A former senior manager at failed lender Irish Nationwide Building Society (INBS) has told the High Court that he was left “absolutely shocked” after being told that Michael Fingleton Sr had given an alleged “get out of jail card” to a borrower who could not repay a multi-million euro loan.
Conal Regan, who joined the bank after Mr Fingleton Snr left the society in April 2009, on Wednesday told the High Court that the defendant allegedly wrote a letter to one lender who borrowed almost €6 million to purchase land in Co Meath in October, 2007, confirming that the sum loaned to him was “non-recourse”.
A non-recourse loan means that debt on a loan is secured by the collateral only and the borrower cannot be pursued by the lender.
The High Court civil case against the former INBS chief executive and managing director Mr Fingleton Snr, which is in its third week, alleges that he negligently mismanaged the building society and engaged in property “gambles” with high-net-worth individuals in an informal and speculative manner in the mid-2000s, leading to fatal losses.
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Mr Fingleton Snr (87), who cannot give evidence due to ill-health, joined the building lender in 1971 and retired in 2009 after holding the roles of both managing director and chief executive in that time. At its height in 2007, INBS had reported assets of €16 billion but was a high-profile casualty of the financial crisis of 2008.
Liquidators for Irish Banking Resolution Corporation (IBRC) have taken the case against Mr Fingleton Snr, who denies the allegation of negligent mismanagement. The total losses at INBS had been estimated to be €6 billion.
However, only €290 million in damages is being pursued by IBRC, relating to five specific loans, allegedly approved by Mr Fingleton Snr. The court has been told that Mr Fingleton Snr was allegedly “nodding through” top-ups and extensions to certain clients without the knowledge of the society’s board.
At the High Court on Wednesday, former INBS manager Mr Regan, who joined the society in late October 2009, said he was dealing with”significantly” distressed “credits” at the lender.
When Mr Regan queried and tested loans issued to the lender, he was told by letter from the lender that the money advanced to him were all “non-recourse” loans.
Lyndon MacCann SC, for IBRC’s liquidators, was told by Mr Regan that a February 2009 letter from the lender to a manager at Nationwide, referred to a list of borrowings by the lender and other individuals that stated “nobody was getting any younger”. The witness said the manager wrote back saying that all loans to the lender were made on a non-recourse basis.
Mr Regan said he could not find any reference “anywhere” in the paperwork about a non-recourse element in loans to the lender for lands in Meath – measured at 21,700 acres – at €5,987,850.
Mr Regan said he had looked at the files regarding this lender’s loans and that “non-recourse was mentioned nowhere. Nowhere”.
Mr Regan told the court he asked the manager “why in the name of God” the letter of confirmation was issued, and claimed the manager told him: “I was only doing what the boss told me to do”.
“I just could not understand that somebody could possibly believe that letter would trump agreements or legal documents signed and on a ‘normal-recourse’ basis. All of a sudden there is this and it just didn’t make sense,” Mr Regan told the court.
Mr Regan said he had looked at the files regarding the lender’s loans and that “non-recourse was mentioned nowhere. Nowhere”.
Mr Regan told the court he asked the manager “why in the name of god” was the letter of confirmation issued and claimed that the manager told him: “I was only doing what the boss told me to do”.
Mr MacCann asked who was being referred to as “the boss”, to which Mr Regan said he was told by the manager that this was a reference to Mr Fingleton Snr.
Later in December, the court heard the lender wrote to Mr Regan saying that as far as he was concerned, all of his business with the society was on a non-recourse basis and that this had been agreed by Mr Fingleton Snr.
Mr Regan told Mr Justice Michael Quinn that it was a “shocking assertion” and that “individuals were not even putting hands in their pockets” if they had a “free bet” on getting planning or zoning for lands.
“It was a get out of jail card. It was incredible. I have never, never come across it before,” said Mr Regan.
In response to a request for any documentary evidence as to the agreement between the lender and Mr Fingleton Snr, the witness said the lender wrote back on March 25, 2010, enclosing a letter of confirmation of the non-recourse loans from Mr Fingleton Snr stating: “I trust this brings matters to a conclusion.”
Mr Regan said he was left “absolutely shocked” by the letter from Mr Fingleton Snr.
The case continues at the High Court.
This article was amended on the 21st of May.
