Former Nationwide director says IBRC liquidators should sue their own firm

A former director of Irish Nationwide Building Society has told the Minister for Finance it is "preposterous" that the two special liquidators of State-owned IBRC, both partners in accountancy firm KPMG, are suing him but not their own firm for alleged negligence.

KPMG has been the society’s auditors for some 20 years.

KPMG accountants Kieran Wallace and Eamonn Richardson, who are suing former Irish Nationwide Building Society director Terence J Cooney over billions of euros of losses at the society, "have clearly decided to relieve their own firm of any responsibility".

The Minister should direct them to bring a claim against their own firm on behalf of the State-owned bank, Noel Smyth & Partners, solicitors for Mr Cooney, stated in a letter to Mr Noonan, the Commercial Court heard.

If the legal action was “a serious attempt” to recover money for the taxpayer, it was “ridiculous” for it to be taken against a director with no possibility of satisfying any judgment in the hundreds of millions or billions claimed when the “culpable” auditors, a multinational firm presumably with insurance, clearly do, the letter added.

The fact KPMG was not being sued showed the action was “a public relations exercise”.

Third party
Mr Cooney yesterday secured an order from Mr Justice Peter Kelly joining KPMG as a third party to the case brought against him and other non-executive directors for the purpose of claiming an indemnity against KPMG for any damages awarded.

Denis McDonald SC sought the order after the Minister failed to respond to the January 31st letter from Mr Cooney’s lawyers alleging the special liquidators had “a glaring conflict of interest” in relation to the litigation.

The only reasons the auditors were not being pursed was because both the special liquidators and auditors were KPMG, the letter alleged. In another case, the IBRC special liquidators are suing another accountancy firm, Ernst & Young, over its auditing of Anglo Irish Bank, the letter added.

Under the IBRC Act, the Minister was entitled to direct the special liquidators to pursue KPMG and it was “manifest” such a direction was advisable, the letter added. “KPMG is at least as guilty as the defendants are,” Mr McDonald said, while noting his client denied all wrongdoing.

He also noted that section 88 of the Building Societies Act placed a special “duty” on auditors of buildings society to tell its members of its concerns, but this did not happen.

The court also heard that Mr Cooney had appointed an expert to review a number of detailed reports prepared by KPMG on the society over the years. Mr McDonald said his client believed that 49 of the 51 recommendations made by KPMG to improve the society were carried out.

Maurice Collins SC, for IBRC, confirmed his side did not intend to join KPMG to the case as a defendant but denied the proceedings were a public relations exercise.

Mr Justice Kelly ruled Mr Cooney had met, “with ease”, the low threshold necessary for joining a third party and granted his application to join KPMG as a third party.

Claims against KPMG
Mr Cooney's claims against KPMG will be dealt with at the end of the hearing of the proceedings brought by IBRC, which took over Irish Nationwide loans, against him and three other former non-executive directors – Stan Purcell, David Brophy and Michael Walsh – over losses of some €6 billion at the society between 2008 and 2010.

Former INBS chief excecutive Michael Fingleton is being separately sued.

*This article was amended on February 18th to correct an error