80 investors owe €18m to bank after signing with accountant

A group of more than 80 investors have found themselves owing almost €18m to Bank of Scotland after signing over power of attorney to an accountant for an investment project.

The medics, dentists, business people and retirees all signed over the power of attorney to Alan Hynes when they placed money into a property investment fund called Tuskar Asset Management.

To make matters worse there is €3.1m in shareholder funds missing with Mr Hynes unable to account for their whereabouts.

Last week, Mr Hynes was found unfit to be a company director for his role in the management of Tuskar Asset Management and barred from acting as a company director for three years.

Tuskar Asset Management (TAM) plc group went in to liquidation in 2009 owing around €50m to banks. However, Mr Hynes had used the power of attorney signed over by the investors to sign them up as personal guarantors on loans that TAM was using to fund property investments.

Each of the investors is now liable for a loans provided by Bank of Scotland Ireland that is proportional to the sum that they originally invested into TAM.

One investor who lost hundreds of thousands of euro spoke on the condition of anonymity. He said the country needed somebody to come in and look at regulation and auditing because the lax standards had left people penniless.

“This country needs somebody to start shaking it up, the Anglos and all of that highfalutin people are tired of that. This is a mere €50m. Individual investors have loss their life-savings here because of the inappropriate use of funds by Alan Hynes.

“Deloitte & Touche were auditors. Why didn’t they do their job? If they have been conned let them come out and say he pulled the wool over our eyes as well,” he said.

Justice Dunne noted in her judgment that the liquidator had found that Deloitte & Touche had not investigated the subsidiaries before signing off on the accounts.

“First of all he made the point that only the accounts for the holding company were audited by Deloitte and that the accounts for the subsidiaries were never signed off,” she said.

A spokesperson for Deloitte said: “We do not comment on matters relating to clients.”

In the court judgment it was also noted that the liquidator to TAM, Neil Hughes, had described the structure of TAM as unusual.

Justice Dunne said in the judgment: “The applicant has described as particularly striking the fact that the company obtained a power of attorney from those investors to enter into guarantees for the banking debts of the company to Bank of Scotland (Ireland). It was the applicant’s view that the investors may not have fully understood the significance of this and they have been left with significant liabilities as a result of what he describes as “this most unusual practice”.

The judge also found Mr Hynes could not explain where more than €3m of shareholder funds had gone.

“I am satisfied that Mr Hynes has not accounted for shareholder funds to the tune of €3.1m. This is a matter of great concern and, in my view, demonstrates a lack of integrity on the part of Mr Hynes in relation to the failure to account for shareholder funds,” Justice Dunne said in her statement.

A second investor lost €100,000 in his initial investment in TAM before finding that he was the guarantor on a defaulting loan to Bank of Scotland for another €100,000.

“There are people who’s marriages have split up as they have found themselves under serious pressure due to this. There is a human cost toll to it as well,” he said.

The investor said he had trusted Mr Hynes when he had invested in the property fund but that he didn’t realise what he had got himself in for. “Nobody realised the extent of what we were signing over. We are all adults, but the risks were never explained to us,” he said.

Another of the investors said: “Alan Hynes asked the investors to give him power of attorney which allowed him to sign them in to personal guarantees for the companies’ debt. I don’t think people understood, he used the power of attorney to sign people up for personal guarantees for the PLC’s debts. It’s worse than the normal scenario, for these people the nightmare lives even though the company is gone.”

One of the investors said there had been a complete lack of regulation that had led to TAM’s collapse. He said the only difference between Ireland’s biggest corporate collapse, Custom House Capital, and TAM was who was regulating it.

Because TAM was an unquoted PLC investing in land and property, it wasn’t regulated by the Central Bank. The only body with oversight was the Chartered Accountants Regulatory Body which oversaw Mr Hynes accountancy firm Hynes and Co.

“There was an immediate investigation into Custom House Capital for the simple reason that Custom House was regulated by the Central Bank. That’s why. Hynes and Co was regulated by Chartered Accountants Regulatory Board (CARB), Custom House Capital was regulated by Central Bank. At the end of the day the difference is the regulators. There is pro-active regulation and non-existent regulation,” said one of the investors.

The investors are not entitled to apply to the Investor Compensation Company and their only hope for recovering some of their money is through the Chartered Accountants Compensation Scheme.

It is unclear if investors will be able to get some compensation. A spokesperson for the accounting regulatory body, CARB, said: “There is a scheme for the provision of compensation for members of the public who have incurred financial loss as a result of investment advice given by a firm of Chartered Accountants and that each claim is assessed individually by an independent panel of the Chartered Accountants Compensation Scheme”

In a statement to the Irish Examiner on behalf of Mr Hynes, Colm Sugrue said a number of shareholders were backing Mr Hynes to investigate issues.

“This group of shareholders have appointed Mr Hynes own company, Tuskar Property Holdings Ltd, to investigate these issues with the Chartered Accountants Regulatory Board.”