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Ciarán Hancock: Nama can't just shrug off criticism of Project Eagle

Agency fails to recognise process failures or respond with humility to the PAC report

At midday yesterday the Oireachtas public spending watchdog produced a hard-hitting report into the National Asset Management Agency's sale of the Project Eagle portfolio in 2014 to Cerberus for €1.43 million.

This gave rise to a loss of €800 million for Nama on its Northern Ireland debtors and was on top of the €2.75 billion discount initially applied to the loans by Nama when they were acquired from the banks.

The Public Accounts Committee (PAC) was "firmly" of the view that the sale strategy pursued by Nama in selling these loans was "seriously deficient".

It also found that Nama's failure to effect Frank Cushnahan's removal from its Northern Ireland advisory committee once he had disclosed that he was acting as a consultant to six of Nama's debtors in the North was a "failure of corporate governance".



In addition, the committee found it was not appropriate for Nama, as the contracting body, to meet Cerberus representatives on the day before the Project Eagle bid closing date.

“It could have given the perception that Cerberus was benefiting from preferential treatment,” PAC chairman Seán Fleming said.

The PAC’s view was that the Nama board was not informed of the extent of the financial loss that would be recorded in Nama’s accounts as a result of setting the minimum reserve price of £1.3 billion. This is disputed by Nama.

This whole saga dates back to late 2012, when discussions took place between US law firm Brown Rudnick and Tughans Solicitors on the concept of a Nama sale of its Northern Ireland portfolio.

The following year, these two firms, along with US private equity group Pimco met with the then Northern Ireland first minister Peter Robinson and his minister of finance, Sammy Wilson, to discuss such a sale.

In September 2013, Nama received an expression of interest from Pimco for the Northern Ireland portfolio.

In December, Pimco submitted an indicative bid of between £1.1 billion and £1.3 billion.

Pimco dropped out of the process in March 2014 after disclosing to Nama that a success fee was payable to Brown Rudnick, Tughans and Cushnahan.

The PAC believes Pimco’s initial offer subsequently influenced Nama’s thinking on the actual sales process that took place in 2014.

“I believe that Nama was influenced by the Pimco offer when deciding on the minimum reserve price and key elements of the sales process,” Fleming said.

In the round, the PAC said Nama had been “unable to demonstrate” that it had got “value for money” for the State by pursuing its sales strategy for Project Eagle.

Given the many adverse findings from the PAC, which was unanimous in its criticisms of Nama, you might have thought that State agency would look deep into its soul, consider the report at length and respond accordingly.

Instead, within four hours it had published a statement effectively dismissing the PAC’s findings.

“Nama disputes the suggestion that an alternative monetisation strategy would have delivered a better financial outcome,” it said.

“It was the board’s commercial and considered judgment, in full knowledge of the financial implications, that this sale provided a better financial outcome than any alternative monetisation strategy. That was the board’s view in 2014 and it remains the board’s view today.”

No humility

There was no acknowledgement of process failures on its part at the time, or any sense of humility in its response.

Having previously and very publicly thrashed the findings of the Comptroller and Auditor General in relation to his findings about the Project Eagle sale, it simply shrugged its shoulders to the findings of PAC, a key Oireachtas watchdog.

When asked if anyone would be held accountable for the failures identified by the PAC, the response was that the “issue does not arise”.

Nama always knows best, it seems.

The PAC welcomed the proposed commission of investigation into Project Eagle, which will seek to to really get under the skin of the transaction.

This could be a case of throwing good money after bad, especially as it is likely to be hamstrung by the fact that there are criminal inquiries under way, and investigations of one sort of another taking place in Ireland, the UK and the United States.

A number of the main players in the transaction also live outside the State and cannot be compelled to co-operate.

Most likely, this commission will take years to complete and cost millions of euro, by which stage Nama will have been wound up and its senior players will have moved on to other roles.

For taxpayers, it will be another case of heads you lose, tails you lose.

Twitter: @CiaranHancock1