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« Permanent TSB/ESRI House Price Index for Quarter 4 shows the decline is continuing at an increasing rate nationally though moderating in Dublin
Is it right that the State must pay 5.8% on bailout funds whilst NAMA is lending billions to developers at 3%? »

NAMA moves to lock stable doors after solicitor controversy

January 19, 2011 by namawinelake

Following the revelation on Monday that a solicitor, whose firm has been appointed to a NAMA panel of legal advisers, was being pursued by Bank of Ireland over a €69m debt, NAMA has moved quickly to put on record that (a) although Brian O’Donnell’s firm has been appointed to the NAMA legal panel that no work was in fact given to that firm by NAMA and (b) NAMA is to introduce additional screening procedures for third party firms so that they will declare the full extent of their property loans before being hired by the agency.

It should be said that Brian O’Donnell who founded a successful legal practice in 1999, is claiming an arguable defence against Bank of Ireland’s claim and that further, he says that his assets are worth €1.1bn with loans of just €0.8bn. Vico Capital, the company owned by Brian and his wife Mary Pat, has built up an impressive portfolio of property which includes an office building on Pennsylvania Avenue just down from the White House in Washington, a substantial office building in the centre of Stockholm as well as blue-chip properties in London. Much of the portfolio appears to have been acquired after 2005 which may not augur well for future overall prospects because an implication is that the property was acquired at peak values.

This is the second episode where NAMA-appointed lawyers has stirred up controversy through involvement in property. In February 2010, one of NAMA’s original 65-member legal panel, Dermot G O’Donovan, resigned from the panel following revelations of property dealings by partners in that firm.

This latest episode prompts a re-visit to one of the core concerns about NAMA employing people and companies that were involved, centrally or peripherally, in the property boom and bubble. NAMA says that Ireland is a small pond and it is inevitable that it will employ some of those who were involved in property – NAMA say that whilst they have recruited from overseas in some instances, familiarity with Irish processes and people is necessary for the agency to effectively fulfil its role. The alternative, employing those not involved in Irish property, means that we have unfamiliar newbies, learning on the job as they manage €90bn of loans which is a worse outcome.

I must say that in my opinion, Brian O’Donnell’s selection for appointment to the NAMA panel is not surprising. His law practice is successful and the man personally brings a huge wealth of experience in property. What is concerning is the possibility, or potential, for conflicts of interest, particularly given the the claim that Brian’s property is worth €1.1bn with loans of €0.8bn. Even if his firm didn’t act on his own property, there would appear to me to exist the potential for more general conflicts of interest with respect to banks that might elsewhere be lending to Vico and procedural practice. NAMA now say that they “will” institute procedures to capture relevant property exposure information. But what does this mean? In respect of Brian O’Donnell Solicitors, does that mean the partner(s) must make declarations, what about their jobbing solicitors, the paralegals, what about support staff? NAMA say they *will* institute these new disclosure requirements before offering work but what about the existing standing army of engagements, will NAMA seek additional disclosure from historical appointments?

A related concern to potential conflicts of interest is tax compliance. NAMA seek tax clearance certificates from third party appointments but NAMA’s appointment of firms whose principals have been forced into settlements with the Revenue Commissioners is controversial. In September 2010, the Irish Times reported that “O’Sullivan Associates/Cathal O’Sullivan, solicitor, Herbert Street, Dublin” had made tax settlements of €209,322 and €790,681 respectively – this, some nine months after that firm had been appointed to NAMA’s legal panel. And the Mail on Sunday reported in February 2010 on two other NAMA panel members, Callan Tansey Solicitors and McKeever Taylor Solicitors whose principals had coloured histories – in the case of Damien Tansey there was a tax settlement of €177,650 in 2007 and in the case of Robert Taylor “he agreed to pay €10,000 to charity after he was found by the High Court to have misled it about the notes of client meetings in a dispute over a €2m property deal”

 

A third area of concern is that NAMA is furthering the crony system in its hiring processes and that it is paying too much for third party services. According to the NAMA CEO at the Oireachtas Finance and Public Service Committee in April 2010  “we are subject to proper procurement rules and for procurement competitions we use the services of an external process auditor. The external process auditor who sat in on all our assessments of all the tenders was Maurice O’Connell, the former Governor of the Central Bank. He signed off on the competitions for the board of NAMA to indicate they were run in a fair and transparent manner, which is very important” and in November, 2010 the Comptroller and Auditor General appeared to give NAMA’s procurement processes a clean bill of health. So that concern may not be justified.

NAMA is planning to pay huge sums to third party firms – an estimated ~€200m a year in both 2010 and 2011 though as NAMA completes its acquisition of loans, these payments will decline and over a 10 year period NAMA is planning to spend €1.6bn on operating costs (expressed in Net Present Value terms according to the June 2010 Business Plan and which includes the ~€30m a year NAMA pays for its own staff and related expenses) – you should ignore the €260m a year claimed in Dearbhail McDonald’s piece in today’s Independent which seems to be derived from the draft NAMA Business Plan in October 2009 . With such a colossal engagement with third parties, an odd scandal is inevitable. It is regrettable though that NAMA is only now seeking disclosure on property exposures and it is to be hoped that the acquisition of loans was not compromised by conflicted third party service providers.

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Posted in NAMA | 10 Comments

10 Responses

  1. on January 19, 2011 at 1:10 pm simon kelly

    There should be no surprise in this revelation. NAMA is rife with conflicts and there are a very large number of lawyers and accountants who are both a client of NAMA (or a bankrupt Irish Bank), and a service provider. This is clearly wrong, but I doubt this is an accident.

    The media reaction to this has also been interesting. I have yet to see any pictures of the home of this solicitor, nor have I seen the RTE cameras follow him and his wife on shopping trips to Brown Thomas.

    Could it be that a solicitor going down with €800m of debt is somehow different to a property developer? It seems that your title in Ireland does matter.


    • on January 19, 2011 at 1:21 pm namawinelake

      Hi Simon, there is a picture of the “pile” in Killiney in today’s Independent at the link below and the Independent did apparently visit the property yesterday (“dragon letterbox” and other details will entertain you in the article). But if you have any recent photographs of investor/developer Paddy McKillen which you have the right to share, they’d be most welcome on here! So I don’t think all developers have been exposed in the same way Gerry Gannon and wife were before Christmas. But I agree with you that professionals that enriched themselves on the back of property transactions during the boom have largely escaped the public opprobrium directed at developers. And it must be galling for some developers to see those same professionals now benefitting from the downturn and crisis whilst developers are pursued (witch-hunted?) by the media, politicians, NAMA and public.

      http://www.independent.ie/national-news/odonnells-luxury-pile-in-bel-eire-a-symbol-of-wealth-2501850.html


  2. on January 19, 2011 at 1:12 pm M

    It’s funny how when one reads

    “Nama did this, Nama did that, Nama paid this, Nama paid that”

    one’s mind naturally thinks its some arm’s distant third party.

    Pity the fact that this is the taxpayer’s money they are playing with. So sad.

    Keep up the good work, NamaWineLake.


  3. on January 19, 2011 at 2:33 pm who_shot_the_tiger

    Whoever participated in the property market is largely irrelevant except to sate the curiosity of the populace.

    The conflict that really galls is the one where the same valuers who valued properties at inflated levels the top of the market are retained by NAMA to revalue those same properties at their “new” depressed levels when there is no market.

    Those same valuers and NAMA see no incongruity or nothing inappropriate in this at all.


  4. on January 19, 2011 at 3:34 pm NamaJew

    Are the legal advisors who act for many of the Developers and Nama conflicted?

    Should a legal firm who acts for a property developer during the last ten years not be allowed to act for Nama?

    The answer is that the partners of these firms know their
    former clients will be bankrupt soon whereas there will be millions and millions of fees way into the future from Nama.

    I am now beginning to question whether we are getting good advice from our Solicitors when they know the new god is the Nama fee payer.

    As for the valuers and the inflated levels etc., just look no
    further than John Mulcahy.

    At the Auschwitz complex of camps, some newly arrived Jews were selected for work – and the rest were usually gassed as soon as possible. We are going to get gassed
    and the rest have been selected to work for Nama.


  5. on January 19, 2011 at 4:10 pm who_shot_the_tiger

    It is impossible at this point for developers to get quality legal advice from Irish lawyers. I am aware of developers who went to UK lawyers as all of the top lawyers in Dublin were conflicted.

    When they approached three of the top UK legal partnerships, they were told that they had been or were working for AIB / NAMA and that they could not act.

    By creating pools, even if NAMA does not become the main employer of lawyers on these islands, they have ensured that, as far as possible, there will be limited serious opposition.


  6. on January 19, 2011 at 4:53 pm BaNAMA Republic

    Could NAMAJew please stop comparing the developers situation in Ireland with NAMA to the genocide of 6m Jews and approximately 9m other citizens of Europe and the near East (Romanys, homosexuals, disabled etc.). It is an easy and offensive comparison. If he would like to illustrate a comparison perhaps Idi Amin’s expulsion of the Ugandan Indian population would be more apt and perhaps less crass. Rant over.

    Did anyone with a serious head on them not believe that NAMA would not face multiple incidences of conflict-of-interest? This was highlighted by McWilliams (not a fan btw) as far back as June:
    http://www.davidmcwilliams.ie/2010/06/02/nama-just-a-bailout-for-the-professional-classes
    The middle professional classes will see themselves safe. They never excel too high (not risk-takers like developers, entrepreneurs etc.) nor fall too low (not risk-takers like developers, entrepreneurs etc!!) just the creamy fatty middle, paid for by the Irish tax-payer. Not one of the Irish ‘magic circle’ firms can claim it has no conflict when working for NAMA and don’t even get me started on the valuation panel.

    Quis costodiet ipsos costodes?


    • on January 19, 2011 at 7:09 pm NamaJew

      BaNama Republic I did not intend to insult the memories of the Jews and all the other different groups murdered during the Holocaust. That was not my intention and I will not make that comparison again.

      How does one illustrate what I believe Nama intend to carry out over the next few years ?

      I can’t think of anywhere in the western world in the last fifty years where the state has decided that one group of people are one hundred percent responsible and that they and their families are going to be liquidated.

      Not murdered although many will get sick and have health problems from the stress and pressure of dealing with the Nama bullies.

      A state agency run by mediocre people and charged with the protection and growth of viable assets have decided to change course from their main brief to debt collection and the liquidation of the entire PD community.

      On the way to this end, Nama are wasting hundreds of millions in fees to valuers/agents, lawyers, accountants, receivers, barristers, media and even banks. All of which are also responsible for the present situation in this country.

      The big Nama lie (the business plans) seem to be forgotten
      by one and all. Drawn up by PD’s with millions of more fees wasted by Nama to support the big lie and now only fit for burning. All the assumptions in the plans wrong because of the IMF/EU bailout.

      Nama will be judged a catastrophic failure in time.


  7. on January 19, 2011 at 5:29 pm sf ca writer

    property boom, collapse, litigation boom:
    like a transfusion, money flowing into one vessel, emptying from another, taxpayers diligently filling the resevoir with their sweat.
    It’s foggy today, feeling poetic.


  8. on January 20, 2011 at 9:23 am Banama Republic

    NamaJew, thank you for your consideration in this matter. I agree with most of what you are saying and I believe that we need a strong construction sector in this country and by it’s actions NAMA is doing its very best to destroy that sector. The reason that I used the Idi Amin example is that the Indians in Uganda were the lifeblood of the economy. After their expulsion the economy in Uganda cannibalised itself which is very similar to what I expect the construction industry in Ireland will have done in 24 months time. The sad thing about NAMA is for all the fees they pay their experts (lawyers, accountants, economists and valuers) I would wager that no-one inside NAMA or advising it could point a brick wall let alone understand the physical issues on large complex construction projects. If you thought NAMA was bad value for money during its establishment, wait til they have to build something…



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