Former Quinn Group chief executive Liam McCaffrey claimed on Tuesday that lawyers in A&L Goodbody – acting for the cement-to-plastics conglomerate – “organised everything” on the legal front of a €1.2 billion refinancing deal more than a decade ago that threatened the financial standing of the group’s insurance arm.
Mr McCaffrey, also a one-time director of Quinn Insurance Limited (QIL), and Kevin Lunney, a former group executive and QIL director, are subject to an inquiry into their alleged involvement in subsidiaries of the insurer providing guarantees against the group loans – without the knowledge of the insurer's board or investment committee.
The Quinn Group loans, arranged by UK banking giant Barclays between 2005 and 2007, amounted to €1.2 billion in total. The guarantees given by eight QIL subsidiaries weakened the quality of their assets, which formed part of the insurer’s key technical reserves.
“In terms of execution, A&L Goodbody quarterbacked this process,” Mr McCaffrey said on Tuesday, the fifth day of public hearings at the inquiry in Dublin. “In working through the logistics, we placed – or I certainly placed – a lot of reliance on A&L Goodbody.”
Mr McCaffrey said the Irish law firm dealt with solicitors for overseas units of Quinn Group as well as lawyers working for banks and bondholders that extended funds during the period under investigation. He told the inquiry that the Quinn Group was worth up to an estimated €2.6 billion at the time.
Mr McCaffrey said he erroneously signed two documents – out of “somewhere in the region of 1,000 documents” he was given to sign as part of the refinancing – that placed guarantees with QIL subsidiaries. He conceded that QIL board meetings authorising the guarantees “were unlikely to have taken place”.
The former group CEO said there was “considerable reflection” given to the need for QIL, as a regulated company, not to have any liabilities as a result of the Quinn Group refinancing. He also believed that the position of the subsidiaries was raised at one stage in August 2005, on reviewing group exchanges from the time with A&L Goodbody. However, he said this issue was seemingly “somehow just forgotten about”.
Adrian Burke, a partner with A&L Goodbody, who led the legal team that advised on the Quinn Group refinancing, last week rejected claims that his firm had failed to discharge its duties in relation to the €1.2 billion debt-raise, as the law firm was not acting for QIL at the time.
Mr McCaffrey also noted that PwC, the external auditors of QIL and four of the relevant QIL subsidiaries at the time, didn't raise any matters of concern relating to the effect of the guarantees on the insurance company.
QIL fell into administration in March 2010 as a hole was discovered on its balance sheet, and was taken over the following year by Boston-based Liberty Mutual Group.
Asked by Paul Anthony McDermott, SC, representing the Central Bank’s enforcement division at the inquiry, whether he is more cautious about documents he signs in his current role, Mr McCaffrey said: “I think, Mr McDermott, I’d be a very foolish man if I haven’t learned from this.”
The Quinn Group was seized by Anglo Irish Bank in 2011. Mr McCaffrey and Mr Lunney are currently top executives at Quinn Industrial Holdings Limited (QIHL), the building products and packaging business that was once part of the Quinn Group. QIHL is controlled by three US hedge funds.