Diddled - Village Magazine

24 April 2015

EDITORIAL

Diddled

NAMA and bankruptcy have insidiously bailed out most of our useless developers

NE of the biggest scandals in the history of the state,

one of the greatest injustices, is now becoming

manifest. The National Assets Management Agency

(NAMA) which Brian Lenihan then Minister for Finance

who established it, assured us would be a bailout of the

(largely taxpayer-owned) banks is in fact a bailout of

developers. This is a massive corruption of fairness and a

sign of just how little progress has been made in

eliminating the attitudes that led to our boom, and bust. It

is a pity the left has not made it the centrepiece of its

campaigning, instead of the small and diminishing issue

that is the water tax. For the rebooting of the speculators

who cost us a decade is at the heart of the inequality that

drives this country, an inequality that favours those who

know enough to buy a few apartments – in Ballina or

Bucharest, who vote Fianna Fáil and Fine Gael and know

their way around the development ﬂanks of those two

dinosaurs, to the detriment of the little people.

“Nothing in the proposed Bill will provide a bailout for

borrowers, whether builders, developers or otherwise . . .

anyone who owes money before NAMA, continues to owe it

and is expected to repay the full amount of the debt”,

proclaimed Lenihan in 2009.

His master, Taoiseach Brian Cowen, a few days later laid

down that while NAMA would acquire loans from the banks

at a discount, the developers who had borrowed from the

banks would still have to pay back to NAMA the full value of

the loans they had taken out.

Writing in the Irish Times, John MacManus noted:

“Nobody suggested that NAMA was going to involve

anything other than huge write-downs of the loans given

by the banks to property developers. And, likewise,

anybody who was paying attention knew the bill for the

write-downs was always going to be borne by the taxpayer,

who would have to re-capitalise the banks – to the tune of

€65bn – in order to allow them absorb these and other

losses.

But what did turn out to be at best a ﬁb was the claim that

NAMA would operate in a way that would make it

impossible for the developers who took out the loans to

beneﬁt from the write-downs. The NAMA legislation did

include a clause that the developers could not buy their

loans back from NAMA but, as we have seen, it was not

possible to prevent them having a continued interest in the

underlying business and assets once the debt had been

written down and sold oﬀ by NAMA”.

Nor, as the dust settles on the Great Recession, do we any

longer hear anything of the ﬁfteen transfers from

developers, including the majority of the top 30 developers

in NAMA, to their wives, three reverse-transfers from

wives to husbands and eight NAMA registrations of charges

against property associated with the wives of developers

that occupied us ﬁve years ago. No punitive action was ever

taken. Can we be conﬁdent that none of it was done to avoid

the rigours of the law:

The central point is that while the likes of Ray Grehan,

Bernard McNamara, Tom McFeely, John Fleming and Paddy

Shovlin more or less put their hands up and declared

themselves bankrupt, developers who made a ﬁst of their

position and co-operated with NAMA by selling assets and

paying down debt are back; as are developers like Johnny

Ronan and Richard Barrett of liquidated Treasury

Holdings, who retained property in their own personal

names, outside their principal operating companies.

Treasury Holdings went belly-up with debts of €2.7bn,

€1.7bn of which was owed to NAMA, on foot of an action

taken by KBC Bank Ireland. But it was more serious than

that: the liquidator, Michael McAteer of Grant Thornton,

accused Ronan and Barrett of carrying out two asset-

stripping transactions – as Treasury writhed in its last

throes leaving behind its giant debt – that in eﬀect

defrauded the company’s creditors.

One of these involved the sale by Treasury to Barrett of

two other companies which managed its Chinese properties

for something around a ﬁfth of their real value. McAteer

ended up agreeing to a proposal to repay him €47m, with

Barrett bagging €5m for putting the deal together, and he

and Ronan getting €36.3m each in cash from the sale of the

shares they held directly in Treasury’s Chinese operation.

Judge Peter Kelly in the High Court approved the deal as

being in the best interest of creditors but ventilated

disquiet at payments to Barrett who he described as “ a

defendant against whom there is an allegation of fraud”.

That allegation appears now to have been dropped.

Also in this section:

Sinéad Pentony on sexism 26

Constantin Gurdgiev on growth 28

Donna Mullen on Phil Hogan 32

Niall Crowley on human rights 33

Mannix Flynn on York Street 34

EDITORIAL&OPINION

NAMA which

Brian Lenihan

assured us

would be a

bailout of

the (largely

taxpayer-

owned) banks

is in fact a

bailout of

developers

‘

April 2015 25

Meanwhile Ronan has recently ﬁnalised a deal with two

multi-billion dollar funds, Colony Capital and M&G to

secure his leave-taking from NAMA. Between them they

will pay over €250m to buy out Ronan’s personal debts of

over €290m. The Sunday Independent cannot get enough

of it.

But nearly all of the boomtown boyos are back, one way

or another – in the Sindo and, even worse, in reality.

NAMA has recently written oﬀ €300m in debts for 23

major property developers, we hear.

It has been reported that representatives for the Quinn

family and the Irish Bank Resolution Corporation (IBRC)

are currently negotiating a settlement of their €4.5bn case

against the former Anglo Irish Bank and the Irish state. The

family might drop its €4.5bn claim arising from the seizure

of the Quinn Group in 2011, a claim already found by the

Supreme Court to be partially inﬁrm, and the liquidators

might drop the so-called conspiracy case against members

of the family.

According to the Sunday Business Post (March 29th) the

Quinn family could, under the terms of the negotiations,

resume control of hundreds of millions worth of property

and other assets, though the Irish Times subsequently

reported that there was no question of the family ending up

with any of the valuable foreign property portfolio it tried

to put beyond the bank’s reach, or that the IBRC would walk

away from any suspected fraud it may have encountered.

Although whatever wealth Castlethorn’s Joe O’Reilly had

before the crash pales alongside the €2.8bn his companies

owed when his loans were taken into NAMA in 2010, the

combination of a high-quality property portfolio including

Dundrum Town Centre, the Pavillions in Swords, the Gaiety

Centre on Dublin’s South King Street and oﬃces at Grand

Canal Dock, and their lucrative rent rolls coupled with well-

located land banks in Dublin appears to make O’Reilly

worth every cent of the €200,000 annual salary NAMA

allows him. He remains in his 15,000 sq ft Foxrock

mansion, Cnoc Ard.

Bernard McNamara is back, leaving his €1bn debts far

away, working on Denis O’Brien’s Stephen’s Green oﬃces

and a €20m revamp of the loathsome Kildare club for

Michael Smurﬁt.

Michael O’Flynn owed his banks €1.8bn when he entered

NAMA in 2009, but left NAMA owing vulture fund

Blackstone €1.1bn – with the ultimate upshot a deal with

Blackstone allowing him to keep 600 acres in Edinburgh,

Cork and Dublin including the 20-acre former Nissan

headquarters on the Naas road. Blackstone had abortively

called in the €1.1bn. John McManus noted that: “This

amounts to a potential eﬀective writedown of his debts by

€700m. The loss ultimately shows up in the books of the

banks that lent him the money – not NAMA, which

probably made a proﬁt buying and selling his debts. The

loss will have been met by some of the €65bn pumped into

the banks by the taxpayer. Hence the allegation of a

taxpayer-funded bailout.

Exactly how much of the €1.8bn Mr O’Flynn repays is

between him and Blackstone. No doubt they will squeeze

him [and they did] but the chances are it’s not going to be

far oﬀ €1.1bn unless NAMA has got its sums badly wrong”.

Accountant to the stars and globe-trotting dealmaker

Derek Quinlan has paid

oﬀ €3bn of his €3.5bn

debts. He had a

spectacular fall and quit

Ireland for Switzerland.

He is currently trying to

ﬂog his most expensive

acquisition– the £1bn

Citibank tower in Canary

Wharf. He is also a

shareholder in the

Maybourne group, which

owns Claridge’s Hotel.

MacManus quotes a

source close to the

developer: “The country

needs to get going again

and you can’t do it

without developers and

ﬁnanciers. We actually

need NAMA to allow the

likes of Johnny Ronan and Derek Quinlan to get back to

work and start spending money and create employment in

the Irish economy”.

Mr Quinlan, we are told, has ‘sorted all his banks’ with

the exception of NAMA – to which he owes €500m – but is

fully cooperating with it, whatever that means.

Another way of putting this is that Quinlan still owes the

Irish taxpayer €500m. To put that in perspective, we are

currently trying to reﬁnance our debts with the IMF in

order to save €350m a year and avoid having to put up

taxes again. If Mr Quinlan were to ‘sort’ NAMA, we might

have some time for him.

The more pragmatic and compelling argument for

keeping them as far away as possible from the property

market is that they are not good developers and ﬁnanciers.

They are, in fact, bad developers and ﬁnanciers. Neither of

them seems to have seen the crash coming and both of them

seemed to have doubled down at the wrong moment. This

goes for most of their peers and the number of Irish

developers who got it right can be counted on the ﬁngers of

one hand.

It is true that there is a need for players to ﬁnance and

develop property in Ireland. But these guys are not the

solution, they are part of the problem. In fact it is arguable

as to whether property development should be done by

“guys” at all.

The superstar developer model that prevails in Ireland is

a creature of a small country blighted by political

corruption”.

Very few of the recalcitrant bailed-out developers are in

any way grateful for the interventions of the state through

NAMA, for they each – being thoroughgoing Alpha males

– assume they would have worked through their diﬃculties

with their banks, if allowed to do so. In fact it is likely most

of them would not because a crisis of conﬁdence, unfair or

not, would have toppled the whole system. And this

inconveniently for the Alphas would have included them.

How many times must we read ‘Here’s Johnny’ in our

broadsheets before we are allowed to say that it’s not a good

thing that any of this crowd are back? •

the problem