An upcoming case confirms Fingleton's close business ties to a politician in a speculative land deal, writes SIMON CARSWELL, Finance Correspondent
MICHAEL FINGLETON grew Irish Nationwide Building Society from a run-of-the-mill savings and home loans business into a specialist lender to builders, developers and property investors, becoming a player in many deals that it financed by taking stakes.
It is not surprising that if he saw value in land speculation and development which led him to push his building society to lend almost half of Irish Nationwide’s €10 billion loan book to the once booming sector, that he himself should have invested personally.
It emerged in High Court proceedings this week that Fingleton and three others – Senator Francie O’Brien (Fianna Fáil) and Monaghan businessmen and property developers Charlie McGuinness and Noel Mulligan – owe €13.5 million over a speculative development on a one-time prime 50-acre site outside Cavan town.
The debt is not due to the building society formerly run by Fingleton, but to Ulster Bank.
This wasn’t the only deal that Fingleton is an investor in, or at least that he claims to be an investor in.
Two days before Christmas last year he issued legal proceedings against property developer Gerry Gannon, one of Irish Nationwide’s biggest borrowers, for a 25 per cent share of a development at Clongriffin in north Dublin, a project worth an estimated €500 million. The former Irish Nationwide boss claimed a £75,000 (€95,000) investment he made in the late 1990s entitled him to a quarter share of the development.
It was a widely held belief within banking circles that in many cases if you went into Irish Nationwide looking for a loan for a development from Fingleton, you came out with a partner in the deal – with the building society taking a share of future profits on the project.
It was also a commonly held view in those same circles that Fingleton was politically connected, and that the building society enjoyed a political patronage matched only by Anglo Irish Bank’s close ties to the political establishment. It was largely accepted, however, that his relationship to politicians was limited to that of a lender to a borrower.
Irish Nationwide had provided a loan of €1.6 million to former Fianna Fáil finance minister and European commissioner Charlie McCreevy in 2006 to buy a property at the K Club golf resort in Co Kildare. The loan was for more than 100 per cent of the property’s value at the time and was fast-tracked by the building society.
Fingleton’s political connections even warranted a mention in a footnote in the report by Central Bank governor Patrick Honohan published earlier this year into the causes of the banking crisis.
Honohan said it was understood by all within the Financial Regulator that Fingleton was “politically well-connected”, but that failure to strengthen Irish Nationwide’s governance around an “overly dominating figure” was not attributed by regulatory staff to “his having a privileged status”.
This week’s legal action by Ulster Bank, which is trying to fast-track the recovery of its loans by seeking to have the case heard in the Commercial Court, confirms for the first time Fingleton’s close business ties to a politician in a speculative land deal.
Ulster Bank’s action coincided this week with the release of records by the Department of Finance to the Committee of Public Accounts relating to private meetings, correspondence and reports leading up to the Government’s bank guarantee in 2008.
In one letter, Fingleton sought to reassure the then secretary of the department, David Doyle, that Irish Nationwide did not have a “seriously impaired” loan book. The society had about €2 billion of development loans in Ireland and a further €3.5 billion in the UK but was estimating bad debts of just €100 million at most for 2008, he said.
The property crash has meant these losses have spiralled, forcing the Government to pump in €5.4 billion and to take Irish Nationwide into State control.
Just as the properties backing most of the loans at his former building society have collapsed in value, so too has Fingleton’s own personal investment in property.
The value of the 50-acre site at Swellan just outside Cavan town in which Fingleton and his three partners invested has collapsed in value by more than 90 per cent, according to a local estate agent. Alan O’Riordan at Peter Donohue Son Real Estate in Cavan town said the land had fallen in value back to agricultural prices and estimated that the site would be worth, at best, €15,000 an acre, or €750,000 in total, given that there were no buyers in the market for development land.
This compares with about €220,000 an acre that Fingleton and his three partners paid. The four speculators agreed to buy the site in late 2005 from the Wall family for about €11 million.
A deal had been agreed with another purchaser from Northern Ireland through an auctioneer in Cavan town, but the family was approached directly with a higher offer and the Walls accepted.
The family’s timing was perfect – selling at the peak of the market.
Mulligan, working through local architect David McCormack, submitted an application for 433 houses. Such a large housing estate would not have been out of the ordinary for this area. “It is within the development envelope of the town and it is well serviced – it is situated beside the local rugby club,” said McCormack. “There are residential areas beyond it to Drumelis past the hospital towards Cavan Golf Club.” The land is within a half-mile of Cavan town centre.
McCormack said there were fewer “ghost” estates – half-built or empty new housing projects – in Cavan compared with towns such as Leitrim and Longford where there was tax designation for development projects, so the town would fare a little better.
The four men bought the land when Cavan was a popular town for commuters working in Co Dublin and looking for an affordable home within driving distance. A four-bedroom semi-detached house in this area would have sold for €195,000 at this time, giving the land a potential development value of about €80 million. However, Cavan County Council shot down the first application to build 433 homes, saying the project was premature pending the development of new roads. That issue was only addressed last year with the publication of a new development plan for the county by the local council.
Under that plan, the four investors have secured planning for an 82-bedroom nursing home, submitted in a planning application filed on the last day of 2009.
This should retain some value in that part of the site as it is within walking distance of the local hospital, although estate agent Alan O’Riordan points out that the nearby nursing homes had not held value.
Certainly, the 50-acre site is worth nowhere near what was paid for it.
An appeal against the planning permission on the site had been made to An Bord Pleanála, but Ulster Bank has not been willing to bide its time any longer on a loan that has risen sharply with interest arrears.
By March 2010, Ulster Bank’s patience had run out. On March 3rd, it wrote to Fingleton, Senator O’Brien and their developments partners at O’Brien’s address in Castleblayney, Co Monaghan, demanding a repayment proposal to repay outstanding arrears.
The debt owing to the bank had risen to €13.535 million, including arrears of €285,000. Some €42,875 had been paid by a cheque from Fingleton the previous July to settle some interest arrears, followed by three more payments totalling €96,000.
Such was the bank’s level of concern that an Ulster Bank manager covering the bank’s eastern area, Ted Mahon, asked Fingleton and his three business partners for current net worth statements, showing all their income and debt repayments as well as November 2009 tax returns for each of them.
(Ulster Bank had also sought confirmation on the tax affairs of Senator O’Brien for the 2006 loan facility, according to court filings.)
In March 2010 the bank also demanded a copy of the planning decision on the nursing home that had been expected the previous month. All information was to be presented by March 24th, 2010, the bank demanded.
There were also a number of outstanding contentious issues between the borrowers and the bank. Ulster Bank pointed out that a new loan facility had been agreed in June 2008 on condition that the partners showed evidence by the following August 31st that they had agreed to sell part of the site to a building firm, Bennetts Construction – at a price acceptable to the bank – for the construction of new civic offices, or that a residential planning application was made to the county council.
The borrowers had also raised concerns about the interest margin being charged that the bank sought to answer in detail.
Ulster Bank said in an appendix to its March 3rd, 2010, letter that “the allegation made by Charles McGuinness that a former bank official predated his signature as witness is irrelevant considering that he, as all borrowers, accepted the proposal in writing”.
The bank said the revised pricing under the new 2008 loan facility offer was “well flagged in discussions if the condition outlined above was not achieved”.
“The bank wishes to maintain an honest and open relationship with you to engineer an acceptable solution towards our mutual goal of debt reduction,” said the bank.
Ulster Bank’s application this week to have its case to recover the loans moved to the Commercial Court for a fast-tracked trial has been put back to November 1st, by which time the bank must explain why it had not taken action on the loan for 18 months until a demand for repayment last June.
In the meantime, Fingleton and his three partners in the Cavan deal face a predicament affecting many land speculators coming before the courts. They are victims of borrowing heavily to buy land at the peak of the market with a view to netting a substantial windfall on development in a booming sector.
“There are thousands of those stories around the country,” said architect David McCormack, who helped draft plans for their site. However, few of those stories involve the former chief executive of a bailed-out financial institution that is costing the Irish taxpayer €5.4 billion, a Senator from the main Government political party and two local property developers.
CAVAN LAND THE SPECULATORS
Michael Fingleton
The former chief executive of Irish Nationwide, Fingleton ran the building society for 37 years. He stepped down in April 2009 – seven months after the Government bank guarantee – following the revelation that he had received a €1 million bonus for 2008.
The Government is pumping €5.4 billion into Irish Nationwide.
Registry of Deeds records show that Fingleton owns a property next to the building society's branch on Phibsborough Road in Dublin (pictured above).
Francis O'Brien
A dairy farmer, Mr O'Brien has been a Senator since 1989 and was elected from the agricultural panel.
He was a member of Monaghan County Council from 1979 until 2003 and chairman of the council from 1986 to 1987.
He has borrowed more than €7 million from Irish Nationwide for the purchase of land and properties in Cavan and Monaghan in loan deals agreed by Mr Fingleton.
Noel Mulligan
From Castleshane in Co Monaghan, Mr Mulligan has a number of businesses in Monaghan town including the lighting shop, Star Lighting Interiors, and Jono's, a home furnishing store. During the boom years he branched out into property development.
Charlie McGuinness
Monaghan businessman and property developer McGuinness has a number of interests in the county. He owns an alarm firm called National Monitoring and the franchise for the O2 outlet in Monaghan town through a company called Communication Services.
However, he is perhaps better known as the man who filmed a creature dubbed the "Border beast", which he believed was a puma that was on the loose in the Border county back in 2004.
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