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PAC has vindicated C&AG

PAC has accepted the C&AG report over Noonan's objection, claiming it has merely reported the facts during public hearings

The Public Accounts Committee (PAC) has criticised finance minister, Michael Noonan, over his dealings with Cerberus, the US fund which controversially purchased the property assets held by NAMA in Northern Ireland in April 2014.

Following public hearings late last year into the detailed analysis report of the Comptroller and Auditor General (C&AG) on the sale of Project Eagle for £1.24bn to Cerberus, the PAC has signed off on its report which is said to be critical of Noonan and a number of senior officials in the Department of Finance.

Village has learned that the final PAC report will defend the C&AG investigation as thorough and robust and support its finding that the portfolio of assets mainly in Northern Ireland, but also in the UK, was sold too cheaply by NAMA leaving the public purse short by over €220m.

Although restricted by its terms of reference to investigating the C&AG’s ‘value for money’ report it is understood that the PAC has also raised questions over various conflicts of interest that arose in the sale of Project Eagle, and in particular those involving Frank Cushnahan, a former member of the Northern Ireland Advisory Committee of NAMA.

When the C&AG, Séamus McCarthy, launched his report into Project Eagle last Autumn, it was heavily criticised by NAMA executives who suggested that the C&AG was not equipped to assess the sale of such a massive property portfolio and disagreed with his conclusions on a number of issues, including the discount rate applied to the transaction.

The PAC has concluded that because there were no up to date property valuations at the time of the sale it was impossible to calculate the exact value of the portfolio. There was no mention in the board minutes of NAMA detailing the 10% discount rate to be applied in the sale leading to the probable loss, according to the PAC report.

However, McCarthy and his team have now been vindicated by the PAC and the spotlight has turned on the failure of NAMA properly to supervise the sale of its single largest asset portfolio which had an estimated value of £4.6bn when the loans associated with over 800 properties across the North and in the UK were transferred to the agency.
The PAC has identified a series of meetings where Cushnahan was involved with global investment funds, Northern Ireland politicians and other businessmen with an interest in the property portfolio which took place as far back as 2012 without the knowledge of senior NAMA executives, chief executive officer, Brendan McDonagh and chairman, Frank Daly.

Serious conflicts of interest were disclosed by Cushnahan to the NAMA executives when he informed the agency that he represented a number of business people and property developers whose loans, representing almost 50% of the entire Project Eagle portfolio, were under the control of the agency.

Meetings took place in 2013 between Cushnahan, Ian Coulter – a senior partner with Tughans Solicitors in Belfast, former finance minister, Sammy Wilson and first minister, Peter Robinson, at which the sale was discussed. From the outset, a representative from Brown Rudnick, an international law firm with offices in New York, London and Dublin, was closely involved in the discussions surrounding the sale and that represenative first invited the giant US investment fund, Pimco, to make an offer.

In mid-2013 Pimco suggested that it would make a bid for the portfolio if it was granted an exclusive right to tender and its interest was relayed by Wilson to his counterpart in Dublin, Michael Noonan. Noonan referred the letter of interest to NAMA who engaged with Pimco in relation to the sale but NAMA’s board resisted the idea of an exclusive-bid or single-tender arrangement.

However, it did provide Pimco with access to the virtual data room which set out in detail the content of the portfolio, the level of indebtedness of each distressed borrower and the likely current market value of the properties involved.

Pimco remained as the favoured bidder almost to the end of the process when it disclosed that it had agreed to pay a “finder’s fee” of £15m to be divided between Brown Rudnick, Tughans and Cushnahan if it was successful in acquiring the portfolio. On the advice of its legal compliance team in New York, who argued that the fee arrangements could be in breach of US law, Pimco withdrew from the bidding process in March 2014.

Noonan was informed by the NAMA executives of this startling development in relation to the purchase of Project Eagle but accepted assurances that the process remained competitive as other tenders were on the table from Cerberus and another US fund, Fortress.

The PAC, however, questions why Noonan and some department officials agreed to meet with executives of Cerberus just the day before the fund won the sensitive tender given the perception that it might be interpreted as an expression of support for Cerberus or of providing inappropriate access to the minister while the tender process was still underway.

According to committee sources, Noonan has objected to the suggestion that he may have acted inappropriately or that he in anyway interfered with the bidding process and has written to the PAC to complain that he is the victim of an adverse finding against him.

However, the Committee has rejected this complaint and has insisted that it has merely reported the facts as presented to it from the various parties that appeared during it public hearings last year or in written correspondence.

The PAC has also questioned how Cerberus, which entered the bidding race in early 2014 ended up with the same solicitors, Brown Rudnick and Tughans, who had helped prepare the Pimco bid and who also promised a £15m finder’s fee to the solicitors and to Cushnahan.

It has also concluded that the criticisms of the C&AG in relation to the price paid by Cerberus are justified and has raised concerns, not least in respect of the conflicts of interest involving Cushnahan and others.

The PAC has found the Project Eagle sales process was “flawed” and that it was compromised from as far back 2012 at the various meetings between Cushnahan and the two law firms when they sought and agreed a success fee among themselves of £5 million each. This is confirmed by correspondence seen by the PAC, Village has learned.

Peter Robinson

Separately, it has emerged that the BBC ‘Spotlight’ programme has been been forced to hold back another sensational report into the Project Eagle saga due to legal threats from some of those under investigation by the UK National Crime Agency (NCA).

In a series of broadcasts last year, Spotlight replayed secret tapes made by developer, John Miskelly, whose distressed loans were taken over by NAMA, and in which he recorded Cushnahan accepting a £40,000 cash payment in return for promised assistance in negotiations with the agency.

On one tape, Cushnahan refers to the “help” he is getting from a senior executive within NAMA in his efforts on behalf of a number of his clients in the North. On tapes made in 2012, he named Ronnie Hanna the Head of Asset Recovery with NAMA until he left the agency in October 2014 as a key figure in ensuring that certain developers in Northern Ireland would be looked after.

Cushnahan, Hanna and Ian Coulter have been questioned by the NCA in relation to the affair and to a sum of £7m placed in an Isle of Man account by Coulter following the closure of the sale to Cerberus.

Former Northern Ireland first minister, Peter Robinson, and a number of other Belfast businessmen, including accountant David Watters and Andrew Creighton were also named at the Stormont finance committee as the intended recipients of some of these monies. Robinson’s son Gareth, was also described as an important source of assistance by Cushnahan, in the secret recordings.

The PAC report was unable to investigate many of the other revelations which have emerged in the public domain including new claims made to Mick Wallace TD by a businessman based in the Far East, who has said that he was in contact with Cushnahan as far back as 2010 in relation to the Northern Ireland property portfolio.

Barry Lloyd has said that he introduced Cushnahan to a number of potential investors, including Japanese bank, Nomura, before he was pushed aside. Later it emerged that Nomura provided a substantial amount of the monies to Cerberus for its successful bid.

A visit by the chairman of Cerberus, former US vice-president, Dan Quayle, in early 2014, during which he met Robinson and others connected to the bidding process in Belfast and Dublin sparked a separate inquiry by the US Securities and Exchange Commission (SEC). A division of the US Department of Justice, the SEC is investigating alleged payments to non-US nationals in the Project Eagle sale process.

By Frank Connolly