How US “vulture capitalist”, the Blackstone group is insinuating itself into the fabric of Irish state-business

It seems these days that not a week goes by without the name of some new foreign outfit hitting the domestic headlines, as international investors look to Irelandfor opportunities in the wake of the property and banking collapses. And that is to be expected with the destruction of wealth at home, and the fact we have both a property and a banking overhang – in the sense that our banks are required to “deleverage” or in simple terms sell loan-books and non-core assets. This time last year an American company called BlackRock was making headlines as it had been engaged by the Central Bank of Ireland to conduct credible stress testing of Irish banks. Before then, Blackrock was just an upmarket district of Dublin.

Another American company that has been getting a foothold in Irish business is Blackstone – both are “black” or “schwarz” in German, but it is Blackstone that is headed up by Steve Schwarzman, though I see Enda Kenny is calling him “Stephen”. You might recall Steve on here for his injudicious speech he gave in December 2010 on the opportunities in Europe – “we’re basically waiting to see how beaten up people’s psyches get” and best of all, “you want to wait until there’s really blood in the streets”. Now before we take too much umbrage at foreign investors salivating over Irish assets, let’s not forget that massive wealth has been destroyed here, the economy is at best stabilising and the banks are still weak and are not in lending mood/mode and foreign capital and investment is essentially a “good thing”.

But having said that, Blackstone’s inroads into Irish in the past year are remarkable and have gone largely unnoticed. It was in America that Blackstone made its first bid for Irish state-owned assets when it went after Anglo’s USD 8bn (€6bn) loan-book which Anglo eventually sold to Lone Star, JP Morgan Chase and Wells Fargo. In October 2011, the managing director of the Blackstone group, Tom Kelly was one of the participants invited to the Global Irish Economic Forum at Dublin castle. Another attendee at that conference was Gerry Murphy, the managing director of The Blackstone Group LP. In October also, Blackstone took over a company with Dublin links – Harbourmaster Capital is an asset management company with €8bn under its wings, and two of its directors Alan Kerr and Mark Moffat are based in Dublin, and the back-office functions of the group which employ some 40 people are expected to remain in Dublin. On 8th November 2011, An Taoiseach Enda Kenny together with Minister for Finance, Michael Noonan met with the chairman of the Blackstone group, Stephen “Steve” Schwarzman in Dublin. On 12th February, 2012 it was reported by Ronald Quinlan in the Sunday Independent that IBRC (“Irish Bank Resolution Corporation”, the resultant entity from the merger last year of Anglo and Irish Nationwide Building Society) had retained Blackstone to advise on the disposal of its remaining UK and Irish loans – worth €30bn at nominal value. And let’s not forget unconfirmed reporting that the Minister for Finance had appointed Gerry Murphy – visitor to theDublin castle conference in October last – to the new NAMA advisory board.

“Blackstone”, a name you won’t have heard much about before.

Now last week, the Minister for Finance faced a batch of questioning on state involvement with Blackstone. Minister Noonan confirmed that Blackstone may indeed bid for Anglo loans in future, and the Minister dismissed concerns about conflicts of interest claiming that IBRC had engaged an advisory division of Blackstone to advise on the disposal of its UK and Irish loan books, but it would be a completely separate division of Blackstone, the investment division, that could potentially bid for IBRC’s loans. Not only that, but the Minister has it that another company you may not have heard of, FTI Consulting, has provided “independent advice” to IBRC on the matter. And to cap it all – “my [Minister Noonan’s] officials sought assurances from the bank that no conflict of interest existed in relation to the appointment and these assurances were provided by the Chairman of the bank.”Well that’s assuaged those concerns then!

Minister Noonan declined to disclose what money IBRC is paying to Blackstone for advice on itsUKand Irish loanbooks, citing confidentiality. So we won’t know how much we, and “we” own IBRC 100%, are paying Blackstone to get advice on a sale of assets whose buyer might well be….Blackstone!

And what about Gerry Murphy’s involvement with the NAMA advisory board? Minister Noonan said “I have appointed Mr Michael Geoghegan to chair a small group of advisors to advise me on the future strategic direction of NAMA. Mr Geoghegan has agreed to carry out his role on a pro bono basis. I am currently considering the names of potential candidates who have the appropriate experience and background to work effectively on the group of advisors with Mr Geoghegan. I expect to announce the other members shortly. At that stage, I will also announce the group’s terms of reference, as well as its reporting framework and arrangements in relation to costs.”

The above is unusually obtuse language from a man who is probably the most articulate in Irish, or indeed most countries’, politics. It’s obtuse because Minister Noonan doesn’t confirm that Gerry Murphy has been appointed though he says “I expect to announce the other members shortly” and “other” refers to current or future members of the NAMA advisory board whose names are not being currently considered because presumably they have already been appointed.

Presumably Blackstone will be allowed bid for NAMA assets on the same basis as IBRC’s assets. And remember this is taking place on the watch of a political party whose 2011 Election Manifesto commitment was to do something about “the same small network of professional advisers, accountants, lawyers, financial advisers or other consultants are linked NAMA, the NTMA, the bailed-out banks, the Central Bank and the Department of Finance. This presents an obvious conflict of interest which undermines confidence in Ireland’s public and private sector governance.”

This morning the Sinn Fein leader Gerry Adams asked An Taoiseach about the potential for conflict of interest in the State’s engagement with the “vulture capitalist” Blackstone – the video of the record-short five minute question and answer is here – but Enda Kenny declined to address the matter directly claiming that disposals of Anglo’s and indeed NAMA’s assets would be subjected to the highest ethical standards and suggested Minister Noonan provide a more detailed answer. An Taoiseach did say that “sections of major groups like Blackstone are legally separated”. Hmmmm.