A group of disgruntled investors – mostly farmers from Munster who invested €21 million in a boomtime Polish property fund only to suffer catastrophic losses – have joined forces to launch legal action against the fund's promoters and associated property developers.
The Polska Fund was set up in 2005 in a partnership between the investment company SWS Corporate Services and Castle Carbery Properties, a property company founded by Cork dairy farmer-turned-developer Michael Scully.
The highly-geared fund acquired a number of sites in Warsaw and Krakow, which were to be used to build apartments, although it is understood that the proposed €100 million of developments were never built.
The investors are now sitting on massive losses, with almost all of the equity believed to have been eaten up with various fees and costs.
The fund was promoted by SWS Corporate Services, which was later bought by Merrion stockbrokers. The development work was to have been carried out by Castle Carbery, in partnership with a Polish-based Irish accountant, Padraic Coll. Mr Scully has previously described Castle Carbery as an “advisor” to the fund, and the “manager of its day-to-day operations”.
Some of the investors have teamed up with a Cork law firm, David O'Meara & Sons, in an attempt to recoup some of their losses. The firm has filed 30 separate lawsuits on behalf of the investors in recent weeks, against Shinagh Estates Corporate Services (formerly SWS), Castle Carbery, Polska Fund Nominees and Merrion.
Merrion, which did not raise any of the cash for the fund, declined to comment this week. Mr Scully also declined to comment when asked to explain the poor performance of the fund, and referred all queries to Merrion. Accounts for Polska Fund Nominees say that in 2010, the investors invoked “an event of default against the developer overseeing the investment projects”.
Mr Scully was a dairy farmer who during the boom turned first to property syndicates, and later to development, raising much of his capital from the farming community. In 2008, Castle Carbery claimed to have a pipeline of €1 billion of developments in Poland. Its latest accounts show less than €750,000 in shareholders funds.