Pyramid scheme accused faces asset sale

A COURT yesterday paved the way for Anglo Irish Bank to sell off the assets of alleged pyramid scheme operator Breifne O’Brien in a bid to reduce his alleged €13 million borrowings to the bank and its subsidiaries.

The assets include properties in Dublin, Paris and England, a car showroom in Munich, and shares in an investment fund in Boston, and are valued at more than €11 million, according to an affidavit from the bank.

Colm O hOisín SC, for Anglo, had applied to the Commercial Court to vary a December 2008 order freezing below €18m the accounts of Mr O’Brien, formerly with an address at Invergarry, Silchester Road, Glenageary, but now with an address in Thomastown, Co Kilkenny.

The bank had said it believed it was entitled to act to enforce its securities without any variation, but had brought its application in case a variation was necessary.

John Hennessy SC, for brothers Louis and Robert Dowley of Carrick-on-Suir, Co Tipperary, who gave Mr O’Brien some €3m to invest, opposed any variation and disputed Anglo’s entitlement to seek it.

The brothers are among several investors who have secured judgment for sums totalling some €18m against Mr O’Brien, over allegedly operating a “pyramid” investment scheme over some 15 years and misappropriating millions from several investors to fund his personal lifestyle and business interests.

Mr Justice Kelly Peter earlier this year referred papers to Garda fraud detectives after saying they disclosed evidence relating to the commission of a series of criminal offences.

Mr Justice Frank Clarke said Anglo’s application yesterday raised an important issue about the position of financial institutions who afford facilities to persons later made the subject of freezing orders. The issue related to the entitlement of institutions to exercise rights they would normally have to enforce their own securities, including the right to “set off” accounts in credit against accounts in debit or to, for example, sell a property on which a loan was secured.

The freezing order was directed against Mr O’Brien and restrained him dissipating his assets or reducing them below the set value, the judge said. The bank was not itself governed by the order except in the sense it was required not to act to aid and abet the frustration of the order.

Unless there was specific wording to that effect, a typical freezing order does not stop a bank exercising its right of set off or acting to realise a security provided the right to set off predated the notification to the bank of the making of the freezing order, the judge ruled. On that basis, there was no necessity for the court to make a variation of the freezing order in this case and he said he would refuse the application.