A ploy that ranks high in the league of Irish scandals

ANALYSIS: The Quinn family is claiming that the debt is 'tainted with illegality' and that, as a result, it does not have to be repaid

THE EFFORTS of Seán Quinn and his family to put assets worth about €500 million beyond the reach of State-owned Anglo Irish Bank belongs high up in the premier league of Irish scandals.

If successful, the ploy would have seen family members ending up as multimillionaires while society laboured to pay off their debts by way of increased taxes and reduced public services.

Members of the family have admitted in sworn evidence that they set out to place their international property portfolio beyond the reach of State-owned Irish Bank Resolution Corporation, which now incorporates Anglo.

This is despite the fact that there is no dispute over the bank’s claim that it has legal security over Quinn property-holding companies that, in turn, own shopping centres, office complexes and logistics parks in such places as Kiev, Moscow and Hyderabad.

The security was given in return for loans worth hundreds of millions of euro that were issued by Anglo and that the family cannot now repay.

IBRC says the family owes it €2.88 billion. The family disputes this, saying much of this debt was issued as part of an illegal scheme to shore up the Anglo share price at a time when the bank was in danger of collapse. The family is claiming that the debt is “tainted with illegality” and that, as a result, it does not have to be repaid.

The key point, however, is that the family’s claims in this regard have yet to be heard by the courts.

Nevertheless the family, by its own admission, initiated a covert scheme to put the properties beyond the reach of the bank by moving them outside the holding company structure over which the bank has security.

Furthermore, although a large part of the debt being claimed by the bank is disputed by the family, there is no dispute over loans of about €455 million, a fact noted by Ms Justice Elizabeth Dunne in her contempt judgment yesterday.

Instead of trying to deal in a straightforward and upfront way with this debt, the family has instead sought to render valueless the bank’s legal security.

“The behaviour of the respondents outlined in evidence before me is as far removed from the concept of honour and respectability as it is possible to be,” the judge said.

In June and July last year, Mr Justice Frank Clarke, following an application to the courts by IBRC, ordered the family to stop its efforts to put the assets beyond the bank’s reach.

Ms Justice Dunne, in her reserved judgment yesterday, agrees with the bank’s claims made earlier this year that Seán Quinn, his nephew Peter Darragh Quinn and his son, Seán Quinn jnr, continued in their efforts after the orders from Mr Justice Clarke to desist were issued.

The family’s scheme came undone after it emerged that a Belize company, Galfis, to which the right to a large amount of money associated with a Moscow office block was purportedly assigned in April of last year, before Mr Justice Clarke’s order, was only a shelf company at that time. The right to the funds, it emerged, could only have been assigned after the orders of Mr Justice Clarke.

Other evidence emerged that contributed to yesterday’s decision, which was arrived at the level of proof of being beyond a reasonable doubt.

The judge decided not just that deceitful and dishonest steps continued to be taken in pursuit of the Quinn family scheme after Mr Justice Clarke’s orders but also that the three men gave untruthful evidence to her earlier this year in their efforts to deny this was so.

The application brought by IBRC was for the committal and/or attachment of the three men for contempt. Yesterday Ms Justice Dunne said the main issue now would be the extent to which the family co-operated with the bank in helping it seize the valuable property portfolio.

It is worth noting that rents worth tens of millions of euro have been produced by the properties during the year since the bank first sought to seize them. The whereabouts of this money is not clear and there have been suggestions that rent from property in Russia has been transferred offshore.

Ms Justice Dunne said the level of co-operation offered by the Quinns will influence her decision as to what consequences should flow for the three men given her findings of contempt. She said it would be difficult to persuade her that some level of punishment was not required, given all that has transpired. She will consider the issue on Friday.

The Quinn-IBRC saga has cost millions in legal bills over the past year and shows every sign of continuing for some time.

Earlier this month the bank secured orders in the High Court prohibiting the Quinn children and others from reducing their individual assets below €50 million.

The bank claimed the family was continuing in its efforts to put assets beyond the bank’s reach, with steps occurring even as the contempt hearing was being heard before Ms Justice Dunne in May.

The freezing orders were against the five Quinn children – Aoife, Ciara, Colette, Brenda and Seán Quinn jnr – sons-in-law Stephen Kelly and Niall McPartland and nephew Peter Darragh Quinn.

The Quinn family’s fortunes have fallen a long way and may yet fall further.

WHAT HAPPENS NEXT: JUDGES SAY PUNITIVE AND COERCIVE ASPECTS TO RULING LIKELY

Lawyers for the Irish Bank Resolution Corporation are to make a written submission today in relation to what the court should do arising from the finding that Seán Quinn snr, Seán Quinn jnr and Peter Darragh Quinn have acted in contempt of orders of the High Court.

The submission is to be given to Ms Justice Elizabeth Dunne and the three Quinns by 8pm.

The judge will then sit on Friday morning to give her ruling.

Yesterday she said the issue of coercing the Quinns – getting them to give the bank full control over the assets sought – would be given priority, given the amount of money involved in the case.

She said the level of co-operation given to the bank by the Quinns would influence her decision as to what should happen to the Quinns.

However, the judge also said that, given all the circumstances of the case, it would be difficult to persuade her that there should not be a “punitive” as well as a “coercive” aspect to her ruling.

The case taken against the three Quinns by IBRC sought their attachment and, if necessary, their committal for breaching the 2011 order that they desist from their efforts to frustrate IBRC from seizing the property portfolio over which it has security.