Bad blood lingers in Dublin financial circles over Bloxham dissolution

Fallout continues from implosion in 2012 of State’s then third-largest stockbroker

The Central Bank waited until Monday morning, just as the markets were opening, to send out its alert. The five-line statement – issued at 8.16am – sent a shock wave through Dublin's close-knit financial community. Bloxham Stockbrokers had been directed to cease trading following the discovery of "financial irregularities".

The firm’s 17,000 private clients had – with immediate effect – been transferred to rival Davy along with its fund management business.

So began the implosion of the State’s oldest and third- largest stock-brokering firm.

The date was May 2012, three years after the collapse of Anglo Irish Bank had supposedly ushered in a new era of financial regulation and two years after the Quinn Insurance debacle effectively bust the State's insurance compensation fund.


Central to Bloxham’s demise was a €5.3 million hole in its accounts. To a firm that declared a profit of €2.4 million in 2010, this was no small chunk of change.

Trading losses and payments had been mis-stated, or more precisely, recorded as assets instead of liabilities, from as far back as 2007, inflating the firm’s capital position by €5.3 million.

As it was required to hold a minimum of €5.6 million in capital to maintain its licence as a broker, the firm had effectively been trading without the required regulatory reserve.

Significantly, these discrepancies escaped its auditor Deloitte, which signed off on several sets of annual accounts in the period leading up to the firm’s collapse.

The discrepancies also escaped the Central Bank, the State’s financial regulator, which would have perused quarterly financial and capital returns as well as annual financial statements.

The bank was eventually alerted to anomalies in the firm’s accounts courtesy of a routine email filing to the regulator, which inadvertently showed a column of numbers that Bloxham had not intended to reveal.

Now, three years after initiating its own investigation, the Central Bank has still not published its report into the matter, raising questions about its own role.

"An extensive investigation is actively continuing and, once concluded, decisions regarding any possible future enforcement options will be made. Until such time as the investigation is completed, we are not in a position to comment," the bank told The Irish Times.

The Chartered Accountants Regulatory Board plans to conduct its own investigation on foot of what emerges from the Central Bank’s probe.

Liquidator Kieran Wallace initially intended to pursue a case against Deloitte over its failure to spot the hole in the accounts but was later advised against it on cost grounds. Deloitte has declined to comment.

How Bloxham got itself into this mess remains a mystery. From the outset, the brokerage, which operated as an unlimited partnership, insisted that apart from its financial and compliance partner Tadhg Gunnell the remaining six partners had not been aware of the problems until the last minute.

Mr Gunnell was immediately suspended in the wake of the collapse and now works for electricity provider Pinenergy, set up by his brother, of which rugby star Paul O'Connell is a director.

The six other partners successfully managed to re-house themselves with other brokerages. Former manager partner Pramit Ghose is now a senior strategist with Davy. Former head of asset management Niall Tinney works with Merrion. Bloxham's former head of private clients Paddy Finnegan was also with Merrion until recently but is now working as an independent consultant. Its head of institutional bonds, Peter Costigan, works for Cantor Fitzgerald. The former head of institutional equities Patrick Dempsey is with Goodbody, while former partner in institutional equities Ray Deasy initially worked for Lazard in Britain but is now understood to be between jobs.

The partners all declined to comment to The Irish Times or could not be contacted.


The fallout, however, continues, with Danske Bank pursuing the partners for €34 million lent to the brokerage through its Irish subsidiary National Irish Bank.

Some €14 million of this was used to fund a partnership buyout in 2007-2008, which saw long-time partner Angus McDonnell among others step aside, and Mr Tinney and Mr Finnegan come on board as equity partners.

The bank, which is represented by Dublin solicitors Ivor Fitzpatrick, is alleging that the financial accounts on which the loans were based were "faulty".

Danske obtained a judgment against Mr Gunnell in the amount of €2million last year. He subsequently applied for bankruptcy and last month was declared a bankrupt by the High Court.

The €2 million judgment in favour of Danske will rank as an unsecured debt in his estate, which now vests with the official assignee.

Mr Ghose reached a settlement with Danske last year, with the bank filing a notice of discontinuance. Four of the other five partners have court dates listed for this year. Mr Tinney and Mr Finnegan have filed defence motions.

Danske will most likely wait to see what it can recoup from the liquidation process, which is still ongoing, before taking any further action. However, it will have to take its place in line behind Revenue and former Bloxham staff.

Last year, the liquidator tried unsuccessfully to retrieve €6 million that would have accrued to Bloxham – had it stayed afloat – from the privatisation of the Irish Stock Exchange, of which it had been a founding member.

Another crucial aspect of the tale relates to the collapse of Bloxham's controversial Saturn bond. The brokerage had sold about €30 million of the bonds created by German bank Dresdner in conjunction with US investment bank Morgan Stanley to 155 mostly Irish- based investors, including several religious orders, in 2005 and 2006.

The termination of the bond in 2009 led to losses of 97 per cent for investors on the bonds.

At the time of Bloxham’s demise, Morgan Stanley was facing claims for damages of €20.5 million in London from investors arising from litigation over the sale of the bonds. Bloxham was joined to those proceedings by Morgan Stanley, which was seeking an indemnity and a contribution from Bloxham, given that the claim was taken mainly by Irish investors.

The Saturn investors claimed the bonds should have been redeemed when a mandatory redemption clause was triggered in early 2009.


In a counterclaim, Bloxham sued Morgan Stanley for an alleged breach of contract and for losses arising from having being exposed to claims by its clients.

Significantly, nowhere in Bloxham’s accounts did it flag that its potential liability arising out of the litigation was grossly underinsured – an issue that was to result in several other legal wrangles. This raises further questions around the auditing and regulatory oversight of the brokerage.

The Saturn case was eventually settled in London with Morgan Stanley shelling out 60 cent on the euro to investors only weeks after Bloxham's collapse. Morgan Stanley covered Bloxham's part of the bill. The bank would not confirm if it was still seeking a contribution from the brokerage.

The story of Bloxham’s fall has undoubtedly been overshadowed, at least in the public’s mind, by bigger and more systemic banking scandals. The fact that the financial repercussions fell directly on the shoulders of its partners and creditors may explain why the official investigation has dragged on for so long.

Nonetheless, the speed of its dissolution, and the reasons why, remain the source of much bad blood in Dublin’s financial quarter, not least because former staff feel they were left high and dry by management.