Analysis: Nama left with a lot more questions to answer

Taxpayer value and conflicts of interest are key criticisms levelled at Nama

Seamus McCarthy: “the decision to sell the loans at £1.3 billion involved a significant probable loss of value to the State”

Seamus McCarthy: “the decision to sell the loans at £1.3 billion involved a significant probable loss of value to the State”


Comptroller and Auditor General (C&AG) Séamus McCarthy’s report into Nama’s £1.3 billion sale of its Northern Ireland loans challenges the agency’s claims it got the best deal for taxpayers.

It also criticises the organisation’s response to the discovery of a conflict of interest involving its former adviser Frank Cushnahan.

US company Cerberus Capital Management’s purchase of the property loans – dubbed Project Eagle – in April 2014 has been mired in controversy since it emerged Ian Coulter, managing partner of Belfast law firm Tughans, transferred £6 million in fees for working on the deal to an Isle of Man bank account, without his firm’s knowledge.

Cushnahan, a former member of the agency’s Northern Ireland advisory committee and a close associate of Coulter’s, was recorded by BBC Northern Ireland’s Spotlight programme earlier this year claiming the money was meant for him.

The report, the result of one of several investigations into the deal, argues the £1.3 billion for which Nama originally decided to sell the loans was £190 million less than the £1.49 billion its own calculations showed it would have realised from working them out, that is keeping the loans while the developers paid off their debts.

“As a result, the decision to sell the loans at £1.3 billion involved a significant probable loss of value to the State,” the report says. It stops short of drawing any conclusions about the merits of Nama’s own argument for taking the decision at the time. The agency ultimately sold the loans for £1.3 billion, as it had separately disposed of a number of debts originally included in the deal.

Alongside its position that it got the best possible price, Nama has always rejected claims a conflict of interest involving Cushnahan, Tughans and US lawyers Brown Rudnick threw a question mark over the entire sale.

In March 2014, the agency discovered one of the bidders – another US firm, Pimco – had agreed to pay the three of them a £15 million success fee, which they were to split equally.

Pimco became involved with the story early on. According to McCarthy, this actually deterred one company from bidding for Project Eagle, as it believed the US firm had an advantage over others.

Open market

Peter RobinsonStormont

The following autumn, when Nama learned of its interest in the Northern Ireland loans, it decided to auction them on the open market as Project Eagle.

However, Pimco left the auction within days of Nama discovering its fee arrangement with Cushnahan and the lawyers. The agency’s board regarded this as a serious issue and met shortly after the US company revealed details of the agreement.

Tughans and Brown Rudnick promptly switched to Cerberus, with which they stuck a similar deal. Nevertheless, Nama’s board approved the company as the preferred bidder for Project Eagle, on condition that it gave assurances that it was not paying any current or former agency executives or advisers.

Nama has used those assurances as a basis for arguing it conducted the sale process properly. However, the C&AG points out the agency only learned the law firms were advising Cerberus on April 2nd, shortly before the sale was agreed.

It says that once Nama knew of the success-fee agreement, this should have raised a red flag not just over Cushnahan but the lawyers as well.

Convincing explanations

McCarthy also argues that when Nama learned of Cushnahan’s involvement, it should have sought advice from the National Treasury Management Agency’s compliance unit, written to its former adviser seeking an explanation and sought the view of its agent, Lazards, on the likely impact on the sale.

Since the controversy broke in mid-2015, Nama has consistently rebuffed criticism with the twin arguments that there was nothing wrong with its conduct of the sales process and that, in any case, it got the best deal possible for the State and its taxpayers.

McCarthy’s report blows a hole in both those lines of defence and leaves the agency with a lot more questions to answer.