Developer to sue Nama over €8.3m interest fee

A developer who built a €90m private hospital in Cork, only for it to close six months later, is to sue Nama alleging that he and others were fraudulently charged €8.3m in interest.

The action is based on 84 loans, valued at €152m, taken out with Anglo Irish Bank during a 15-year period.

The borrowers include Chicago-based Dr Joseph Sheehan, whose Sheehan Medical Group set up the Cork Medical Centre without critical backing from the VHI. It closed in 2011.

Dr Sheehan is joined in the case by the developer John Flynn and his family, who live in Florida, and who has invested in the Hermitage private clinic.

Both Dr Sheehan and Mr Flynn are shareholders in the Blackrock Clinic.

They have asked an American court to force Nama — which now houses former Anglo loans — to cancel all of their outstanding debts.

They also want court permission to rescind the personal guarantees linked to the loans. The case has been filed in New York.

The private hospital partners claim Anglo Irish Bank knowingly overcharged interest and, when the problem was detected, failed to refund the full amount of interest.

They said this continued when the loans first passed to IBRC and, when it was liquidated, to Nama.

Dr Sheehan and Mr Flynn affidavit has said that Anglo staff misrepresented documents, was careless and negligent in its dealings, and lied to customers to keep them from moving their business.

It said when Anglo offered loan packages to them the bank knew, or should have known, the interest arrangements advertised were false.

“Anglo Irish Bank used fraudulent inducements, coercion, and threats to prevent plaintiffs entering into competitive loan agreements with other banks and to coerce plaintiffs into entering into further loan transactions with the bank as part of the bank’s ongoing scheme to defraud plaintiffs,” it said.

In 2010, an internal review at the bank discovered that it had overcharged interest to the tune of €100m between 1999 and 2004.

However, the new action said that the bank did not fully compensate those affected.

“The bank has reimbursed the plaintiffs for less than 2% of the overcharges identified in the [audit reports] and the overcharging continued, and continues to this day,” it said.

The action has also been taken against the chief executive appointed to salvage Anglo, Mike Aynsley, and its former chief operating officer, Tiarnan O’Mahoney.

The affidavit said the Government’s decision — to liquidate IBRC and sell its loans to Nama — left the entity with insufficient resources to compensate the claimants.

They also argue that Nama, since it acquired the loans, has continued to charge the wrong rates of interests.

In a statement, Nama said it would not comment except to say that it will “defend our position vigorously”.

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