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Archive for March 20th, 2012

For a man who famously cherishes his privacy, today must have been an intensely uncomfortable experience for Paddy McKillen as he took to the witness stand in London’s High Court. Here’s what happened.

Again just to paint the scene. The case is taking place in Court 26 at the Royal Courts of Justice in London. Court 26 is in the New Rolls Building just around the corner from the main courts building which is grand gothic edifice we generally see on TV. It’s a modern building, with an atrium and lots of glass, and Court 26 is modern also, no wooden cladding on the walls, hard-wearing carpet on the floor. The judge is seated on a bench of sorts but everyone else is on the same level save for the witness stand. There’s no press gallery. There are three rows of desks facing the judge, the first occupied by senior counsel, the second by junior counsel and the third by solicitors and behind them are two rows of chairs where everyone else is seated. And at 10.30 this morning there was hardly a seat remaining, with nearly 100 people in the 30 x 50 foot room. The judge Mr Justice David Richards has a gown but no wig and sits a couple of feet above everyone else. To either side of him is a carousel, like a tie rack, in which the many, many, many files in this case are accessible to him. Down on the floor there is a hive of activity even as the case is heard with yellow Post-It notes being passed up from the back to the solicitors to the barristers to the lead barristers, like salmon swimming upstream. The barristers are bewigged and be-gowned, and the lead barristers, judge and witness have microphones.

Today the case started at 10.30am and as billed, the reclusive Paddy McKillen took to the witness box. A diminutive figure just over 5 ft, he was smartly dressed in a dark suit, light blue shirt and dark tie. Silver-white haired and deeply tanned, not mahogany brown like George Hamilton, more the reddish hue that you get on Celtic skin. A man with delicate features, but his amiable disposition was still evident on his face, at least before the real questioning started today. His voice is a softer version of Barry McGuigan’s and in the witness box, after taking the religious oath, he was very focussed and considered in his performance, frequently donning and doffing his reading glasses to examine documents. Paddy didn’t once look over in the direction of Derek Quinlan who was seated some 30 feet away.

After confirming the statement submitted was his, Paddy was given over to cross-examination by Kenneth McClean, barrister for four of the respondent companies, and the cross examination went on from 11am to nearly 4.30pm with a 1-hour break at lunch. There seemed to be four strands to the narrative that Kenneth McClean was trying to create today

(1) That Paddy’s main motivation is his dealings with his shareholding in the Maybourne hotels was to secure secret side deals or “disguised consideration” for his shares. It was suggested that Paddy had worked out a deal with Middle Eastern investors which would pay Paddy GBP 5m (€6m) per annum for 3-5 years and that this was going straight into Paddy’s pocket. It was also suggested Paddy was negotiating a side deal with the Middle Easterners – Qataris in fact – which would see him get a percentage in any uplift in the value of the hotel group based on independent valuations every five years. Paddy denied the former accusation saying that any payment was for project management of the €200m redevelopment of Claridges and the Berkeley hotels, and that Paddy would only receive his expenses and Paddy denied the second deal, saying it never made it as a feasible option. It was further suggested that Paddy supported an investment deal by the Qataris which was worth GBP 875-900m to Maybourne and which would require due diligence at a time when the Barclay brothers were seemingly offering GBP 900m without requiring due diligence and warranties. It was suggested that the Barclay brothers’ deal was superior in value and absence of strings attached, whereas the Qatari deal was potentially worth less and did have strings attached. The implication was that Paddy was supporting the Qatari deal so as to secretly feather his own nest.

(2) That Paddy is inherently shifty. Paddy was asked where he was “domiciled” in 2010, 2011 and 2012 and the answer was “I don’t know” which prompted some guffaws from the respondents’ solicitors and this questioning went on for a minute or two before Paddy’s barrister finally piped up and suggested to the judge the term “domicile” was not defined. Paddy was unable to say where he was tax-registered and explained that he spent his time travelling but he had bases inLos Angeleswith his family,DublinandLondon. The judge intervened and asked Paddy “where is home” and again the response wasn’t straightforward. Several times it was suggested to Paddy that he was lying and when Paddy said at one point the management fee deal with the Qataris was for five years, which was contrary to the three years he had given in evidence, he was asked if that was a “slip of the tongue” and when Paddy said “yes”, he was insolently asked “are you sure” to which he also replied yes. Paddy denied telling lies.

(3) That Paddy withheld information from fellow shareholders in Maybourne, which seems designed to ultimately demonstrate that Paddy’s behaviour is no better or worse than the Barclays whose avowed intention is to take over the hotel group. It was shown that Paddy did not tell other shareholders about the full detail of the deal he had negotiated with the Qataris. When asked if he “kept it secret from the shareholders”, his reply – which garnered more guffaws from the other side – was that “he just didn’t reveal it”

(4) That Paddy did not suffer any damage at all as a result of the closure of the so-called “Data Room” in January 2011 which was set up to provide a one-stop shop of information to potential funders/investors. It seemed to be one of the four strands of Paddy’s petition that the closure of the “Data Room” was at the behest of the Barclays (and Derek Quinlan) and resulted in Paddy not being able to maximise value from his shareholding. But he appeared to concede under cross examination today that there really were no viable investors in Maybourne at the end of January 2011.

Elsewhere Derek Quinlan was there from the start of proceedings today, together with his good wife Siobhan. He sat impassively throughout as the cross-examination took place and although his bull-headed frame was looking over in the direction of Paddy, seated some 30 feet, there were no dagger glares, as he calmly took in what was being said. He left the room nearly every hour for a few minutes – there is no mobile phone reception allowed in the court-room as it interferes with the sound system. A confidentiality order covering payments made by the Barclays to the Quinlans has been continued, and will continue until lifted.

The gossip: Paddy doesn’t have an email address and communicates with his assistant Ann-Marie Ryan in Dublin via fax. Paddy does do texting but hasn’t tried typing on a computer! Paddy’s 29 year old son, also called Paddy, managed the Captain America restaurants here in Dublin. Besides the Qataris, there was interest from a Malaysian fund, called Wynton, to buy Maybourne for GBP 900-1,000m. I have not come across Wynton before and if it is this group, it looks too small to have been a feasible investor in Maybourne. Although Paddy keep cool throughout, answering many questions after a noticeable pause with “that is correct”, he will be feeling pretty frayed this evening but he could relax with a vigorous aerobics work-out, perhaps kicking his barrister Philip Marshall up the arse for five minutes in pay-back for the delay in intervening in the domicile question.

In respect of NAMA, we learned that Maybourne petitioned NAMA in June 2010 not to take over the GBP 660m of loans which NAMA ultimately did take over anyway – it should be remembered that Paddy McKillen’s success at the Supreme Court in Ireland last year meant that only a portion of his loans remained outside NAMA, other loans which were to the Maybourne group did in fact go into NAMA. NAMA was willing to refinance the GBP 660m of loans which it acquired for two years but only if there was a stable shareholding arrangement in Maybourne which there wasn’t in January 2011 with the Barclays now on the scene having acquired 28% of the group and emerging tensions between Paddy and the Barclays.  It seems that NAMA gave up on the notion of refinancing the loans in February 2011, and went into sales mode thereafter.

Paddy is still on the witness stand – actually a dais about a foot off the ground with a desk and a chair – and tomorrow is likely to concentrate on the next strand in the narrative – that Paddy hasn’t a bucket to pee in. A lot of the information around Paddy’s wealth is confidential, at least at present and tomorrow will begin with a closed session where it seems the respondents may ask for more openness in terms of Paddy’s finances and the investors he claims to now have.

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