The “black brochure” about the fund given to potential investors by Anglo in September 2006, had stated there “is no planned hotel development in Midtown East” but Anglo was involved in funding the refurbishment of the Crown Plaza Hotel nearby, Martin Hayden, counsel for investor Gerard McCaughey, told the Commercial Court.
Mr Hayden said Timothy Haskin, the US businessman who was Anglo’s general partner in the fund, had emailed the bank in August 2006, saying zoning issues related to the hotels should be disclosed to the investors. Mr Haskin had also asked the bank not to send out the brochure to the investors until issues were resolved.
When Anglo, its servants or agents, replied stating their impression was there was a risk about some issues but it was “manageable“, Mr Haskin again wrote saying the issue was one of “disclosure”. However, Anglo had failed to disclose these matters in the brochure, counsel said.
While the brochure did refer to the hotel fund as being a “high risk” investment and Mr McCaughey accepted it was high risk, his case was he should have been given information about those risks, particularly the risk relating to the key issue — the renovation costs for the hotels, counsel said.
The brochure referred to renovation costs of $28.4m for the two hotels, the Beekman Tower and Eastgate Tower, plus management fees and other costs of $7m, but did not disclose there was at that point no basis on which Anglo could have advanced realistic renovation costs, it is claimed.
Renovation costs quickly rose and were put at some $103m in 2008, beyond the capacity of the investment fund, the court heard.
Mr McCaughey, of Sandymount, Dublin, and Manhattan Beach, California, is taking the action against Anglo and the Anglo-owned Mainland Ventures Corporation over the Anglo Irish New York Hotel Fund.
Both defendants are being sued for $23m dollars over alleged fraudulent and/or reckless concealment and/or misprepresentation concerning the private equity fund.