Time for a conflict liquidator to take on INBS?

As auditors of Irish Nationwide, KPMG watched for decades as the society mutated

Economist Colm McCarthy

Economist Colm McCarthy

Sat, Jul 5, 2014, 01:01

As liquidator of Irish Nationwide, KPMG finds itself trying to work out just who, if anyone, should pay for the society’s being allowed run out of control at an ultimate cost to the taxpayer of €5.4 billion.

To put this number in context, the economist Colm McCarthy has said that in one-dollar bills laid out end-to-end it would stretch to the moon and back 1½ times.

The problem is that the list of suspects includes KPMG itself. As auditors of Irish Nationwide, KPMG watched for decades as the society mutated from an old-fashioned lender into a funder of choice to the biggest property gamblers of the bubble.

From 2000 on, KPMG completed report after report for the society’s board which found that Irish Nationwide was riddled with flawed and reckless practices.

The KPMG audited accounts presented to the society’s members annually gave little sense of these serious issues, which were never properly addressed by the society.

KPMG belatedly appointed an external legal advisor to independently review whether it should sue, and they are due to report shortly. But if the firm wants to protect its reputation it should go further.

It should remove itself entirely by appointing a conflict liquidator to consider pursuing a potential claim. There is legal and practical precedent for this, such as in the case of Weavering Macro Fixed Income Fund Limited, where Ernst & Young feared a conflict of interest as liquidator in litigation and got a court order to appoint Grant Thornton as “conflict liquidator.” In the UK there are other practical examples.

Appointing a conflict liquidator removes the potential for any real or imagined chance that every avenue would not be pursed to get the maximum money back. The same should be done in the Irish Nationwide debacle.

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