Bankruptcy move latest twist in Mick Wallace-Cerberus saga

The bankruptcy application from US fund Cerberus to have independent TD and former property developer Mick Wallace placed in bankruptcy adds a new layer to what is already a complex relationship.

Wallace has used his position as a public representative to attack relentlessly the State-owned National Asset Management Agency (Nama) and how it has gone about selling the book of distressed loans it inherited after the banking and property collapse in the late 2000s.

Among those who have been in the market buying loans has been Cerberus, the multibillion dollar US investor fund.

While it has been buying loan portfolios from Nama, it has also been buying them from other troubled financial institutions, including Ulster Bank. As part of a sale called Project Aran, Ulster Bank sold a portfolio of loans to Cerberus in 2014 for a reported £1.4 billion.

In among the more than 1,300 borrowers, whose loans were backed by property in the Republic and Northern Ireland, were loans associated with Wallace.

The Cerberus vehicle used to buy the loans was Promontoria (Aran) Ltd, which is now seeking to have Wallace declared a bankrupt. Earlier this year the company secured a €2 million judgment order against the Wexford TD.

Vocal

Meanwhile, Wallace has been very vocal in the Dáil about the Nama portfolio sales, including the Project Eagle sale to Cerberus of Nama property loans to Northern Ireland borrowers. The €1.6 billion sale happened in April 2014.

Following the sale, Wallace claimed in the Dáil that politicians and businesspeople were to benefit from the deal, prompting investigations by the Northern Ireland Assembly, the UK’s national crime agency and the Republic’s finance watchdog, the Comptroller and Auditor General.

At the core of the controversy is a transfer of £7 million associated with the deal to an Isle of Man account. The transfer was “reportedly earmarked for a Northern Ireland politician”, Wallace said in the Dáil last year.

He has also used the Dáil to argue that a smaller loan portfolio sale, Project Arrow, by Nama, should not go ahead. In July of last year he called for the suspension of the sale, and an inquiry into how Nama had been operating.

In October 2015, Cerberus was chosen as the preferred bidder. That same month, Wallace confirmed to The Irish Times that he had received a €2 million loan repayment demand from Cerberus.

The demand arises from a personal guarantee he gave for loans for Dublin apartment developments.

If declared a bankrupt, Wallace's assets and liabilities will most likely come under the control of the Official Assignee, Chris Lehane, though Cerberus could apply for its nominated official to oversee the bankruptcy.

Some years ago Wallace said he would devote a portion of his Dáil salary towards paying off a tax bill. His company, M&J Wallace, was found to have under-declared VAT to the tune of €2.1 million, including fines and penalties, and the TD said he would use half his Dáil salary to make payments against the debt.

Up to 2014, TDs who were declared bankrupt had to give up their seats, but that was changed with the Electoral Amendment Act 2014.