Former Quinn Insurance Limited (QIL) director Kevin Lunney has reached a settlement with the Central Bank, following an investigation into his alleged involvement in transactions as far back as 2005 that would threaten the insurer's financial standing.
It follows on from another one-time QIL director, Liam McCaffrey, agreeing a similar settlement last December, and brings the inquiry involving the two men to a close.
A Central Bank spokesman declined to comment on the terms of the settlements. The bank said that costs of the five-year inquiry, including seven days of public hearings last year before a three-person panel led by retired High Court judge Mr Justice Iarfhlaith O'Neill, will be published "in the near future".
In May 2015, the Central Bank ordered an inquiry be set up to look into allegations that Mr McCaffrey, former chief executive of Quinn Group and one-time director of QIL, and Mr Lunney had been involved in eight subsidiaries of the company providing guarantees against loans to the wider Quinn Group, without the knowledge of the insurer's board or investment committee.
The Quinn Group loans, arranged between 2005 and 2007, amounted to €1.2 billion.
The guarantees undermined the ability of QIL to rely on the subsidiary assets to form part of a reserve of money set aside to meet insurance claims, if necessary, the inquiry heard in public sessions in May 2019. QIL fell into administration in March 2010 after a hole was discovered on its balance sheet, and was taken over a year later by Boston-based Liberty Mutual Group.
Both men said they were unaware of the nature of the guarantees at the time of the Quinn Group refinancing, as they signed reams of documents giving rise to the deals.
The inquiry into the two men came after QIL was fined €5 million in 2013 for failing to maintain adequate solvency reserves and having insufficient internal control mechanisms. The amount was waived because the firm was in administration.
Quinn Industrial Holdings
Mr McCaffrey and Mr Lunney are top executives at Quinn Industrial Holdings (QIH), a cement-to-plastics conglomerate rescued from the implosion of businessman Sean Quinn’s business empire following the financial crash, and now under the control of three US investment funds.
Mr Lunney was subjected to a kidnapping and violent attack in September last year amid a long campaign of intimidation against QIH and its top executives.
“Given the circumstances arising for the individuals at the time the these settlements were concluded, which were unrelated to the Inquiry, the Central Bank will not be making any further comment in relation to the settlements,” the bank said.
Since 2006, the Central Bank has imposed monetary penalties of more than €105 million through enforcement actions, mainly reached by settlements that did not involve public inquiries. The bank successfully defended itself in the High Court in 2017 after the two former QIL challenged the inquiry.
"The Central Bank will not shy away from deploying the full suite of powers available to it and publicly defending those powers," said Seana Cunningham, the bank's director of enforcement.
“The important take away here is that the Central Bank may use the full extent of its powers, including pursuing cases to inquiry, in order to promote compliance and high standards in financial services.”