Share, , Google Plus, Pinterest,

Print

Quinn was our champion when the State did nothing

0 Comments


10March/April 2022This is a tale of greed, destruction, violence, corruption and betrayal.The Quinn Group business employing 7000 with profts of €500m/year has turned into a husk of itself with only 800 employees and meagre profts with its construction division scandal–ously losing money. Conventional wisdom blames the recklessness of Sean Quinn but there was a further betrayal of the community that, refecting national indif–ference to the border counties, has gone untold.Keep your eye on who was in charge as the Quinn Group has disintegrated! The name of the Quinn Group was changed to Aventas in 2013 to Quinn Industrial Holdings in 2015 and to Mannok in 2020. Along the way it sold of Quinn Glass, Quinn Plastics and Quinn Radia–tors abroad. The sale of Quinn Packaging did not complete.However, the frst big event that should detain us is that on 30 March 2010, following an application by the Central Bank of Ireland, the High Court appointed joint provisional administrators to Quinn Insurance Limited, “Quinn was our champion when the State did nothing”By Michael Smith A Crossborder Community feels so betrayed that it’s issued legal proceedings against the part successors to the Quinn Group – QBRC The name of the Quinn Group was changed to Aventas in 2013 to Quinn Industrial Holdings in 2015 and to Mannok in 2020. Along the way it sold off Quinn Glass, Quinn Plastics and Quinn Radiators abroad. The sale of Quinn Packaging did not completethe frst manifestation of regulatory stringency that has now been playing out for 12 years. Then, in April 2011, a share receiver was appointed over the whole Quinn Group, by Anglo Irish Bank Group (then owned by the State), to which the Quinn Group owed over €2.8 billion. A receiver took control of the Quinn family’s equity interest in the Quinn Group (Quinn had divested himself some years earlier), replacing them with a board of outside professionals. This served the interests of bondholders who now owned 25% but had 75% voting right, with the balance held by the State. Formerly the bondholders interest had been contingent not a shareholding and they technically had no voting rights.That is the principal grievance of Sean Quinn – he accepts that he had scandalously over-invested in con–tracts for diference (CFDs – suspended payments, i.e. agreements to exchange the diference in value of a fnancial instrument between the time at which a con–tract is opened and it is closed) but feels the situation could have been salvaged if nerves in government had been held and the bondholders not indulged. The Quinn Group and its advisors considered it could repay the €2.8 billion it owed including the €2.34 billion it owed Anglo for share support. Others say that would have depended on retaining institutional confdence that he had done a great deal to lose.Anglo and Quinn had been in discussions to avoid a legal dispute over the way Quinn had supported Anglo’s shares, with awareness from State regulators that the State has disingenuously always tried to deny. But the plug was pulled.NEWS

March/April 2022 11Quinn was declared bankrupt in the Republic on 16 January 2012.The State’s motivation may or may not have been primarily the welfare of the local community and its jobs. But it compromised on legality. A notable delinquency was ignoring the outrageous actions of Anglo Irish Bank. Ann Nolan, the Second Secretary General at the Department of Finance with responsibility for fnancial stability/risk management gave evi–dence in 2015 to a case taken by the Quinn family against IBRC, and Sean Quinn and former Quinn Group directors. The family had had a 25 per cent stake in Anglo, held through the CFDs. It later converted this into a 15 per cent stake in the bank, using bank fnance, partly channelled through Quinn Direct Insurance, while other long-term customers, of the bank (the Maple 10) used further loans from the bank to buy the other 10 per cent. This con–version had the efect of preventing a food of shares coming onto the market. But it was ultimately illegal and improper to facilitate the wind-down of Anglo and the Quinn Group without resolving this extraordinary illegality for it was predictable that the Quinns would get some very substantial ben–eft if it could be shown that their own delinquencies were known to the regulatory section of the Department of Finance, the State.Nolan stated [above] that a draft letter dated 3 February 2009 from the then chairman of Anglo, Donal O’Connor, to Minister for Finance Brian Leni–han stated: “As requested, I enclose a report on the extent of lending for the purposes of share acquisitions and contracts for diferences generally and Anglo shares in particular”. However, she also drew attention to an alterna–tive version of the same letter, dated the next day which was amended to read: “The total extent of lending by the Bank for the purposes of acquiring publicly quoted shares is €1.767bn (See Annex 1). We do not lend for the purpose of taking positions in contracts for diferences. Of this total, €918.6m relates to lending for the purpose of acquiring shares in Anglo Irish Bank”.The letter was changed to omit a reference that would show the Depart–ment of Finance knowing in 2009 that Quinn Group had a CFD position. There were a lot of improprieties associated with the Quinn Group, espe–cially related to the support of Anglo’s share price. The problem was that Anglo had benefted from Quinn’s support and indirectly therefore so had the state. If the support was illegal and had been approved by Anglo and the State then the State might ultimately have to sufer some of the loss that it in the end seemed determined to dump on Quinn himself and his group.The Central Bank came to a weird, presumably embarrassed, settlement with Quinn Direct Insurance, the vehicle for the share support, and some of its directors. In December 2019 the Central Bank entered a settlement agree–ment with Liam McCafrey in his capacity as a former director of Quinn Insurance which had made losses of €905m in 2009, and €160m in 2010 partly through loans made by Quinn Insurance to fund speculative invest–ments for other Quinn family companies, to cover falling stock-market investments and fnance share-buying in Anglo Irish Bank. In 2008, Quinn Insurance was fned a record €3.25 million by the Finan–cial Regulator though in the circumstances of its dire state, and compromisingly for all involved, it was never levied. A related private High Court judge-chaired Central Bank inquiry into suspected participation by Directors Liam McCafrey and Kevin Lunney in breaches of regulations relat–ing to accounting and controls was settled without comment, and compromisingly, by the Central Bank in 2019. McCafrey seems to have had CFDs in Anglo shares worth €1.6m with the source of €500,000 of his fund–ing ultimately being the Quinn Group.Another blind eye, this time to the beneft of Sean Quinn and the Quinn family, was turned by regulatory authorities to the unresolved mess that was Quinn assets in faraway places. The Quinn family settled a bitter dis–pute with IBRC in 2019, having originally claimed that Anglo Irish Bank had illegally given them €2.35 billion in loans at the height of the fnancial crisis to prop up a stake in the bank before it failed. An execution of a judgment against the Quinns for €440 million was stayed on condition that they helped secure the return to IBRC of valuable assets in their international property group. The bank had moved to seize the properties in 2011.The asset recovery operation, known as QIPG Refnance Ltd, was set up in 2013 to go after a portfolio of ofce blocks, shopping malls and logistics warehouses – once worth €500 million – that had been used as collateral against loans from Anglo for share support. The bank moved to seize the properties in 2011.A not-for-proft organisation Cavan, Fermanagh Leitrim Community Group (CFL), was formed on Easter Monday 2014. It felt Anglo Irish Bank, which initiated the receivership of Quinn Group, had sold the company and com–munity short. Its main aims and objectives were to protect jobs and the factories that Quinn had built in the area, to keep it from being broken up but rather locally controlled for the beneft of the community. Over the next year it put out a lot of propaganda targeting Aventas, then running Quinn Group, but de-Quinned. Quiet recent settlement by Central Bank with past and current Quinn Group head, McCaffreyAlternative letter incorrectly implied Anglo didn’t lend for CFDs

12March/April 2022CFL organised meetings of up to ten thousand protestors, claimed the sup–port of 90,000 and met politicians, local and national, and management; but it got nowhere.It initiated a campaign of protests and of erecting posters and signs at all major road junctions and at entrances to all pro–duction sites on both sides of the border. This was designed to deter any prospec–tive suitors, including the circling vultures, that might consider diving in to cherry-pick individual businesses. It kept the obstruction up for the next three years and successfully prevented any sale of what the community considereditsassets. For example the letter exhib–ited on page 13 [top] successfully intimitated one company into not going ahead with its planned purchase of Quinn Packaging.CFL realised that to advance its objec–tives to the next stage it needed to put in place a management buyout. This it started to engineer by approaching the previous management team, led by former Quinn directors, to set up an entity to buy the business back. QBRC (Quinn Business Retention Company) was formed for that purpose. CFL dedicated itself to assisting in this process which lasted almost a full year. Letters were circulated to all local GAA football clubs and businesses seeking support for the QBRC bid [top image]. In 2014 one of CFL’s members arranged a meeting in Dublin with a potential fnancier to secure funding for QBRC. A facility of £115m was agreed in principle, with Endless LLP in London, to buy the concrete and packaging businesses in Derrylin – giving QBRC an opportunity to acquire the rest in due course. The process kicked of in February 2014 and gained signifcant momentum in the following months. One of the CFL members asked Liam McCafrey, former Quinn Group CEO, to facilitate a local management buy-out and he called a meeting for the next day at which all ex-directors agreed it was a good idea. All agreed QBRC would be a vehicle to get the businesses back for the Quinns and the Community. A spokesperson for CFL said the reason for the obsessive focus on Quinn was simple: “Quinn was our champion when the State did nothing”.When the bondholders saw this inter–vention was imminent and to avoid further hassle they agreed to go along with the community’s vision and pre-empt the Endless LLP facility. Meanwhile, when it became a reality that QBRC had secured funding to buy part of the business, three of the 43 bondholders realised that they hadn’t a hope of selling Quinn Glass.It had dawned on them that eventually it would be bought by QBRC as no out–sider would buy in such a hostile environment. Glass was the jewel in the crown and was worth in excess of €400m. The quick-thinking three bond–holders did a deal with the other 40 to buy their debt – at a knock-down price. So if Glass alone could be sold they would clear almost all their debt! The deal was so good that they decided to fuel it with a covert donation to QBRC. €6 million [below left] plus lucrative con–tracts were agreed. CFL should have been following what was going on, more closely.What happened couldn’t have worked without QBRC’s involvement which depended on CFL’s support, so it had to be timed during the window when the incendiary local community was well dis–posed to the new management. The community was happy that its interest was represented by the people it chose to represent it, holding – it consid–ered – in trust for it. Later it was agreed it would buy back everything except Glass and Radiators. At the time the Anglo-Celt editorialised that the “formal £100m bid for the former Quinn Group businesses (excluding Quinn Glass) to the Aventas Group is encouraging”. While deploring intimida–tion it noted, “Whether or not you are a Quinn supporter” it would be “a crying One of the documents drawn up between bondholders and QBRC, behind CFL’s back. The hightlighted text gives a formula relating to sale price of the glass plant which was c €440 million in the end. 1% of €440 million is €4.4 million and 4% of €40 million is €1.6 million. So QBRC was to get €6 million. Nobody knows where the money went.CFL seeking the return of Quinn and preservation of communities, 2014The Quinn Group and its advisors considered it could repay the €2.8 billion it owed including the €2.34 billion it owed Anglo for share support. Others say that would have depended on Quinn retaining institutional confdence that he had done a great deal to lose

March/April 2022 13shame if the business empire he built over four decades and the employment it brought to an otherwise forgotten part of Ireland, were to crumble”. Cavan County Council backed the bid.In December 2014 Sean Quinn famously served a tray of drinks to a meeting which had agreed that McCafrey would be CEO on €500k salary, Kevin Lunney would be COO at €345k and Quinn would be consultant on €500k. 11% of the Quinn Industrial Holdings would be owned by QBRC and another 11% by the same entity QBRC but in trust for its Directors who described themselves as “Sponsors”. On the recommendation of Sean Quinn Fine Gael Councillor John McCartin (apparently compro–misingly), Ernie Fisher And John Bosco O’Hagan, all with links to the community, secured lucrative salaries as well as director–ships, and were the sole shareholders in QBRC with its ambiguous 22% of what remained of the Quinn Group. The future of the community rested with them.An email from Liam McCafrey said “As you will see from our mission statement the sole motivation driving this initiative is to protect the economic wellbeing of this local area ensur–ing that the former Quinn Group business is local managed and controlled for the beneft of this community and most importantly kept “whole” and not disposed of piecemeal”. As far as CFL and the community was con–cerned this was mission-accomplished. How naïve they were: this couldn’t have been further from the truth. The wording of commitments from the new management such as from McCafrey above was inadequate to guarantee the community control or any stake in the prof–its, though arguably it actually owns the stake as benefciary. Everything unravelled. The boys and Quinn did not get on, and he was sacked, to CFL’s horror. The directors have not been responsive to the community and have not facilitated the intended return to business for Sean Quinn. In June 2016 CFL asked for a meeting with the management team in QIH with concerns at how the company was being run. QIH facili–tated this meeting which had some frank exchanges. They said Quinn brought ongoing reputational damage to the Company. It was the last meeting.CFL set up a Facebook group and publicised some embarrassing things about McCafrey, who had been incumbent CEO of the Quinn Group when the receiver was appointed, and now was CEO of QIH, including an allegation that he had diverted a £97,000 invoice due to be paid by a UK-based business called Nu-Span that he and his wife owned, for a steel delivery, to QIH. CFL alleged [see Complaint, extreme bottom] there had been no declaration of a Director’s interest and while there had been an adjustment to the Quinn account no money had actually been paid in to reconcile the invoice for £97,000. It alleged on another occasion a c €30k credit note was issued to Nu-Span fooring without proper consultation with the relevant divisional manager, though there was already concern about the £97,000 and though €30,000 was three or four times the normal credit limit. The man who drew atten–tion to these improprieties, Denis Doogan, a director of QIH and a director of Nu-Span was sacked. The women who furnished him with the information changed their stories. Sean Quinn also went to the Garda with complaints that €167,063 in credit notes were irregularly made out by Quinn Cement to its biggest rival, Irish Cement, part of the CRH Group.In 2016 Sean Quinn wrote to Councillor John McCartin:“The four million [he should have said six million] pound golden handshake or bribe, call it what you may, that QBRC was to be paid to facilitate the sale of glass, has since through some accounting wizardry never made its way to QBRC and mark my words we will leave no stone unturned in relation to investigating what has actually taken place here once we have possession of all the facts. At this juncture, needless to say, it is blatantly obvious that a fundamental confict of interest exists for the three senior direc–tors of Quinn Building Products to continue with their directorship positions on the board of QBRC”. And of course by this time the money raised by QBRC for certain aims had gone into the Company though it was clear that neither Quinn Building Products nor QBRC was at any stage serious about implement–ing the original mandate. The company was being run – as would ordinarily be the case – in the fnancial interests of shareholders rather than the long-term interest of the com–munity which appeared had a subtantial stake in it, as benefciary. On the occasion of the sale of each Glass, Plastics and Radiators – none of which was in the spirit of the agree–ment – senior executives achieved signifcant pay-outs. It is this dynamic that is now being tested in the High Court by CFL.The sale of Glass has put the jobs of 300 workers at risk. With Quinn Glass having two plants, one at Derrylin (23 years old) and the other the most modern glass plant in Europe, at Elton in the UK: a new plant) it is a concern for the community that the older plant will be closed at some stage in the future. Moreover €50m of profts annually has been repatri–ated to Spain, as can be seen in the accounts of the new parent company for Glass.This was totally contrary to what QBRC’s aims and objectives were created to be; and the reason today why so much ill feeling, anger and diehard Sean Quinnery prevail in the community. Internal QIH document showing it was investigating allegations of impropriety by McCaffrey with Nu-spanLetter drafted by Liam McCaffrey for CFL to send to RPC Containers to deter them from buying Quinn Packaging, 2014

Loading

Share, , Google Plus, Pinterest,