Insurance giant Fairfax has defended its Dublin operations amid claims that it was being used to fraudulently add an extra $500 million (€375 million) to the dividends of its US parent company.
Fairfax is now suing a group of leading Wall Street hedge fund managers for $6 billion, claiming they deliberately tried to create uncertainty about the company's reputation and financial future.
In legal documents lodged in a New Jersey court, Fairfax claims that investigators working for the hedge fund managers sent a bizarre and threatening e-mail to its Irish legal counsel, stalked its US executives, and left excerpts from a Harry Potter film and speeches by President George Bush on their voicemails.
A Fairfax spokesman said yesterday that a former analyst who conducted a major investigation into Fairfax's Dublin subsidiary, nSpire Re, has been charged with four counts of wire fraud in an unrelated case, a claim confirmed by the US attorney's office in New York.
NSpire Re chief operating officer John Casey, who works from the company's headquarters on Adelaide Road, Dublin, said the allegations were "nothing we haven't seen before".
Fairfax is battling some of the biggest New York hedge fund managers, including SAC founder Steven Cohen; Rocker Partners founder David Rocker; hedge fund Exis Capital Management and its chief executive, Andrew Heller; all of whom it claims were involved in a concerted effort to lower the company's stock price so they could buy Fairfax stock cheaply. The companies and officers deny the allegations.
In its $6 billion lawsuit, taken at a state court in Morristown, New Jersey, the company alleges that the hedge fund managers relied on a misleading report issued on March 2nd, 2005 by an analyst working for the Fitch corporate rating agency.
According to Fairfax's legal complaint, the Fitch report accused the company of using inter-company reinsurance transactions with nSpire Re in Dublin "to inflate dividends to Fairfax by over $500 million". In reality, the company said, "those reinsurance transactions resulted in losses to nSpire Re and provided no dividend capacity".
Fairfax also complains that the hedge fund managers relied on information supplied by former analyst Spyro Contogouris, who has been indicted on wire fraud charges for alleged theft from a former employer.
Mr Contogouris and an associated travelled to Ireland to investigate nSpire Re, which, according to a 5,000-word article in the latest edition of Fortune magazine, has provided much of the financing for the acquisition of Fairfax's US operations. The Dublin operations were in turn funded by Fairfax's Hungarian subsidiary, which the company says was a legitimate way to lower its US tax burden.
In its legal complaint, Fairfax claims that Mr Contogouris and a colleague sent false claims of a sex orgy involving a Canadian Fairfax executive to the pastor of his church. In another incident, Mr Contogouris is alleged to have sent an "eerie" anonymous e-mail to Catherine Regan, the Irish legal counsel to Fairfax's European subsidiaries, in which he said he saw her photograph in a trade publication next to a statue with a very large nose.
The e-mail said Ms Regan should have been able to smell the financial irregularity at Fairfax's subsidiary from where she was standing. The e-mail ended with the words: "I will be seeing you soon."
Mr Contogouris is also accused of leaving taped excepts from a Harry Potter film and Mr Bush's speeches on another executive's answering machine.
Last night, a Fairfax spokesman said Mr Contogouris's indictment spoke for itself and there was nothing improper about movement of funds through the company's Dublin subsidiary. "It's really not usual for a company of Fairfax's size to have this type of flow between the US and its European subsidiaries," he said.
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