Anglo’s long shadow

County View

County View
John Healy

Dead and buried it might be, but the gravestone of Anglo Irish Bank still casts a long shadow. Curly headed Seánie Fitz – spared a term behind bars when the lead investigator accidentally shredded a sheaf of documents during his trial – is gone but not forgotten, as the top brass in Davys now know too well.
It is worth taking a second look at how the world of high finance conducts itself. Paddy Kearney was the property developer who, in 2014, found himself holding €27 million worth of bonds in the defunct Anglo Irish. He had bought the bonds using a loan advanced to him by the bank, so that when the bank collapsed, he had in his back pocket a €27 million promise that was not worth the paper it was written on, but still owed the original borrowed amount to the liquidator of the zombie bank.
As the Government battled to clean up the mess left by Anglo, Paddy’s debt, among others, was offloaded for a fraction to a US debt investment firm called Car Val, one of many who take a chance that someday they might be able to recover enough to give them a profit. And in due course, Car Val came to Paddy with an offer: give us €2 million and change, and we’ll call it quits.
So it was that Davys, the stockbrokers, came into the picture. Kearney asked them to find a buyer for his bond, he would pay off Car Val and anything over would be divvied up between himself, his advisers and Davy.
The sale went ahead, and Davys were able to tell Kearney they had realised €5.5 million on the sale. This should have meant that everyone was happy, a win win all round. But what Davy did not tell Paddy, or anyone else, was that the bonds had been sold to a 16-man consortium of Davy senior executives.
In the words of Leo Varadkar, it was as if you were selling your house, and the auctioneer was promising to get the best price for you, only that he himself was the actual buyer.
Paddy Kearney is no simpleton, and the west Belfast carpenter-turned-developer is able to smell a rat as soon as the next man. And when word reached his ears that there were others who had been prepared to pay three times what Davy got, he realised he had been taken to the cleaners. Accusing Davy of underselling the bonds, he sued the stockbrokers. The case was settled outside court in 2016 at a reported cost to Davy of €3 million.
But even then, the cat was not fully out of the bag. It took a while for it to emerge that the Davy rugby-team-plus-a sub had broken every rule in the book, misled its own compliance team and lied to the Central Bank. And the three card trickery is not over yet. What has not been established is whether the consortium held on to the bonds, or chose to flip them on at a handsome profit.
In an ironic twist, those who held on the bonds through the liquidation of Anglo would eventually see them recover their full face value. Only a small coterie did so – the majority of shareholders, bond holders and creditors settled for the 20 cent in the euro the liquidator offered them, believing that a half a loaf (or, more accurately, a couple of slices off the top) was better than no bread. Those who brazened out, maybe even the Davy 16, came in for a windfall when, against all predictions, the remaining debts were redeemed in full.