Court told that Irish Nationwide boss Fingleton should have been ‘summarily dismissed’ by 2007
Building society directors being sued for tens of millions of euro over ‘catastrophic losses’
Michael Fingleton and Michael Walsh, Chairman at an Irish Nationwide Building Society agm in 2002. Photograph: Eric Luke.
Michael Fingleton should have been summarily dismissed from his position as chief executive of the Irish Nationwide Building Society as far back as 2007, the Commercial Court heard yesterday.
Mr Fingleton and four former directors are being sued for sums estimated to amount to tens of millions of euro arising from “catastrophic losses” suffered by the building society. The case is being taken by the special liquidators of the IBRC, formerly into which Irish Nationwide was merged.
Losses of €6 billion from 2008 to 2010 arose mainly from development loans made while Mr Fingleton was CEO, they claim.
Had the true picture of INBS’ affairs been disclosed, Mr Fingleton would have been summarily dismissed for breach of duty by 2007 at the latest and not paid expenses inappropriately incurred, plus some €1.2 million in performance bonuses for 2008 and 2009 when he left, the liquidators claim.
An “unusual” management structure had operated at the INBS, it is claimed, under which the board effectively delegated its powers over years to Mr Fingleton.
He allegedly authorised many loans without prior board approval in breach of the lending policies. Had those policies been adhered to, and had the board ensured the necessary oversight, the building society would not have incurred the associated losses, it is alleged.
Mr Justice Peter Kelly agreed yesterday to fast-track separate proceedings by the special liquidators against Mr Fingleton and four other former directors of INBS in the Commercial Court. While no sum for alleged loss and damage is specified in the proceedings, the judge noted the claims, which will not be heard before next year, will run into tens of millions of euro.
INBS was nationalised in 2010 and later merged with Anglo Irish Bank into IBRC. The proceedings relate to matters dating back to 2006 and centre on actions allegedly taken by Mr Fingleton and the board’s oversight of his role and management of the lender.
The cases centre on conduct of some 20 transactions subject to a forensic examination by accountancy firm Ernst & Young and lawyers extending over the past three years.
Bill Shipsey SC, for Mr Fingleton, said he was concerned Mr Fingleton was not covered by insurance within the meaning of a policy relating to directors and officers of the Society. It seemed Mr Fingleton was being blamed for effectively allowing the board give him too much power, counsel added.
Among many claims, the liquidators allege Mr Fingleton was grossly negligent in approving a series of loans to companies linked to Colpy Ltd, a property company of Cyrill Dennis. Some 50 loans were advanced over the years by INBS to companies connected with either Colpy or Mr Dennis, it is claimed.
By July 2007, INBS had loaned some £218 million sterling to Admiral Taverns to buy some 800 pubs in England and Wales. That was grossly imprudent, reckless or grossly negligent, it is claimed.
It is also claimed Mr Fingleton was grossly negligent approving a €29 million loan in 2007 to Devondale Ltd in breach of INBS’s lending policy and without any advance authorisation by the Board.
The IBRC investigation took more than three years due to factors including “astonishingly few” documents were left behind with the result affairs of INBS had to be effectively reconstructed from crates of documents, Maurice Collins SC, for IBRC, said.