Claims of Dunne’s insolvency focus of defence’s questioning

Expert witness in US trial alleges Sean Dunne was insolvent from ‘end of 2007 into 2008’

Sean Dunne: claim he was insolvent by the late 2000s is key to allegation he transferred tens of millions in assets to his wife Gayle Killilea and others to shield them from creditors.  Photograph: Collins Courts

Sean Dunne: claim he was insolvent by the late 2000s is key to allegation he transferred tens of millions in assets to his wife Gayle Killilea and others to shield them from creditors. Photograph: Collins Courts

 

Defence lawyers sought on Thursday to poke holes in an expert witness’s conclusion that Sean Dunne was effectively insolvent as of late 2007. This is the fourth day of the once-high-flying property developer’s American civil trial.

The plaintiff’s claim that Mr Dunne was insolvent by the late 2000s is key to proving his allegation that Dunne transferred tens of millions of euro in assets to his wife Gayle Killilea and others during that period to shield them from creditors.

The plaintiff is the trustee for the 2013 bankruptcy that Dunne filed in the United States. The trustee is suing Mr Dunne in the US district court in New Haven, Connecticut, to claw back properties and other assets Mr Dunne gave his wife and other relatives so he can pay off Mr Dunne’s creditors.

The couple’s lawyers deny any scheme to damage creditors, saying Mr Dunne transferred the assets out of love for his spouse and children and that he was solvent at the time.

Dublin chartered accountant and insolvency expert George Maloney – hired by the plaintiff as an expert witness to review Dunne’s finances as well as those of his companies – testified on Wednesday afternoon the real estate man was effectively insolvent starting “the end of 2007 into 2008”.

Cash flow conclusion

Mr Maloney told the jury he based his conclusion on cash flow instead of balance sheets because the unfolding property crash had rendered property values unreliable. He defined insolvency as the inability to pay debts.

In his cross-examination, which began late on Wednesday and extended into Thursday morning, Ms Killilea’s lawyer, Peter Nolin, challenged Mr Maloney’s methodology and reading of certain documents. Under questioning from Mr Nolin, Mr Maloney said he had focused on the solvency of the totality of Mr Dunne’s businesses, not the individual businesses. He justified his approach by noting that they were mostly backed by personal guarantees.

Mr Nolin sought to sow further doubts by citing a lien released by Ulster Bank in 2008, a Royal Bank of Scotland loan to Dunne that same year and other documents that appeared to show banks were still working with him when Mr Maloney contended he was insolvent.

“Why would a bank be releasing a lien if he was insolvent?” Mr Nolin asked.

Personal guarantees

Under Mr Nolin’s questioning, Mr Maloney confirmed that Ulster Bank only invoked Mr Dunne’s personal guarantees until 2010 and the National Asset Management Agency, created by the Irish government to take in bad loans, did so in 2011.

During redirect by the plaintiff’s lawyer, Mr Maloney explained the Ulster Bank lien was released because Mr Dunne had a partner in the project and the Royal Bank of Scotland loan was a refinance that essentially replaced debt with debt. He further explained that Nama was only created in 2009 and didn’t get up to speed until late 2010.

Mr Nolin also sought to suggest that no one could have seen the coming property crash, citing the book The Big Short in which only a tiny minority foresaw the disaster. Mr Maloney disagreed, saying it was clear a disaster was coming.

About halfway through Mr Maloney’s testimony, Judge Jeffrey A Meyer called a recess and, with the jury removed, admonished Mr Maloney for dodging and evading questions and being argumentative with Mr Nolin. He said he was “stunned” by Mr Maloney’s conduct and instructed him to answer questions in a more forthright manner.

Ms Killilea sat at the defence table on Thursday as she has since the trial began on Monday. The plaintiff is expected to call her as witness in the coming days.