Fall of the once-mighty Quinn
JAMES Bond would have had a job keeping up with these boys. The air miles alone would be enough to make any continent-hopping secret agent dizzy to his bones. And the plot would certainly find favour among the scriptwriters that push against the limits of the average imagination.
Meet the Quinns: Seán, once Ireland’s richest man; his son Seán Jr; and his nephew Peter Darragh Quinn.
Last Tuesday, a High Court judge found that all three were in contempt of a court order instructing them to keep their hands off hundreds of millions in property assets, spread across Europe and beyond. Russia, India, Cyprus, Ukraine, Sweden, the British Virgin Islands, and the tiny Central American state of Belize all featured in the proceedings.
The court order was granted last year on foot of an application by the bank formerly known as Anglo Irish. The bank is owed €2.8bn by the Quinn family, and it had reason to believe the family was squirrelling away as much as they could before stumping up to pay their debts.
The ruling was a major blow to the Quinns as their empire and wealth unravel. Apart from the serious bobs involved, the ruling also depicted Seán Quinn as somebody a world away from the man of truth, honour, and honesty, which, for decades, he used as his calling card.
Judge Elizabeth Dunne referenced Quinn’s evidence about the “honourable, respectable way” that the family’s group of businesses were run. “I wish I could say the same about the manner in which the respondents have dealt with the adverse circumstances in which they now find themselves, having regard to the collapse of the Quinn business empire,” she said.
“The behaviour of all three was as far removed from the concept of honour and respectability as it was possible to be.”
She accused them of giving untruthful evidence. She found it “impossible” to accept that Quinn had no “hand, act, or part” in an elaborate scheme to move assets beyond the reach of the bank.
The scheme involved flying to places like Dubai and Kiev to meet various shadowy figures; there was evidence of Quinn and his nephew signing bundles of documents in Russian which they didn’t even understand. Then there was the mysterious figure of a former railway worker by the name of Yaroslav Gurynak. He was assigned loans owing to a Quinn affiliate company for nominal sums with the instructions that the Quinns got 20% of anything that was recovered. The deal, conceived between the family from rural Fermanagh and the Ukrainian, was signed as a “gentleman’s agreement”, as if everybody concerned had long-standing ties that negated the need for any paperwork.
It’s all a long way from the position that Sean Quinn used to inhabit in the popular imagination. His image was that of a decent man of the soil who showed the slick suits that it was possible for a countryman to succeed through nothing but hard work and a good eye for an opportunity.
In 2007, when a newspaper story challenged the folksy image, he took out large ads in the daily press proclaiming: “My word is my bond”.
Two years later, as his gambles began to crystallise, he told Tommie Gorman: “Anything we’ve done we paid a heavy prices for it. Me, my company, my family, nobody was ever involved in any impropriety and I’ve no intention of being involved in any impropriety.”
Those days are gone now, the folksy image tattered and worn, as the long arm of the law finally caught up with a man who had ducked and dived one too many times.
THE MONEY TRAIL
Seán Quinn’s problems with Anglo Irish Bank date from 2003. Like many others who considered themselves astute, Quinn bought into the myth of the business genius that was Seán Fitzpatrick.
Quinn began buying shares in the bank, believing Fitzpatrick has created some class of a banking rocket. The shares were bought under a scheme called contract for differences, which has been described as the crack cocaine of share dealing. Under contracts for difference, you could win up to 10 times what you invest. Equally, losses were of the same magnitude. Quinn lost big, particularly in the years leading up to 2008 when the roof came off the bank. In the end, he was caught for about €2.8bn, thrown into a bank that was disappearing down the sinkhole, taking him with it.
In April of last year, the bank called in the debt. Quinn’s group of companies were taken over. Quinn Insurance, the cash cow of the group, was eventually sold off to Liberty Insurance (say hello to Liberty). The bank also took control of the family’s foreign property portfolio as security against the debt. The portfolio had been built up over the past 15 years and was valued at about €500m.
Relations between the parties soured beyond reconciliation. In June last year, the bank secured a High Court order freezing all the assets in the property portfolio. Anglo — by now known as Irish Bank Resolution Corporation — got wind that the Quinns were trying to move the foreign assets beyond reach. The whole affair began to take on a surreal complexion.
Allegations were made that Quinn’s son-in-law bought a property company worth $13.4m (€10.6m) for the price of a laptop. Peter Quinn, who oversaw the foreign property portfolio, bought a €132m property for €1,000. As far as the bank was concerned, these transactions were just a ruse to move the companies beyond the reach of the debt recovery capacity of the bank. By then, IBRC had moved to bankrupt Quinn. He maintained this was part of a vendetta. The bank’s position was that it was necessary to ensure they got their hands on all they were owed, which is ultimately now owned by the citizens of the State.
ELABORATE PLOT
The contempt proceedings were taken by IBRC on foot of the information that the Quinns were involved in an elaborate plot to hide away the assets.
The evidence put before the court was pretty damning. The Quinns admitted they did attempt to move property assets beyond the reach of the bank. This admission raises questions about Quinn’s earlier claims that his family would act with honour and pay back all their debts.
However, any such move was not illegal prior to the court order of June 2011 freezing the assets. The bank claimed that after that date the Quinn family continued in its plot to take the properties beyond the bank’s reach. Doing so would be against the law.
One element of the strategy employed by the Quinns, as alleged by IBRC, showed what was at stake.
On June 20, 2011, Peter Quinn made a return day trip to Dubai. On the same day, a company called Galfis was set up, to be registered in the Central American state of Belize, a former British colony.
Galfis was set up for the benefit of the Ukrainian former railway worker Yaroslav Gurynak. This man had in recent years apparently switched careers and is now a corporate strategist. He also happens to be a cousin of a Russian lawyer who was advising the family. The Quinn family formed a “gentleman’s agreement” with Gurynak that debts of €163m owed to a Quinn-controlled company would be transferred to Gurynak, who would reimburse the family to the tune of 20% of all debts recovered.
Peter Quinn told the court he never met Gurynak. It follows that the debts in question are now beyond the legal control of the Quinns and, therefore, out of reach of the bank. If Gurynak decides to welch on his gentleman’s agreement, there is precious little the Quinns can do. More to the point, though, there is absolutely nothing IBRC can do to get its hands on the money.
Peter Quinn told the court that Russian lawyers had advised him that it was better to go down that route rather than allow the bank take the assets which would ensure the family definitely got nothing.
The High Court also heard that Peter Quinn retained one set of Russian lawyers who believed the family was merely restructuring its assets internally. Ultimately, another firm advised the family. Peter Quinn denied in court that this was because the original solicitors refused to get involved in the scheme. Gurynak must have thought all his choo choo trains had come at once.
Another person of the Quinns’ acquaintance to strike it rich in these straitened times was a businesswoman by the name of Larisa Yanez Puga.
She worked for a Quinn family vehicle in Russia for a salary of about $6,000 per month. Judge Elizabeth Dunne, in her ruling last week, found that Seán Jr and Peter Quinn had doctored documents in her employment contract to include a clause entitling her to $500,000 in the event of being dismissed.
On Aug 30, 2011, the two men met Puga in Kiev and it was decided she would be dismissed. Probably never in the history of business was somebody so delighted to be dismissed.
The exact purpose of the scheme remains unclear, but quite obviously that $500,000 was another tranche that was thus placed beyond the reach of the taxpayers’ bank, IBRC.
THE POOR MOUTH
Paul Gallagher is a serious dude in the law business. A former attorney general, those who know about these things claim he is the brainiest barrister in the State. He acted for IBRC in the contempt case, and boy did he get downright forensic in his examination of the Quinns.
Seán Quinn used his time in the witness box to berate the bank, accusing it of driving his business into the ground. He said the bank had “wrecked” the country, and “bullied me out of office... made me a criminal in Irish society... tried to ruin me forever”.
“You guys are treating me as a criminal and want rid of me at all costs,” he told Gallagher. “I should not be here.”
The lawyer brought Quinn though the specifics at issue, but the former billionaire kept lashing out at his fate. He accused Gallagher of trying to make him look stupid, and said he resented implications that he was “a liar”.
Gallagher had a different take on things: “You lost money because you began directly investing in the stock market through contacts for difference and the share price went down.”
Later, Quinn reasserted his innocence, his total belief that all which had befallen him was as a result of vendettas and stupid bankers chasing him down blind alleys.
“I never breached an injunction in my life and I never will,” he said.
Judge Elizabeth Dunne disagreed. She found that he did breach it and that he and his relatives had given evidence that was simply unbelievable.
Leaving the court on Tuesday, Quinn asserted to reporters: “I am not dishonest.”
That’s for others to decide. But there was an ironic angle to the conclusion of the proceedings.
The Quinn Group’s cash cow, Quinn Direct (later Quinn Insurance), had a fearsome reputation as a litigator. The company had blazed a trail by revolutionising the claims culture through moving to settle claims quickly and cutting down on legal costs. That was a very positive development in the business.
The other side of the coin was that when the claims were big, the company refused to pay out and fought long battles through the expensive legal system. In this, Quinn Insurance acted as many big corporate entities do, and used the law as a weapon to fight off less resourced opponents.
However, time and again, whenever claimants stuck the course and went to court, judges berated Quinn Insurance for its conduct. On one occasion, a judge threatened to jail two company executives over giving false evidence.
Now, the law has turned on the mighty Quinn. While once, he was in a position to take it to the limit — like other high-flying businessmen — turning back just before he crossed a line, it seems that the pressure of his current predicament pushed him one step beyond.
Seán Quinn, his son, and nephew are not the only family members caught up in the fall-out from the dispute with IBRC. All of the Quinn siblings, and two in-laws have also been drawn into the dispute.
The five Quinn children — who were the owners of the Quinn group of companies — are suing the bank over the €2.8bn debt. The family admits to owing €455m but claims the rest of the debt accrued as a result of negligent or illegal actions by the bank, and is therefore void.
That legal action is expected to begin in the coming months. In the meantime, though, IBRC has claimed that all or any of the family members may be involved in attempting to put foreign assets beyond the reach of the bank. As a result, a freezing order was issued on assets associated with Aoife, Ciara, Colette, Brenda and Seán Jr. Aoife’s husband, Stephen Kelly and Ciara’s beau, Niall McParland are also included in the order as is their cousin, Peter Darragh Quinn.
On Thursday last, Judge Peter Kelly continued an order allowing them €2,000 a week for living expenses, although he said any withdrawals will have to be approved by the bank.
“There will have to be vouching in the light of current events,” he said. “I expect there won’t be nickel and diming over a packet of sausages.”
The Quinns’ mother, Patricia, has also put in a court appearance. Last December, the family took an action claiming that a €300m loan extended in 2007 from Anglo Irish, as it then was, to Patricia and Seán, was invalid because she didn’t know what she was doing.
Patricia provided a sworn statement saying her husband had exercised “undue influence over her” to sign for the loan. She didn’t specify what form this action might have taken, but claimed she was merely a homemaker who knew nothing about finance. The court heard she was a director in 91 different companies.
She claimed her only business dealings were “deciding upon the weekly groceries and providing for the household expenses”.
Judge Peter Kelly did not accept her claims. He found that there had been no presumption of “undue influence” between husband and wife since 1750.
TOTAL IGNORANCE: “This is embarrassing to admit, but it is the truth,” said Patricia Quinn, in a sworn statement in which she said she had no business dealings “beyond deciding upon the weekly groceries and providing for the household expenses”.
LAST December, Patricia Quinn provided a sworn statement for the High Court in a case in which IRBC was pursuing a €300m judgment. The money was a loan forwarded to Sean and Patricia in 2007. Now, in light of other disputes, the bank was looking for its money.
Patricia claimed total ignorance of all things financial. She said that her husband had used undue influence to get her to sign the loan agreement. In the same vein as the folksy image her husband used to cultivate, Patricia, who is a director of 91 companies, claimed she was a homemaker for the past 36 years.
“This is embarrassing to admit, but it is the truth,” she said in a sworn statement in which she said she had no business dealings “beyond deciding upon the weekly groceries and providing for the household expenses”.
If Judge Peter Kelly accepted her claims — which he didn’t — the loan agreement could have been declared invalid. However, he pointed out that under Irish law there had been no presumption of “undue influence” between a husband and wife since 1750. The Quinns produced no evidence to demonstrate what form this “undue influence” might have taken in a marriage that has always appeared rock solid.
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