KPMG decision ‘cannot be put off forever’

A High Court judge has strongly criticised the continuing failure over months to make a decision whether accountancy firm KPMG should, in its capacity as former auditors to Irish Nationwide Building Society, be sued as a co-defendant in separate actions by State-owned IBRC against Michael Fingleton and other former directors of the society over €6bn losses.

KPMG decision ‘cannot be put off forever’

Mr Justice Brian McGovern noted that the special liquidators of IBRC, Kieran Wallace and Eamonn Richardson, are partners in KPMG. He said that while it was not for him to advise anyone “as to what Chinese walls have to be created”, it was “a matter of concern” that there was no decision on the procedural matter of whether KPMG, a third party in one action, should be a defendant, he said.

“How long is it going to take to make a decision?” the judge asked in the Commercial Court, warning he would not permit the matter to “drift” much longer and a decision “cannot be put off for ever”.

“I cannot for the life of me understand why someone can’t decide if [KPMG] are to be a defendant rather than a notice party,” he said.

If there was an issue of potential conflict of interest, how much longer does it take for someone to make a decision about that, Mr Justice McGovern asked.

KPMG was last February joined on the application by former Irish Nationwide director Terence Cooney as a notice party to the action against him and three other former directors — John S Purcell, David Brophy, and Michael P Walsh — over losses of €6bn at the society between 2008 and 2010.

Mr Cooney said he was seeking a contribution and indemnity from the firm, which acted as auditors of Irish Nationwide for 20 years, should any damages be awarded against him.

Mr Fingleton is being sued separately.

In July, the Commercial Court heard that the law firm Eugene F Collins had been appointed last April to review legal advice on the issue of joining KPMG as a co-defendant to the case against the four directors.

Mr Justice McGovern was yesterday told by Maurice Collins, for IBRC, that aspects of the review exercise had been completed but the review was “not all done” and he could not say when a decision would be made on the KPMG joinder issue.

Mr Collins said he was instructed to consent to an application by Edward Farrelly, for Mr Cooney, seeking a stay on any further steps in the proceedings involving Mr Cooney until a decision was made. There should be a similar stay on the proceedings against Mr Fingleton, Mr Collins said.

John Rogers, for Mr Purcell, objected to any stay, saying IBRC’s reasons for its consent to that should be put in an affidavit.

The judge said the joinder issue was a procedural and tactical decision and the party who may be joined was not required to go into the “minutiae” at this stage. In all the circumstances, he would refuse the stay application, the judge said.

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