Developers’ wives. Is NAMA now taking action?

Take a look at the picture in the attached article on Sean Fitzpatrick’s bankruptcy (not that anyone needs reminding but Sean was the boss of Anglo Irish Bank whose collapse is set to cost Ireland’s citizenry €29-34bn). The picture is from the front page of the Independent on 29^th September, 2010 and shows Sean’s wife, Catriona, alone at the wheel of a car. She is wearing sunglasses so it is difficult to make out her expression but she seems surprised to be having her photograph taken when she is in the privacy of her own car. Her relevance to the article is that information about her personal finances was disclosed in the court which was considering the bankruptcy of her husband. The article sets out in considerable detail Catriona’s finances despite the fact that it is not she that is bankrupt but her husband. I don’t know Mrs Fitzpatrick personally but her coverage seems intrusive when you remember that the story is really about Sean. Of course we want to know if Sean has channelled wealth to his wife that can be questioned in the context of unlawful transfers to avoid creditors but that’s about the only newsworthy aspect of this story. The woman is the wife of someone that has cost us dearly but that doesn’t make her the embodiment of Marie Antoinette, Lady McBeth and Elizabeth Bathory.

Contrast that photograph with the photographs of Paddy McKillen, the developer and property investor presently fighting NAMA in the courts. Paddy owes Anglo €899m and given that we all own Anglo that means Paddy owes every man, woman and child in the State €200. And on top of that Paddy apparently owes AIB (which is going to be 90%+ owned by us) a further €900m. And if we believe some reporting, if Paddy is successful in court that may place the government’s entire strategy for dealing with the banking crisis in jeopardy. The case is so serious that for only for the second time since becoming Attorney General in 2007 has Paul Gallagher come out of his shell to personally lead the State’s case in court. Paddy, we are told, is a very private man and that is why the only photograph in circulation is a 20-year old photograph from a Construction Industry Federation black-tie event. So who is more newsworthy, of more significance to the public interest – Catriona Fitzpatrick or Paddy McKillen? See anything wrong in that?

Sean of course is not mainly known as a developer though he does have a portfolio of property. But wives of developers are becoming more newsworthy it seems as reports multiply of their husbands transferring assets to them (examples here and here).

There is a concern that developers, whose debts we are all now shouldering with the bailout of the banks, have transferred assets to their wives in an effort to squirrel away their wealth and not pay down their debts which they owe to the rest of us. Of course that is a legitimate source of concern and it is enraging to think that a developer has calculatedly deprived his creditors (which is mostly us) of millions by handing it over to his wife or has put property in her name or sold property to her below the true value. It is concerning though that the media seems to be whipping up a campaign against developers’ wives – not because this isn’t a legitimate subject but because of inaccuracy and false innuendo. There are suggestions that NAMA can’t seek to undo transactions effected before 21^st December 2009 (the date NAMA came into being). There are also claims that the banks themselves are limited to challenging transactions upto two years old (ie upto October 2008). All of this is rubbish – this is from law firm Lavelle Coleman “transfers made with the intention of defeating delaying or hindering creditors or preventing the proportionate distribution of assets made be set aside, if the transfer is proved to be a “fraudulent conveyance” (i.e. deliberately done for this reason). There is no time limit in which such a transaction may be set aside.” and “there are bankruptcy rules which invalidate gifts and transfers at undervalue made within a certain time of bankruptcy. A transfer made within two or five years before bankruptcy other than in good faith and for valuable considerations can be avoided if the transferor was insolvent at that time.” The Bankruptcy Act 1988 provides more detail. NAMA takes over the rights of the loan agreement and that includes pursuing borrowers and allows NAMA to seek to set aside transactions up to five years old (that brings you back to October 2005).  The five year rule applies where a developer was insolvent at the time of the transfer.

NAMA, it seems, is not ignoring the issue of transfers to spouses and I hear on the grapevine that NAMA may have written a letter to developers in recent days in the following terms (or similar)

“Re: Unencumbered assets / asset transfers

Dear -,

I refer to the statement of affairs in respect of XXX and the listing of property transfers which you submitted to us as part of the recent business plan submission.

To finalise this information, NAMA requires that xxx principals submit a final, signed, comprehensive and itemised listing of all asset transfers to connected parties (including spouses and other family connections if applicable) over the past five years. This list should detail the date of transfer and where relevant, the consideration paid.

In addition, NAMA requires a final. signed and comprehensive listing of all assets currently held for each of the principals, and separately for each of their spouses. The listing of assets should be itemised , subject to a financial threshold of €10k for personal assets and house contents, and should include a full breakdown of all properties, cash, personal assets, house contents and all other assets, detailed by the partnership, corporate entity and trust in which they have a beneficial interest or in their own name. A description, estimated valuation and details of any related debt should be provided in respect of each asset.

The principals and spouses are reminded that NAMA may at any time seek sworn affidavits in respect of the statements of affairs or asset transfers.

Yours sincerely,
Portfolio Asset Manager
National Asset Management Agency”

I hope that future reporting on transfers of assets to developers’ wives sets out the correct legal context for dealing with fraudulent transfers or transfers below value or transfers when the developer was insolvent. There is very real anger in this country at the consequences of the property crash and financial crisis and it must surely be incumbent on the media when it does report on developers’ wives that it doesn’t withhold relevant information, the suppression of which just stokes up latent anger.

UPDATE: 1st October, 2011. As this is probably the flagship blogpost on developer wives, an update to report that NAMA has claimed the majority of the Top 30 developers had made spousal transfers, and that a message from Minister for Finance, Michael Noonan’s office claims that a minority of NAMA’s debtors had made spousal transfers. Remembering that NAMA overall has 850 debtors, that implies that outside the Top 30, transfers were not so common.