How the Quinns' Anglo gamble cost the State millions

Seán Quinn’s children potentially remain on the hook for €88m each despite IBRC settlement

Seán Quinn’s daughters, Aoife,  Brenda, Colette and Ciara,  outside the High Court in Dublin. Photograph: Collins

Seán Quinn’s daughters, Aoife, Brenda, Colette and Ciara, outside the High Court in Dublin. Photograph: Collins

 

After years of battling the State on various fronts, support for the former billionaire Seán Quinn appears to be waning in his native Cavan/Fermanagh area. “Close to Ballyconnell [where Quinn lives] there’s still strong support, but as you move out from there, it weakens. It’s not like it was a few years ago,” said one local source with knowledge of the topic.

The High Court settlement this week between the 71-year-old’s five adult children and the State-owned Irish Bank Resolution Corporation (IBRC), will be a further blow to Quinn’s reputation and will further weaken local support, according to the source.

“They were saying wait until the court case, that it would show that the [Anglo loans which lay behind the seizure of the Quinn Group in 2011] were not legal, but that’s gone now. They had even been saying that the Quinns might get everything back. But you can’t think that now.”

However, many still admire what Quinn did in the past, when he created a profitable industrial group in a Border area that had a sore need for the good employment it provided.

Some have interpreted the decision this week to settle with IBRC as indicative of a desire on behalf of Seán Quinn’s adult children – Colette, Ciara, Seán jnr, Aoife, and Brenda – to put distance between their own affairs and those of their driven and forceful father.

“We are just forgetting about it and trying to move on with other things,” Seán jnr said when contacted by The Irish Times after this week’s High Court settlement was announced.

One of the decisive moments in the proceedings that have just been settled, had to do with the childrens’ relationship with their father.

Quinn apparently had the aspiration to leave each of his children with a €1 billion inheritance

The ruling by the judge that they could not introduce a new argument to their case, to the effect that they had been unduly influenced by Seán snr when they had signed documents supporting loans being issued by Anglo to their father to support his highly-risky investment in Anglo shares, led directly to the settlement negotiations.

There were two cases involved in the settlement, one in which the children were challenging the multibillion loan arrangements that led to the Quinn Group being seized, and another where IBRC was alleging conspiracy against the children and others, saying that they had sought to improperly frustrate the bank from seizing international properties worth more than €500 million, over which the bank had title.

That the father was a dominant figure in the family was evident to observers from an early stage. In hearings in Belfast in 2011, Seán snr, when discussing his business affairs, moved easily between business decisions he made, and the establishment of companies in his childrens’ names that were to be used to implement these decisions.

It was his plans for his children and his thoughts about how to hand on the huge business he’d created, that led to the decision in 2002 to transfer ownership of the Quinn Group to them.

The valuable international property portfolio Quinn began accumulating in the early 2000s was also held in the names of the children, with Quinn apparently having the aspiration to leave each of them with a €1 billion inheritance.

The children have all been close to their father’s business activities most of their lives. In-laws and relatives also became strongly involved, both in the running of the business and the litigation and controversial events that erupted when all that Quinn snr had created, began to implode.

Business empire

Brenda, the youngest, was just 15 at the time she and her sisters and brother became the owners of their father’s business empire. She followed her siblings into the family’s group of businesses, worked summer holidays in the Slieve Russell Hotel and in the group’s head office in Derrylin, which is on the site of Quinn snr’s former family home and farm.

In a witness statement prepared for the courts, Brenda said she was “broadly aware” of her family’s business activities when she was growing up and knew the group of industrial businesses was “very profitable”.

“From a very young age I was aware that the Slieve Russell Hotel was owned by me. The hotel is located very close to our home and was the asset with which I was most familiar with from a very early age,” she said.

By the time her father’s reckless investments in Anglo shares was about to bring the house down, she was studying in Galway. She had to slip away from lectures to sign and fax signature pages on loan documents to Quinn headquarters in Fermanagh, to provide guarantees and pledges as co-owner of a multibillion euro conglomerate.

Once, in March 2008, when Anglo’s share price began to plummet, she had to ask a bus driver to drop her off at a hotel in Co Clare on her return from a college football game. A receptionist faxed back a signed document linked to her father’s Anglo investment.

Even grandchildren got mentioned during the court hearings that have taken place over the years. Some time back, the courts were told of a payment in June 2011, for €65,750 which went from the account of the then infant daughter of Ciara Quinn and her husband Niall McPartland to a company in Dubai, with the sum being used the next day to buy newly-issued shares in a property company in India called Mack Soft.

Seán Quinn jnr (right) and his brother-in-law Niall McPartland arriving at the Four Courts yesterday. Photograph: Courts Collins
Seán Quinn jnr (right) and his brother-in-law Niall McPartland arriving at the Four Courts. Photograph: Courts Collins

The net result was that the Dubai company got control of an 74,000sq m (800,000sq ft) multi-tenant office building in Hyderabad, India, called Q City, that was valued at more than €60 million.

The building was part of the Quinns’s international property portfolio and had up to then been owned by way of a corporate structure over which Anglo had appointed a share receiver. It was only earlier this year that IBRC managed to finally assert its title over this building, according to reports.

Property portfolio

The international property portfolio included office blocks, commercial units and a shopping centre, featuring assets located in Ukraine, Russia, Turkey and India and elsewhere. The investments were made in the early 2000s at a time when Quinn snr apparently believed that the return in such countries would be greater than on investments closer to home. The ownership structure was elaborate and global.

Quinn snr’s nephew, Peter Darragh Quinn, played an important role in the management of the portfolio, and when the Quinn empire began to come crashing down in 2011, he, according to his own evidence, sought to convince his uncle that they should take steps to prevent Anglo getting everything. Eventually, according to the nephew, Quinn snr agreed.

The family’s actions, the judge said, 'reeked of dishonesty'

A law firm in Dubai, Senat Legal, was engaged, and an elaborate international scheme began to be rolled out, which had as its aim the frustration of Anglo in its effort to seize the valuable portfolio.

In 2012, Mr Justice Peter Kelly, in the High Court, made the following comment about the scheme: “On the evidence which is before me, and which is not controverted, it appears that the Quinn family have created and operated a scheme of mesmeric complexity on a deliberate and premeditated basis which has cynically sought to achieve a twofold purpose . . .

“Its first object is to place assets which should be available to [IBRC] beyond that bank’s reach. Its second is to feather the Quinns’s own nests.”

The family’s actions, the judge said, “reeked of dishonesty”.

During court proceedings that year the family said that they had in fact set in train a scheme to frustrate the bank, but that they had in turn been double-crossed by the foreign parties with which they had teamed up. IBRC, for its part, said it believed the family remained in control of the valuable property assets.

The effort to fight against what the Quinns set in motion has been enormously expensive and has involved lawyers in the US, Russia, the British Virgin Islands, India, Turkey, Ukraine, and many other jurisdictions. The operation was overseen by McCann Fitzgeralds in Dublin, the law firm advising IBRC.

At one stage, IBRC teamed up with a powerful Russian asset recovery business called A1, to counter shadowy moves in Russian and Ukrainian courts that were allowing the asset stripping of properties in those jurisdictions. The A1 plan was not proceeded with after Russia invaded Ukraine in 2014, and the value of commercial property in both countries weakened. However, the costs associated with the plan are understood to have been in the region of €25 million.

Legal and other fees associated with defending the Quinn’s actions against the State, and IBRC’s effort to assert its legal title over the international property portfolio, are believed to in the region of €70 million, while a figure of that size again is thought to be involved in missing rental incomes and other funds taken from the property portfolio business during the period while the battle reigned.

Total cost

In total the cost to the public purse may be in the region of €170 million. As part of the deal agreed this week, both sides walk away with responsibility for their own costs.

Quinn’s dream of establishing a family of hugely wealthy children is now in shreds. The deal agreed with IBRC means the children, in order to avoid having agreed judgment orders for €88 million each being executed against them, will have to co-operate fully with IBRC in its efforts to seize and sell the international property portfolio. Control over most of the portfolio has already been established.

The portfolio is believed to be worth well in excess of €500 million, and so should be sufficient to clear the debts associated with the judgments. It is understood that, as part of the deal, it has been agreed that the five will be allowed retain their family homes.

IBRC has already managed to assert control over most of the property, but the co-operation of the family will assist in cleaning up the situation, which in turn should add to the value of the portfolio.

Sources close to IBRC believe that the family used some of the missing rent-roll to fund legal and other expenses associated with the scheme to frustrate the Irish entity, while other money may have been taken by shadowy figures who became involved in the asset-stripping scheme along the way.

It will no doubt take some time for the proper title over all of the properties to be put in place, and their sale arranged, but these are mere details.

Meanwhile, a campaign of intimidation continues against those running the former Quinn industrial holdings on the Cavan-Fermanagh border. Former Quinn Group executives Dara O’Reilly and Liam McCaffrey, who are now employed by the new owners of Quinn Industrial Holdings (QIH), both have been subject to “threats and acts of violence”, their counsel told the High Court last month.

It is understood O’Reilly had his car set on fire before Christmas, and boiling water thrown in his face last month. A Facebook page supportive of the Quinns has posted intimidatory material aimed at those involved in running QIH.

Those running the businesses now hope that tensions will ease given that the family’s long-awaited case, where it was going to challenge Anglo’s right to have ever seized the Quinn Group, has now been abandoned.

As already noted, the cost to the public over how the family reacted to the collapse of the Quinn empire is well in excess of €100 million.

Insurance debacle

But that is not the largest bill facing the taxpayer arising from Seán Quinn’s risk-taking actions. There is also the massive losses on the Anglo loans granted to Quinn to fund his share investments. And then there is the insurance debacle.

In 2008, Quinn Insurance, and Quinn snr, were fined because of huge loans issued by the insurer to associated companies to cover Quinn’s falling investment in Anglo. Later, after the insurance group was placed into administration by the Central Bank of Ireland in 2010, it emerged that the company was not as profitable as had been previously believed.

The losses were so catastrophic that the Government had to introduce a 2 per cent levy on on non-life insurance policies

Simply put, the administrators decided it had been taking in people’s insurance premiums, but not putting enough aside to fund the claims that would inevitably be made.

The losses were so catastrophic that the Government had to introduce a 2 per cent levy on on non-life insurance policies, in part to fill in the financial hole that had been left by the collapsed Quinn Insurance. The levy will remain in place for many years to come.

Meanwhile, the administrators of Quinn Insurance, Grant Thornton, are suing its former auditors, PwC, with the latter saying they they will vigorously defend the action. The damages being sought are in the region of €900 million.

As has been stated in the Dáil by Dublin Fingal TD Clare Daly, Quinn’s speculative gambling debts have been transferred “on to the shoulders of hard-pressed taxpayers and working people who need to insure cars, homes and so on”.

Given how his reckless gamble has proven such a problem for Quinn snr, his family, the people in the Cavan/Fermanagh area, and Irish society generally, it is ironic that Quinn’s latest venture is an online betting business, Quinnbet.

At least customers of that business voluntarily put their money at risk.

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