworld UK Limited was “one of Europe’s
leading water park operators with approximately 20 years’ experience operating and
managing some of the most popular and successful resorts. Their philosophy is to maintain
and improve their place in the market by constantly seeking creative and innovative ways to
have fun.” (Annex V)
A claim was made in material submitted by the consortium that “designated operators for
the new aquatic leisure centre in the north of Dublin currently being designed and for a
similar aquatic centre in Southport, currently under construction. (Annex E) No attempt
appears to have been made to examine or verify the information supplied on the Southport
project.
S&P Architects described Waterworld (UK) Ltd as “the UK company of one of the world’s
leading waterpark operators with approximately 20 years’ experience operating and
managing some of the most popular and successful resorts. Their philosophy is to maintain
and improve their place in the market by constantly seeking creative and innovative ways to
have fun.” (Annex F)
From these assertions it is clear that an attempt was made to foster in the minds of CSID the
impression, during the early stages of the process, that Waterworld (UK) Limited was itself
a leading waterpark operator with approximately 20 years experience. (Annex V) No due
diligence searches were made at this stage.
30
However, members of the Assessment Panel were aware of the reputation of Schlitterbahn
and NGBS. This would appear to be the only assessment of Waterworld UK at the pre-
qualification stage referred to by Mr Teahon in his letter of 7 March 2002 quoted above.
MDC, the lead contractor at the pre-qualification stage and later, Rohcon (who substituted
for MDC), did supply information sufficient to satisfy the qualification criteria concerning
themselves.
Contracting Strategy
The strategy adopted for the Aquatic and Leisure Centre was for a design, build, finance,
operate and maintain contract. This is the same strategy as was proposed for the National
Stadium at Abbotstown and which appeared in the advertisement of the tender for that
project. The High-Point Rendel Report, which has already been submitted to Cabinet,
discusses the contracting strategy for the Stadium at pages 12 to 15. Paragraph 27 of the
report, using the term DBFO rather than DBFOM, says
In principle a DBFO approach is a possible approach for this type of facility.

However, in the absence of a detailed business model it would be difficult to form
an objective view. The judgement on the realisable benefits of a DBFO strategy
will be determined by a number of factors namely:
• the level of private funding secured;
• the risk allocation between the parties;
• the control and influence the client has retained; and
• the quality of the end development.
As the DBFO structure is still embryonic it is difficult to take a view on these issues.
However it is already clear that the level of private sector funding available is likely
to be relatively small which gives rise to the questioning of the DBFO strategy.
Some of the problems arising from the choice of the DBFO/DBFOM strategy for the
Aquatic and Leisure Centre are referred to in the reports from Kit Campbell & Associates
and some extracts are quoted later in the report. Once the strategy was set out in the
advertisement it became in one sense a strait-jacket for the tendering procedure and resulted
in a number of practical and legal problems for the process.
31
However, it is important to emphasise that this analysis is not suggesting that the decision
of the Assessment Panel to select Rohcon/Waterworld in preference to the other two
bidders who submitted detailed bids was unreasonable. For reasons concerned with price
and design, the preferred bid was obviously clearly ahead of the other contenders.
The operation and maintenance aspect of the bid, however, appears to have received far
from adequate attention at the Assessment Stage .
PricewaterhouseCoopers’ due diligence searches

No steps were taken to check the credentials of any of the bidders until a request was made
by CSID to PwC on or about 22 November 2000 who commenced their review work on 30
November 2000. The preliminary information from the searches was made available to
CSID on 18 December 2000, on the eve of the final meeting of the Assessment Panel when
they were to choose the preferred bidder. These searches disclosed for the first time that
Waterworld UK was a dormant company which had never traded and whose share capital
was £4 sterling. As a result of enquiries made for the purposes of this Report, I understand
that the following members of the Assessment Panel – Mr Sean Benton, Mr John Tracey,
Mr David O’Connor, Mr Pat Duffy – were not made aware of this information. With the
exception of Mr Paddy Teahon, Executive Chairperson of CSID, no member of the board
of CSID was made aware of the information.
On 21 December 2000, PwC provided an analysis of the ownership of Waterworld UK Ltd,

the participation of Mark Potiriadis of S & P, the ownership of NBGS UK Ltd and Bad-
Schloss Inc, which trades under the name Schlitterbahn. Attached to that analysis was a
diagram showing a connection between Waterworld UK Ltd and NBGS UK Ltd in the form
of a shared director, Mr Keith Palmer. Mark Potiriadis, a principal in S&P Ltd, the
architects in the consortium, had acted as chairman of Waterworld UK Ltd. (Annex G)
The map at Annex G shows Ealing Trading, British Virgin Islands as the 100% owner of
Waterworld (UK) Ltd. When enquiries were made of PwC for the purposes of this Report
they said that it was not possible to identify the owners of Ealing Trading because it is not
possible to obtain ownership details of companies registered in the British Virgin Islands.
32
There does not appear, from material furnished to me, to be any closer legal link between
Waterworld UK Ltd and NBGS.
In a letter dated 22 January 2001 from Roger Currie, Director, Waterworld (UK) Ltd to
McCann FitzGerald (Annex U) the following statement appears:
NBGS International is one of a number of sister companies owned by the Henry

Family. A Statement to this effect was issued to the Client at the meetings in Dublin
in December 2000 and was resent last week. There is no ultimate Holding Company
for the group. NBGS International is the parent company of the named business
involved in negotiation with CSID and for these purposes it is the ultimate holding
company offering the required guarantees.
No attempt appears to have been made to clarify or verify Mr Currie’s suggestion that
NGBS was a parent company.
It seems from the map of the companies at Annex G that the statement that “NBGS
International is the parent company of the named business involved in negotiation with
CSID and for these purposes it is the ultimate holding company offering the required
guarantees” is unclear and ambiguous.
An implication of the letter set out at Annex M is that the suggestion in the letter at Annex
U that Waterworld (UK) Ltd was beneficially owned by NBGS is incorrect since the two
named directors now appear free to make a decision to wind up the company and to award
its proposed Irish shareholding to themselves personally.
Later in Annex U, Mr Currie’s curriculum vitae (furnished to CSID in January 2001),

describes Waterworld (UK) Ltd as:
“formed to provide the operating entity the client required [in the Southport Ocean Plaza
Project] as a partnership between the UK based team and NBGS International Inc.,
acting in conjunction with their European company NBGS (UK) and their operational
sister organisation, the Schlitterbahn Waterpark”.
33
This description as a partner is at variance with claims that it had NGBS International Inc.
as a parent.
The reason given for winding up the company, namely saving several hundred pounds for
annual costs and fees, is hard to reconcile with earlier claims that Waterworld (UK) Ltd
was part of or the UK arm of a very successful international conglomerate.
It is evident from a manuscript spreadsheet at the preliminary expression of interest stage

that CSID believed Schlitterbahn and NBGS to be the “parent company”. That spreadsheet
is Annex H.
At Annex I, the reader will find a memorandum dated 18 December 2000 by Aidan Walsh
of PricewaterhouseCoopers (which deals with events on Monday, 18 December and
Tuesday, 19 December 2000), a further file dated 19 December 2000, (Annex J) and a fax
from Dervla McCormack of PwC to CSID dated 20 December 2000 (Annex K).
It is clear from the memoranda of the meeting prepared by PwC that the dangers arising
from the “shelf company” status of Waterworld UK Ltd were extensively discussed and the
shortcomings had been noted.
The memorandum of 19 December 2000 records a conversation between Kevin Kelly,

Laura Magahy and Aidan Walsh in which Ms Magahy asked Mr Walsh and Mr Kelly how
they had found themselves in a situation where they were now faced with a “contracting
entity that has no substance”. In view of these dealings, it is very difficult to understand
how the Assessment Panel and the Government were not felt by those with executive
functions in CSID to be bodies entitled to be informed of the true situation regarding
Waterworld UK Ltd, especially when Mr Teahon had the opportunity to brief orally
members of the Government on 19 December 2000.
At the time that the Government considered the matter, it would appear from Mr Walsh’s
memo that Kieran Rutledge and Liam Bohan were to share only a minority interest in the
company of between 5% and 10% and that the company itself would have a share capital of
£500,000.
34
Legal advice concerning “dormancy”
Mr Paddy Teahon, Executive Chairperson of CSID wrote to the Minister for Tourism,
Sport and Recreation on 7 March 2002 stating:
“CSID received legal advice that, notwithstanding its “dormant” status,
Waterworld UK Limited was entitled, under EU procurement rules to proceed as
part of the bid, provided it was in a position to satisfy CSID that it had available to
it the resources from a third party or parties on which it could rely in performance
of the contract (if awarded).”
This advice, I understand, was tendered orally by Kevin Kelly of McCann FitzGerald to Mr
Teahon. Mr Teahon did not communicate it to the other members of the Assessment Panel.
Ms Magahy was also aware of the legal advice.
While it is technically true that a dormant company could be eligible to be awarded a

contract, it is abundantly clear from the rules in the directive governing the award of such
contracts (which are set out in Annex L) that a dormant company was highly unlikely to
satisfy the financial criteria for pre-selection or selection unless it was adequately
capitalised or externally resourced or was otherwise made the subject of very substantial
external guarantees or indemnities.
At the very least, its dormant status was a warning sign that all was not well. Bearing in
mind the claims of a 20 year successful trading history that had been made on behalf of the
company at an earlier stage in the process, the information that Waterworld UK was
dormant should have caused very serious and immediate reservations in the minds of the
Assessment Panel (had they been informed of it). This non-conformity with previous
representations would undoubtedly have been of interest to the board of CSID and to the
Government which it was expected would approve the awarding of the contract on the same
day.
Certainly, there appears to have been no good reason why the dormant status of the
Company and the inconsistency of that status with claims previously made on behalf of the
Company was not drawn to the attention of the Department of the Taoiseach or later the
35
Department of Tourism, Sport and Recreation whose Ministers were primarily accountable
in these matters to Dáil Éireann, or the attention of Government itself.
Again as a result of enquiries, I have been informed that Messrs Benton, Tracey, O’Connor
and Duffy of the Assessment Panel were not aware of the request or the content of the legal
advice. The only members Assessment Panel who were aware of the legal advice were Mr
Teahon and Ms Magahy. With the exception of Mr Teahon himself, no member of the
board of CSID were informed of the advice.
Guarantee and financial backing of the operator company

Rohcon/Waterworld’s detailed bid indicated that a company would be set up to operate the
Aquatic and Leisure Centre. The day to day management of this new company would be in
the hands of Mr Liam Bohan and Mr Kieran Rutledge who currently manage swimming
pools in Tralee. During the bid process the Waterworld consortium had represented that all
three consortium members would form a new company to operate the Aquatic and Leisure
Centre. However, only Waterworld UK participated in the formation of the new company
and ultimately only as a minority shareholder. During the course of the contract
negotiations no parent company guarantee was secured for the operation of Dublin
Waterworld. In the light of the information now available it is clear that Waterworld UK
could not give such a guarantee as Waterworld UK had no resources of its own.
On 19 December 2000, the date of the Government’s decision, CSID wrote to Waterworld
UK seeking, inter alia, for the first time, “satisfactory financial information of the standing
of NBGS in the United States (or other satisfactory party) and their agreement to guarantee
Waterworld for the purpose of operating”. This began a long correspondence between
CSID and Waterworld UK with CSID seeking this guarantee but it was never received.
Satisfactory information regarding NBGS’s financial standing was furnished. It became
clear in early 2001 that a guarantee from NBGS would not be forthcoming.
On 2 February 2001 in a letter from Waterworld UK to CSID, it was stated that “taking into
account the ongoing issues arising from the Heads of Agreement and the yet as unknown
implications of the Lease, NBGS International is unable to provide the various guarantees
and securities in the form and content currently required by CSID.” The letter went on to
36
say that “at present, the indication is the level of operating return does not justify the degree
of risk and security being requested.” Annex O
Thus, it became clear that Waterworld UK Ltd (a £4 dormant company) was not in a
position to offer any worthwhile financial guarantee for the Irish operation company and, in
addition, that it proposed to have only a very small shareholding in it.
It would appear that Mr Rutledge and/or Mr Bohan sought alternative financial backing for
the company once it became clear that Waterworld (UK) Ltd was in no position to furnish
any worthwhile “parent company” guarantees. They found alternative financial backing in
Mr John Moriarty.
On 7 February 2001, a letter of comfort from Anglo Irish Bank issued to Mr John Moriarty
stating that “on request and subject to receiving full details” a guarantee of £3,000,000 with
respect to Waterworld UK in connection with the Aquatic and Leisure Centre could “be
secured by way of a legal charge over the assets of John Moriarty & Co”. This information
was later supplied on a confidential basis to the Department of Tourism, Sport and
Recreation and to this Office by CSID. A personal guarantee of £3,000,000 was never put
in place but Mr Moriarty later negotiated that he would give a personal guarantee of
£250,000. PwC, as financial advisers to CSID, had suggested a minimum financial
guarantee of £750,000 on 19 April 2001. PwC was not convinced that £750,000 would be
adequate.
Mr John Moriarty appears to have emerged as a bona fide “white knight” in early 2001,
willing to take a majority shareholding in the operator company and to provide financial
backing in the form of guarantees. In effect, Mr Moriarty, Mr Bohan and Mr Rutledge
became 95% owners of the operator company, leaving 5% of the shareholding for
Waterworld (UK) Ltd.
No adverse inference is warranted in respect of Mr Rutledge, Mr Bohan or Mr Moriarty.

They appear to have become involved in good faith and to have negotiated in good faith
with CSID. The fact that the financial guarantees negotiated by them are of a much smaller
order than the joint and several liability originally envisaged in the DBFOM project does
not reflect adversely on them but may reflect the relative negotiating strengths of CSID and
37
the preferred bidder consortium once the construction work proceeded on the project
without having previously secured adequate financial guarantees from the original
consortium members as originally envisaged.
Proposal to wind up Waterworld (UK) Ltd

On 11 March 2002, Mr Moriarty wrote to Paddy Teahon (Annex M) informing him that
Roger Currie, apparently one of the owners of Waterworld UK had recently asked him if he
wished to purchase that company. Waterworld UK, it now appears, decided to transfer its
shares in Dublin Waterworld Ltd to Roger Currie and Keith Palmer personally. This would
make them each entitled to 2.5% of the equity of the Dublin company. Apparently Mr
Currie and Mr Palmer have now decided to wind up Waterworld UK Ltd. How they could
do so, if it were beneficially owned by an international group is entirely unclear.
By letter dated 13 March 2002, Mr Kevin Kelly of McCann FitzGerald, Solicitors, advised
that there is no change of control in the Dublin company. (Annex N) Mr Kelly advised Mr
Teahon as follows: “Despite its disposal of its shares in Dublin Waterworld, it should
remain the concern of Waterworld UK Ltd to make appropriate arrangements to ensure it
remains able to comply with its obligations under the Project Agreement.”
Kit Campbell Associates – Operational Assessment

In their Operational Assessment prepared subsequent to the final meeting of the
Assessment Panel on 19 December 2000 (Annex P) Kit Campbell Associates, Leisure
Recreation and Tourism Consultants who were employed to advise on the operation of the
project summarised the key strategic points in relation to the operational assessment of the
three tenders that are relevant to this inquiry as follows:
“The time taken to get tenders and select the “preferred bidder” has been
unrealistically short and forced CSID to take a short term perspective. Equally, the
time required to design the building and estimate its capital cost has left tenderers
relatively little time for the preparation of fully considered operational and revenue
proposals. The key risk with this building, however, is the long term. The lowest
38
estimate of operating expenditure is some #3M, giving a total operating cost over 30
years of roughly twice the capital cost at constant prices.
Each of the tenders has been driven primarily by those members of the consortia who
will be involved with the building rather than its operation and therefore tenders with
varying levels of information from different potential operators attached. There is no
significant profit element for any of the proposed operators, nor are they investing in
the complex.”
Kit Campbell had earlier made an oral presentation at the meeting on 19 December 2000.
A written review of the tenders prepared by Kit Campbell Associates for CSID for the
Assessment Panel meeting on 19 December 2000 (Annex Q) states that “[the] Waterworld
bid is architect-led and therefore the prime mover will be involved only for a limited period
with no long term commitment. Management will be by a new company, Waterworld
Ireland, (sic) to be created for the purpose by two existing Irish pool managers from
Waterworld in Tralee, with unspecified support from a UK parent with no real resources.”
The OPW representatives at the meeting of the Assessment Panel on 19 December did not
receive Kit Campbell’s report nor were they advised of the existence of such a report. They
do not have any record or recollection of an oral presentation by Kit Campbell which drew
attention to the financial standing of Waterworld (UK) Ltd. A letter of clarification
concerning this matter is included with the responses to the Assessment Panel questionnaire
at Annex T. Mr John Treacy has also clarified in a letter included in Annex T that the Kit
Campbell report was not circulated or made available to him at the meeting of 19 December
and he has no recollection of Mr Campbell quoting from a report or drawing attention to the
financial standing of Waterworld (UK) Ltd.
In additional comments furnished to CSID, Kit Campbell said of Waterworld UK Ltd:

The head office of the UK parent management company is in Sussex but it does not
have the contract to manage Horsham District Council’s pools – which were
recently tendered.
This is a designed-led scheme with long term operation to be entrusted to a new

company which will be set up for the purpose. This company is unlikely to have
39
significant reserves in the event of income shortfall, creating considerable risk for
the government which should ideally be minimised by a bond from the operating
company or consortium.
These remarks were obviously ones in which the Government (which was to consider the
matter on the same day) might have been seen to have an immediate interest.
Corporate governance
The board of CSID delegated to the Assessment Panel the function of deciding on the
preferred bidder for the Aquatic and Leisure Centre. This decision of the Assessment Panel
was to be made without any opportunity for the full board of CSID to be briefed on or to
deliberate on the preferred bidder prior to the Government taking a decision. It seems that
unease with this situation was expressed by the board and this is found in the hand written
notes relating to the board meeting held on 11 January 2001. As only two members of the
board were on the Assessment Panel, Mr Paddy Teahon and Mr John Treacy, (the latter not
attending the 11 January 2001 board meeting), and though Ms Laura Magahy was in
attendance at that board meeting, no satisfactory account of the transactions and meetings
on 18 and 19 December 2000 appears to have been given to the board.
At that stage the board ought to have been apprised of all the corporate entities which made
up the Waterworld consortium and what was going to be sought from each of them in
respect of securities and/or guarantees. Despite of the complete uncertainty during the
period 18 to 21 December, no direction was sought from the board of CSID on the question
of the relevant securities and guarantees or what might be contemplated as a replacement.
Next, whilst PwC had been requested in writing on 30 November 2000 to instigate
corporate searches, when they arrived, these were not brought to the full attention of the
Assessment Panel nor deliberated on by the Panel with their full understanding of the legal
position. Nor could there be an informed discussion of whether CSID could or should
proceed with the Company despite the fact it was dormant entity. The lack of deliberation
on the status of the Waterworld consortium by the Assessment Panel on 19 December 2000
was surprising in light of the representations made by Aidan Walsh of PwC and the fact he
had stressed the necessity to understand how the company would finance construction and
deal with operating risks.
40
The only contemporary allusion by the Assessment Panel to the financial, banking and
status of the Waterworld consortium is found in the handwritten memo of 19 December
meeting (Annex R) and the comment by Mr Paddy Teahon that the bids from the other two
consortia should remain open due to nervousness and a slight concern about the
Waterworld consortium’s backing and its ability to have deep pockets.
Clearly it was unacceptable that the results of the corporate searches and business reports
were only produced for the Assessment Panel, or at least certain members of it, during 18
and 19 December 2000 when a Government decision had to be made by the end of 19
December in order for the necessary letter of intent to be executed so that a planning
application could be launched by 22 December 2000. Consequently, if the Assessment
Panel had brought forward its deliberation by a week or so a fuller consideration might
have been achievable. Indeed, further financial documentation on the corporate entities
behind the Waterworld consortium only came to hand after the decision had been made to
proceed with the Waterworld consortium as the preferred bidder.
However embarrassing the failure of Waterworld UK Ltd as a contracting party may have
been, no excuse has been offered for failing to inform the board, the Department, or the
Government of the true situation as would be expected in the case of a semi-State or State-
sponsored company seeking major Exchequer commitment to a project. Failure to alert
those politically accountable to the true situation seems to seriously call into question the
existence of a proper relationship between the executive and the board and between the
board and its State shareholders.
It does not appear that up to 11 October 2001 any adequate discussion took place at board
level on the joint and several obligations being sought from the contractor and operator. No
adequate background information was furnished at any stage to the board as to why a parent
company guarantee was not forthcoming from NBGS, how and why Anglo Irish Bank had
become involved along with Mr John Moriarty and that notwithstanding the provisions of
the letter of intent and the parent company guarantee therein, the security and guarantee
position were being met from the alternate sources referred to.
41
The effect of what transpired between October and December of 2000 was, in large
measure, that a contract involving formal public procurement procedures for a design,
build, finance, operate and maintain project was reduced to a design and build project with
very limited effective obligations on the part of the winning consortium to operate or
maintain the centre once constructed.
These limitations arose from the following factors:

• A decision made to excuse the consortium members from joint and several liability in
respect of each other’s obligations;
• A decision made to award the contract to a consortium in which the potentially onerous
operation 30 year obligations fell to be discharged by a company with little or no
internal resources or external backing.
• The commencement of construction of the Aquatic and Leisure Centre at a time when
no firm agreement or understanding existed and no contract had been executed in
relation to ongoing liability and guarantees for operation and maintenance of the Centre
over the envisaged 30 year period.
This mutation of the contract as originally approved by the Government from design, build,
finance, operate and maintain into design and build with very limited operational
obligations was a matter on which the board of the company and the Government which
had sanctioned the original project clearly ought to have been kept fully and punctually
informed. Instead, the critical Government decision of 19 December 2000 was allowed to
proceed at a time when information in the possession of some of those carrying out the
executive functions of CSID was not disclosed to those making that decision.
The Department of Finance published a code of practice for the Governance of State
Bodies. The Code should arguably apply to CSID. In Appendix A to the Code of Practice
there is a framework code of best practice for the corporate governance of State bodies.
• In section 1 it is suggested that there should be a formal schedule of matters specifically
reserved to the board of the body for decision, to ensure that the direction and control of
the body is firmly in the hands of the board. Some of these matters included in the list
may also require ministerial approval and this would be noted in the schedule. The list
includes, “approval of terms of major contracts”
42
• Section 2 covers briefing for new directors including the schedule of matters reserved
for the board.
• Section 3 includes the disclosure of interest by directors of State bodies.
• Section 4 covers the establishment of an audit committee and it is not entirely clear if
such a committee exists in CSID nor is it clear if there is an internal audit procedure in
operation.
[Legal Advice of the Attorney General to the Government on the issue of consequent
liability has been removed for reasons of confidentiality]
43

AG Report On Campus Stadium Ireland 2002

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AG Report On Campus Stadium Ireland 2002

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REPORT OF THE ATTORNEY GENERAL

AWARD OF THE OPERATOR CONTRACT

AQUATIC AND LEISURE CENTRE

CAMPUS STADIUM IRELAND LTD

Aquatic and Leisure Centre - Chronology 8

Annex B Government Decision 12 July 2000 Memorandum for Government 11 July

Annex C Government Decision and Memorandum for Government 19 December

Annex D Government Decision 23 January 2002 Memorandum for Government

Annex G PwC analysis of ownership of Waterworld (UK) Limited, participation of

Annex H Manuscript spreadsheet at preliminary expression of interest stage

Annex I Pricewaterhouse Cooper internal memo, 18 December 2000

Annex J Pricewaterhouse Cooper internal memo, 19 December 2000

Annex L Extract from Articles 24 and 26 of Directive 93/37/EEC

Annex S Questionnaire for Board members and replies

Annex T Questionnaire for Assessment Panel and replies

Annex V Letter of 23 August to CSID

• Campus Stadium Ireland Limited (CSID)

In addition, a written questionnaire was issued by the Attorney General’s Office to

28 July 2000 Advertisement by CSID in Official Journal

25 August 2000 Closing date for Expressions of Interest

9 October 2000 Closing date for receipt of Outline Bids

22 November 2000 Due diligence searches requested of PwC

15 December 2000 Closing date for detailed bids

18 December 2000 Preliminary PwC due diligence report received by CSID

19 December 2000 Rohcon/Waterworld selected as preferred bidder by Assessment

preferred bidder and lodge planning application

21 December 2000 Completed PwC due diligence received by CSID

intention to appoint the consortium as the preferred bidder subject to

certain conditions including financial guarantees

application in order to meet Special Olympics deadline

28 March 2001 Planning permission received

23 January 2002 Terms of contract approved by Government

circumstances surrounding selection of dormant company on 19

The Government in accepting the recommendations of the Stadium steering

2. Development of ALC Agreed: 12 July 2000

3. Invitation to Tender: 17 July 2000

CSID sent to the Official Journal of the European Communities an advertisement

Expressions of Interest were received from 8 consortia, comprising more than

5. Outline Bid Stage

The Assessment Panel of the Expression of Interest Stage (composed of Paddy

Meanwhile, as part of normal diligence, CSID commissioned Pricewaterhouse

8. Detailed Proposals Stage: 15 December 2000

Detailed Proposals for the design, construction, financing, operation and

The assessment of the Detailed Proposals included a full examination of Bills of

CSID received a preliminary report by fax from PwC on Monday 18 December,

10. Decision of Assessment Panel: 19 December 2000

The Assessment Panel (including OPW representatives) met on Tuesday 19

On foot of a Memorandum to the Government from the Department of the

12. Further financial report by PWC: 22 December 2000

14. Willingness to Provide a Guarantee: 7 February 2001

(a) receiving full details of same and

15. Heads of Agreement signed: 22 February 2001

Detailed negotiations of the terms of the contract then commenced.

16. Agreement of the Board: 12 April 2001

On 25 January 2000, the Government decided (S130/08/05/0001K) that the feasibility of

1) That “CSID should be satisfied that S & P is financially stable”, and

Monday, 18 December 2000

Tuesday, 19 December 2000

Function of Assessment Panel

Information supplied in respect of Waterworld

In principle a DBFO approach is a possible approach for this type of facility.

PricewaterhouseCoopers’ due diligence searches