NAMA is considering referring one developer to the Gardai for making a false declaration of assets

The recent Comptroller and Auditor General report on NAMA’s management of assets noted that the Agency had started quite a few investigations to pursue assets that might be available to developers to help pay off loans, but which were not declared by those developers when submitting their “Developer Business Plan” to NAMA. Here’s a reminder of the types of assets uncovered by NAMA’s investigators.

 

So NAMA is now more than two years into its asset management phase, the first loans having been acquired in March 2010. The Agency has three full-time employees whose job it is to uncover assets and who in turn manage a panel of private investigators.

You might therefore have expected a train of prosecutions, because remember the “Developer Business Plans” were supposed to be accompanied by statutory declarations and if developers had told porkies to NAMA about their assets, then NAMA could refer those porkies to the “appropriate authorities”, presumably the Gardai. And of the 850 developers whose loans are being managed by NAMA, how many such prosecutions are in train?

Zero, according to Minister for Finance Michael Noonan who told Sinn Fein’s finance spokesperson Pearse Doherty yesterday that (a) responsibility for prosecutions didn’t rest with NAMA (!) and (b) only “one case is being reviewed to assess whether there may be a basis for onward referral to the appropriate authorities”. The full exchange is here:

“Deputy Pearse Doherty: asked the Minister for Finance following the publication on 24 May 2012 of the special report by the Comptroller and Auditor General which examined the National Assets Management Agency’s management of its assets, if there have been any prosecutions or other legal action in respect of developers who omitted assets from schedules which required a declaration from the developer pursuant to the Statutory Declarations Act 1938 as part of the NAMA business plan review process.  [27941/12]

Minister for Finance, Michael Noonan:  I am advised by NAMA that there have been no prosecutions to date for submission by debtors of inaccurate Statements of Affairs. As the Deputy will be aware, prosecutions in such cases are a matter, not for NAMA, but for the relevant law enforcement authorities. NAMA advises that one case is being reviewed to assess whether there may be a basis for onward referral to the appropriate authorities.”

Of course it might very well be that NAMA is reviewing “one case”, but somehow I doubt anything will come of it – even if it is a serious “review” as opposed to the impression NAMA would like to give developers: “we’re watching you” – given the absence of any action so far. Of course it might be that there is no untoward declaration by any of the 850 developers whose €74bn of loans NAMA has now acquired….

Advertisement

Read Full Post »

NAMA developers generating €9m a month in Irish residential rents; NAMA still only getting around to taking charge of that income

We know that NAMA developers and receivers have rented 9,200 Irish residences. In addition, NAMA has control over a further 4,000 Irish residences but the asset management agency doesn’t know the status of these properties – for sale, rent, vacant, whatever. Yesterday we found out that the 9,200 properties are generating “of the order of” €9m a month, €108m annualised or just under an average of €1,000 per month. Minister for Finance, Michael Noonan was responding to a question from the Sinn Fein finance spokesperson Pearse Doherty as follows:

“Deputy Pearse Doherty:  the 9,200 residential properties that the National Assets Management Agency says it is now renting in the State, if he will confirm the monthly rent payable on these properties and that all of this rent is being applied to pay down outstanding loans due by borrowers to NAMA.  [27948/12]

Minister for Finance, Michael Noonan:  I am advised by NAMA that the units to which the Deputy refers are under the control of NAMA debtors and receivers. As I stated in my response of 22 May {PQ 24849/12}, NAMA is currently engaged in an extensive analyses of the residential portfolio under the control of its debtors and receivers. Whilst this analysis is expected to continue for some time, initial findings indicate that the total monthly rental income generated by residential properties rented by NAMA debtors and receivers in Ireland is of the order of €9 million. NAMA continues to be engaged in an exercise to put legal documentation in place to capture all rental income so that it will be applied to service the loans. This control was not in place when the loans were acquired from the participating institutions.”

You may be alarmed to see that NAMA is still continuing “to be engaged in an exercise to put legal documentation in place to capture all rental income so that it will be applied to service the loans” or in other words, developers whose loans may be completely underwater may still – more than two years after NAMA started transferring the loans – be pocketing rent receipts. I don’t recall the Comptroller and Auditor General uncovering that little nugget in its recent report on NAMA’s management of assets.

Read Full Post »

NAMA paying €3.46m dividend to its “independent third party” investors for 2011, despite €1bn cumulative loss

The Minister for Finance, Michael Noonan is still not able to reveal the identity of the buyer of the 17% stake in NAMA formerly owned by Irish Life and Permanent (ILP). ILP had to sell the stake after Eurostat warned the Government that NAMA’s €30bn of bonds would have to be placed on the national debt if the Government’s stake in NAMA exceeded 50%. And with our nationalisation of ILP, that was an imminent danger, so Minister Noonan announced the sale of ILP’s 17% stake on 23rd April 2012. Seven weeks later and Minister Noonan still can’t reveal the identity of the buyers telling Sinn Fein’s finance spokesperson Pearse Doherty yesterday

“I am advised by NAMA that it is expected that the private investors will purchase the Irish Life shareholding in the NAMA SPV through a nominee account structure. The detail of this deal, which ILP expect to complete shortly is commercially sensitive. It would not be appropriate, therefore for me to comment any further on it until such time as the deal is completed.”

However the Minister was able to reveal that the three so-called “third party independent” investors who each own 17% of NAMA, walked away with a total of €3.46m in dividends in 2011. This was on top of the dividends of €5.093m paid to these investors in 2010. Remember NAMA made a loss of €1.1bn in 2010 and an audited provision profit of €200m in 2011. So for an organisation nursing €982m of cumulative losses, you might say the NAMA investors have done alright!

Minister Noonan tries to justify the dividend by saying one NAMA entity called “National Asset Management Agency Investment Limited” (NAMAIL) actually makes a profit and it was for this entity’s 2011 retained profits of €8.46m that the 2011 dividend was paid. The view on here is that this machination to stop the NAMA debt coming on to the national debt might be costing us a considerable sum of money – to date, the “third party independent” investors have pocketed €8.55m on a total investment of €51m – not a bad return from an organisation which has run up €982m of cumulative losses.

Read Full Post »

Mick Wallace and his tax affairs

I’m afraid I’m one of the people who admire Mick Wallace (pictured below). The “man of the people” image might be overblown, but he comes across as a quietly-, but considerately-spoken man with an educated and wise head on him that might be at variance with his dishevelled appearance. Active in the community through sports, and a man with a history of accomplishment under his belt and a non-politician, it was no surprise he topped the polls in Wexford in February 2011 as widespread anger and contempt for traditional politics saw so many new faces enter Leinster House.

Last week, out of the blue, he announced that he had knowingly under-declared VAT in his building business, that he had reached a €2.1m settlement with the Irish tax authorities, the Revenue Commissioners but that it was unlikely the debt would be paid as his business was in receivership and, under the terms of the settlement, the debt was owed by the business. He was prompted to make the announcement by the fact the Revenue Commissioners were this week publishing the list of tax sinners for Q1, 2012 – extract showing Mick’s company settlement above – and his company would feature prominently in that list.

Many might be able to sympathise with the man who said he under-declared the VAT in order to save his business – keeping up to 60 people in work and not disappointing his customers who had paid deposits, presumably – and people might also be able to sympathise with the panic you can feel when you screw up and in the case of the Irish property market, there was a lot of screwing-up and many property developers were caught short. So he says he made the under-declaration so as to conserve cash and consequently to save the business, in the hope that something would turn up so that he could make good on his sin.

Many people wouldn’t be able to sympathise with his actions up to this point, but even on here, the well of sympathy would run dry if the cash that was supposedly being conserved to save the business was in fact used to enrich Mick and his associates personally. The last accounts filed for the company appear to be for 2008 so we don’t have an answer for how the conserved cash was spent, but the accounts for 2008 show that Mick and his son who was the other director of the company drew €290,000 total salaries, which was double the previous year.

Here is the chronology uncovered so far:.

2008/9, it is unclear from  media reporting but it seems to be suggested that the VAT under-declarations were made in 2009. VAT is generally paid on a 2-monthly basis, but we don’t know what 2-months period saw the under-declaration, or indeed if there were multiple under-declarations across a number of 2-month periods.

October 2010, Mick went to the Revenue to reveal the under-declaration of VAT. This would seem to be at least nine months – January to October 2010 – and possibly up to 20 months – March 2009 to October 2010 – after the under-declarations were made.

9th February 2011, Mick declares his candidacy for the impending general election

25th February 2011, Mick is elected as a TD for Wexford. He tops the polls for 1st preference votes with 13,329 ahead of Labour’s Brendan Howlin who received 11,005. Third, fourth and fifth seats in the 5-seat constituency went to John Browne (FF), Liam Twomey (FG) and Paul Kehoe (Government whip, FG).

May 2011, receivers appointed at the behest of ACC Bank to M&J Wallace Limited

November 2011, receivers appointed at the behest of ACC Bank to MJ Wallace Limited

Settlement with Revenue agreed in February 2012

June 2012, list of defaulters for Q1, 2012 published by the Revenue Commissioners

Many people cannot fathom why Mick can seemingly walk away scot-free from such a large tax bill when his company apparently continued to reward him and his family after the under-declarations were made. To many people, there are still un-answered questions

1. When did the under-declaration take place? The suggestion in the media is 2009 but VAT returns are generally made every two months, so when precisely?

2. Was it a single incidence or were there multiple under-declarations?

3. What salary, rewards and other benefits were paid to Mick Wallace, his family and  associates between the under-declaration and October 2010 when Mick ‘fessed up?

4. Why did it take 15 months for the Revenue – between October 2010 and February 2012 – to examine what was presumably a straight-forward matter with a cooperative defaulter and make a settlement?

5. Since MJ Wallace was placed in receivership in November 2011 and Mick Wallace’s financial issues have been prominently reported in the media during 2011, why did the Revenue agree a settlement in February 2012, when there would have been strong suspicion that the settlement would not be discharged?

6. Why has the chairperson of the Revenue Commissioners, Jospehine Feehily – pictured below –  not been summoned before an Oireachtas committee to answer for the behaviour of her organisation, either in general or specific terms? After all, she was summoned lickety-split in January 2012 after those letters were issued to pensioners advising them of claw-backs!

Yesterday’s publication of tax defaulters by the Revenue Commissioners contained the usual list of tax sinning and the resultant penalties which include imprisonment. To many people in this country, including on here, it is incredible that the Mick Wallace file has apparently been closed with an acceptance that the settlement cannot be paid. Mick Wallace has asked to address the Dail on his tax affairs and that request has been turned down, but in 2012 we are all media companies and Mick has his own website which remarkably has no statement whatsoever on the matter.

Read Full Post »

Irish finance minister responds to request to provide estimate of overall Spanish bailout needs

Although Spain might be in the eye of the storm right now, with the interest rate demanded by potential lenders to Spain soaring to a record 6.8% yesterday for 10-year loans, Ireland’s “issues” haven’t gone away even if they are no longer centre-stage. When Ireland’s first bailout concludes at the end of 2013, Ireland still faces uncertainty about where it will source funding of nearly €40bn in 2014-2015 to pay for its deficit and maturing debt – the hope was that Ireland would return to the traditional bond market, but with each passing week, that prospect is looking less-and-less promising and the betting is that we will need official funding, or in common parlance “a second bailout”. And it is the European Stability Mechanism that has been touted as the only feasible official source of funding. So for Ireland, it is of paramount importance that this fund has enough cash to deliver a second bailout – after all, that was the main plank on which the “Yes” side argued in the recent Fiscal Compact referendum.

So you would think it was a perfectly reasonable request when Independent TD Stephen Donnelly asked the Minister for Finance, Michael Noonan for an estimate of Spain’s financing needs over the next three years. After all, if Spain is locked out of the bond markets as one of its own ministers claimed last week, and if its bond yields are at 6.8% when official funding is apparently available for 3-4%, and if Spain has substantial immediate financing needs, then it would seem logical that Spain would seek official funding now. And the worry for Ireland would be that at the end of 2013 when our first bailout concludes, the cupboard will be empty. A matter of high national import, some might say.

Here was the question and answer exchange from the Dail yesterday:

“Deputy Stephen Donnelly: To ask the Minister for Finance if he will provide an estimate of the funding requirements of Spain to cover a three year period and to include deficit funding, repayment of maturing debt and recapitalising banks should that country seek to access official sources of funding..

Minister for Finance, Michael Noonan:  As the deputy will be aware, it was clarified over the weekend that Spain is to seek official sources of funding.  In particular, financial assistance is being sought from euro area Member States for the recapitalisation of Spanish financial institutions.  Finance Ministers in the euro area have welcomed this and have expressed their willingness to respond favourable to the request.

Financial assistance is to be provided by the EFSF / ESM and is to cover all possible capital requirements which will be estimated by the external audit that is currently taking place.  The loan amount to cover the estimated capital requirements with an additional safety margin is estimated as summing up to €100 billion in total.

Spainwill continue to fund its sovereign needs via market based financing.”

So Minister Noonan and the Department of Finance either don’t know the answer – which is quite possible, remember this Department has a reputation for being economically illiterate – or they do, and they don’t want to spook the nation by revealing there may not be anything left in the ESM for Ireland at the end of 2013.

Of course, we can have our own stab at Spain’s financing needs ourselves by examining:

(1) Spain’s deficit. The EU recently published its Spring economic forecasts for all EU countries and it would seem on here that Spain will need about €100bn over the next three years to fund its deficit which is nasty at 6.4% estimated in 2012 and seems to be on a growing trend in a country with 24% unemployment, 90% debt:GDP, a property and banking sector where there is evidence of denial of the real extent of problems and an uncompetitive economy.

(2) Spain’s roll-over of maturing debt. Spain owed €785bn at the end of 2011. It is estimated that Spain still needs to refinance over €100bn this year and as for 2013-2015, it is remarkably unclear what the funding profile is, but if you assume €80bn per annum, then Spain might need €340bn over the next three and half years.

(3) Spanish banks. Although we still await details, it seems that Spain has initially requested up to €100bn to deal with immediate losses and provide a buffer for future losses. But losses will depend on a number of variables including the decline in property values. Spanish residential property is down by nearly 25% from peak. In Ireland, the official estimate from the CSO is that our property is down 50% from peak, though other estimates which include consideration of cash-only transactions suggest we are down 60% from peak. There are parallels between the Irish and Spanish construction boom in the 2000s and both generated over-construction, and the view on here was that there was similar over-production. Should Spanish residential property decline by 50% from peak, with present levels of macro-economic distress, its banks may be looking at losses around €250bn or 25% of its GDP.

There is presently some €250bn potentially available from the EFSF which thankfully Ireland is no longer contributing to – it is being funded by lenders who are receiving guarantees from other EZ countries. The ESM is supposed to have a €500bn lending capacity once the 17 EZ countries have contributed €80bn in capital –Ireland’s share is €1.3bn. So it would seem that Spain alone might eat up all remaining available official sources of funding.

Italy’s 10-year bond closed at 6.2% yesterday and if Italy needs tap official funding as was suggested yesterday by Austria’s finance minister – “Italy has to work its way out of its economic dilemma of very high deficits and debt, but of course it may be that, given the high rates Italy pays to refinance on markets, they too will need support”, then it would seem almost certain that existing mechanisms will not be adequate and on a parochial level, Ireland will be unable to fund itself from the end of 2013. Serious stuff, deserving a better response than the one provided by Minister Noonan yesterday.

Read Full Post »