Seán Dunne’s path to freedom may run into brick wall

In theory, yes, one of the poster boys of Ireland's property bubble could be in and out of bankruptcy in the US state of Connecticut within six months, as he told The Irish Times last weekend.

In fact, under US bankruptcy law it could happen as soon as early July.

“Theoretically, it’s possible,” said a source close to one of the developer’s creditors. “It’s also possible I could win the lottery tomorrow.”

Dunne may not have chosen Ireland as the place to become a bankrupt because he didn’t like the stranglehold the banks would continue to have on heavily indebted borrowers under the Government’s new insolvency rules. However, bankruptcy in the US, while far more lenient, can still throw up obstacles.

The timing of his discharge from bankruptcy will be a matter for the court and the trustee it has appointed to liquidate his assets and distribute the proceeds among creditors owed about $500 million (€390 million).

Given that Dunne is already embroiled in litigation with the National Asset Management Agency in the US and with Ulster Bank in Ireland, two of his biggest creditors, it is highly likely that at least one of them will object to having almost all of their debts written off without further investigation into his assets.

Nama, the State loans agency, sued Dunne and his wife Gayle Killilea in Connecticut last year.

It claimed in a hotly contested case that he fraudulently transferred an asset to her and is behind lucrative property dealings in affluent parts of the state when the couple claim they are her investments alone.

Creditors may object
Dunne must meet his creditors at the bankruptcy court in Bridgeport on May 8th. They can object to any claims made by the fallen property tycoon in a detailed financial statement he has yet to file.

Bankruptcy lawyer Richard Coan, one of the longest-serving trustees in Connecticut, will investigate what is available to repay his creditors. He can also decide to investigate Dunne’s financial affairs further and has the power to undo asset transfers dating back four years.

Judge Alan Shiff, one of the state's longest-sitting judges, will then determine whether Dunne is entitled to a fresh financial start, free of debt.

“He [the judge] has been around the block and has seen a lot of cases and generally speaking is not going to tolerate people who he feels are trying to get away with something,” said Joel Grafstein, a bankruptcy lawyer from Farmington in Connecticut.

You only have to look to neighbouring Massachusetts to see how another high-profile Irish debtor has struggled to escape bankruptcy in the US.

David Drumm, the former chief executive of Anglo Irish Bank, filed for bankruptcy in Boston in October 2010 but the bank objected to him being given a debt-free start. The date for a trial to decide whether he can walk away from his remaining debts has still to be set.

Dunne could yet join a fellow casualty of the Irish financial crisis on an equally long road to redemption.