As public hearings at the Public Accounts Committee into the controversial sale of the Project Eagle portfolio of distressed assets in Northern Ireland and Britain come to a close, its members are facing some difficult choices with potentially serious political implications.
However, the absence of key individuals who have declined invitations to give evidence, including of former Northern Ireland first minister, Peter Robinson, his former finance minister Sammy Wilson, Ian Coulter of Tughans Solicitors in Belfast, as well as of some unsuccessful bidders for the €4.5bn property portfolio (sold for €1.6bn to Cerberus) will make it extremely problematic to make definitive conclusions on a number of matters.
Even more complicating is the absence from hearings of the former member of the Northern Ireland Advisory Committee of NAMA (NIAC), Frank Cushnahan, and of the agency’s former head of asset recovery, Ronnie Hanna, both of whom have cited the ongoing criminal investigations in the UK by the National Crime Agency as reasons for their absence as witnesses.
Without this pair, it is arguable that the final report and conclusions can only rely on a great level of speculation as to the real motivation behind the decision by the eventual successful bidders, Cerberus, in paying a £15m success fee to be divided between US law firm Brown Rudnick, Tughans and Cushnahan which of course is the most dramatic and questionable aspect of the entire Project Eagle saga.
The PAC inquiry is based on the finding of a report from the Comptroller and Auditor General (CAG), Seamus McCarthy that NAMA could have secured some €220m more from the sale of the mainly NI-based assets, that it applied a greater than expected discount to the buyer and that it failed properly to investigate a series of apparent conflicts of interest involving key figures in the transaction. The committee is restricted to the parameters of the comprehensive and detailed CAG report and to the broad question of whether NAMA delivered the Irish people ‘value for money’ from the purchase.
But what has emerged from the public hearings goes much further than this and opens up a truly appalling vista if it emerges in time, following the various investigations in the UK and the US, and by the Bureau of Fraud Investigation in the Republic, that the executives and board of NAMA failed to uncover an attempt by a small number of key insiders, in business and politics, in the North to enrich themselves at the expense of the state agency.
This was the thrust of the sensational claims by Mick Wallace TD when he revealed the £15m success-fee arrangement, in the Dáil in July 2015 and in much of the subsequent debate in the House and at the Committee hearings into the controversy while it is also central to the demand by the opposition parties, including a somewhat reluctant Fianna Fáil, for a full-scale Commission of Investigation into the Project Eagle purchase and sale.
When and what NAMA knew about the details of this success fee were at the heart of the most recent hearings of the PAC when further questions were put to its chairman Frank Daly and chief executive Brendan McDonagh about this crucial issue that goes to the heart of how the property management agency dealing with billions in distressed assets across Ireland, the UK, the EU and US has dealt with its awesome responsibilities.
Under robust questioning by several committee members including Josepha Madigan of Fine Gael, Mary Lou McDonald and David Cullinane of Sinn Féin and independent, Catherine Connolly on 24 November, the NAMA executives were put to the pin of their starched collars to explain how Frank Cushnahan could have been seeking purchasers for the Project Eagle assets as far back as November 2012 without any senior executive of the agency knowing about his activities.
Cushnahan met Brown Rudnick along with Ian Coulter to discuss the idea of finding a buyer for the entire NI property portfolio in late 2012. Cushnahan represented six debtors, mainly in Belfast, who made up more than 50% of the entire bundle of distressed commercial property and residential assets and had declared some of these interests under NAMA compliance requirements.
It has emerged in recent correspondence from PIMCO, the US fund which was forced to withdraw from the sales process in March 2014 after it revealed to NAMA that Cushnahan was to share in the three way £15m success fee. Pimco has also claimed that it was approached by Brown Rudnick and introduced to Cushnahan in April 2013.
PIMCO also asserts that Cushnahan set up a meeting for PIMCO with the NI first minister Peter Robinson and finance minister Sammy Wilson a few weeks later, in May 2013. PIMCO also confirmed in a letter in early November last to the PAC that it was approached by Brown Rudnick in June 2013 about a success fee, one third of which was to go to Cushnahan. PIMCO went on to claim that it sought assurances from Brown Rudnick, whose then partner Tuvi Keinan was leading its effort to secure the Project Eagle portfolio, as to whether NAMA had been informed of, and approved, the involvement of Cushnahan in the planned deal.
During all of this time, and until 7 November 2013, Cushnahan was a member of the NIAC which was chaired by Frank Daly and which sometimes held its meetings in the offices of Tughans solicitors in Belfast, where Cushnahan occupied an office.
The NAMA executives claim that none of these meetings or requests were raised by PIMCO as it entered into discussions to purchase Project Eagle between September and December 2013. The discussions followed a request by Wilson in a letter to his Dublin counterpart Michael Noonan to consider PIMCO’s request to buy the entire NI portfolio of NAMA in an exclusive deal that would not involve the normal open tendering process.
The board of NAMA did not agree to this exclusivity requirement but allowed PIMCO to access the virtual data room which provided details of valuations, debts, borrowings and other essential information on the properties included in the Project Eagle portfolio. Daly told the PAC hearings that it was not until March 2014, when the sale was about to close, that PIMCO legal personnel advised NAMA executives, including the key negotiator for the agency, Ronnie Hanna, of the promised fee to Cushnahan.
Hanna, an executive of Ulster Bank in Belfast before he joined NAMA, was familiar to Cushnahan and indeed to the other major players named in various parliamentary hearings north and south in connection with the deal. Cushnahan was a close advisor to Robinson in the office of first minister for several years. The refusal of Hanna and Cushnahan to give evidence is thus a fundamental flaw in the efforts by the PAC and others to track the complete process of meetings, discussions, email and telephone communications that surround the Project Eagle debacle.
When Hanna learned of the fee arrangement he informed PIMCO that it would cause a problem for NAMA and asked whether there was any way around the problem that would allow the sales process to continue. PIMCO, on advice from its US based compliance officers, said that it could not continue as it could breach US corruption laws.
In his evidence to the hearings in November, Daly contested much of what PIMCO asserted in its recent correspondence to the PAC and insisted that the first he and the NAMA board knew of Cushnahan’s role over the previous two years of discussions with different parties in relation to the sale was during those phone conversations between 10 and 12 March 2014, after which PIMCO withdrew from the sale.
Brown Rudnick then approached Cerberus to pick up the pieces and the US fund came on board to meet the reserve price set by NAMA of almost £1.3bn having confirmed that no former or current employee of the agency was involved in their bid. It subsequently confirmed that it paid an acquisition fee of £15m to Brown Rudnick in order to ensure that it had sole access to confidential data in relation to the portfolio. The sale was completed in April 2014. Asked by Deputy Cullinane about the circumstances leading to the PIMCO withdrawal and the late entry of Cerberus to the competition, Daly told the PAC:
“What was our focus at that time in March 2014? We were in the final stages of the competition for Project Eagle. The main point was that PIMCO were gone or exiting at that stage. The main point was that we were making sure Cushnahan did not get any money. The main point was that in respect of Cerberus we were ensuring, by means of a declaration, that Cerberus was not paying any fee to anyone connected with NAMA”.
At the heart of the exchanges was the insistence by Daly that NAMA was never informed by PIMCO, or anyone else, of Cushnahan’s significant role in pushing the sale of the NI portfolio after late 2012 and of his refusal to accept a claim by PIMCO that it provided the agency with details of meetings it held with Cushnahan, Coulter and others starting in April 2013. Attempts by NAMA since April 2014 to find out from Cushnahan the extent of any conflict of interest arising from the deal or the fee arrangement, have met with silence, Daly said.
Daly and McDonagh have disputed the CAG suggestion that it could have obtained €220m more from the sale, and claim that there was sufficient competitive tension in the bidding even after the withdrawal of PIMCO, in March 2014, to justify pushing ahead. They also insist that the particular conditions in Northern Ireland, and the reluctance of debtors to engage, made it more realistic to have a quicker than normal sale of the entire bundle of assets at a discount rather than a piecemeal disposal over a number of years.
Although it is not allowed to delve into a range of other matters outside the parameters of the CAG report, the members of the PAC would need to be living on another planet if they are not aware of hugely damaging allegations, including taped interviews, which suggest that Cushnahan was taking money from debtors in Northern Ireland while a member of the NIAC, and apparently making promises of a light touch from NAMA in return.
On one secret tape made by developer, John Miskelly, Cushnahan is apparently heard naming Ronnie Hanna as a key individual in NAMA who was helping to ensure that debtors in the North were not wiped out in the carnage that followed the arrival of vulture funds into the Irish property market.
Mick Wallace has recently revealed how a businessman in the far east, Barry Lloyd, claims he was approached by Cushnahan about the property portfolio as far back as 2010.
The refusal of key politicians in Northern Ireland to attend the PAC hearings is telling in itself. Meanwhile in the South finance minister, Michael Noonan, failed to intervene after he was informed of the extraordinary withdrawal of PIMCO in March 2014 and failed to make any effort to stop or delay the process until the potentially sordid details of the finder’s fee arrangements were fully investigated.
By Frank Connolly