C&AG report: Michael Noonan faces quiz on Nama firesale

Finance Minister Michael Noonan faces questions about why he let a firesale of Nama’s £1.6bn Northern loans proceed and did not stop it after the emergency of success fee payments in bids.

C&AG report: Michael Noonan faces quiz on Nama firesale

An audit by the State’s financial watchdog of Project Eagle has concluded that the agency incurred a potential loss to the taxpayer of £190m. The Comptroller and Auditor General report has prompted the Government to agree to the potential further investigation.

Ministers have expressed confidence in both the C&AG and Nama, despite the latter contesting the findings.

Consideration will now be given to how cross-border legal difficulties may be overcome with any full inquiry, after the Cabinet agreed to leave the door open for a further investigation.

In the meantime, the Public Accounts Committee (PAC) will quiz Nama officials next month and ask Mr Noonan why he did not stop Project Eagle when he became aware of fixer fees.

The C&AG report highlights how restrictions were put in place for the sales process. This resulted in reduced competition and information for bidders compared to other Nama sales.

This acted as a deterrent and had the potential to affect the price achievable, says the report.

Nama’s board disputes this.

The C&AG questions whether Nama should have considered the role of Frank Cushnahan, a businessman and member of Nama’s Northern Ireland advisory committee. Between 2011 and 2013 he was advising six Nama debtors, who had loans estimated to amount to half the value of the loan book. A “potential conflict of interest” that arose through this should have raised questions about his role, says the report.

US firm Pimco in March 2014 told Nama of a fixer fee structure, where £15m was to be divided between law firm Brown Rudnick, Belfast solicitors Tughans, and Mr Cushnahan. The group was asked to withdraw from the bid and another US firm, Cerberus, went on to win it, paying £1.3bn for the loans that had been bought by Nama originally for £1.9bn.

Cerberus later informed Nama the two legal firms were to receive success fees.

The report concludes Nama should have had “concerns” around the fixer payments for Project Eagle and took a “narrow approach” in addressing problems.

Lazards, advisers for Nama on the sale, recommended Cerberus had the best bid. But the report notes they were not told of the success fee structure. Nama also never consulted its compliance unit about the fees and and it could have sought more details from Mr Cushnahan, who resigned in the bid period.

The report concluded that the agency incurred a loss of £190m for taxpayers after previous writedowns on some loans were included.

Nama chairman Frank Daly rejected the findings yesterday. His agency said findings were based on an incorrect assumption on the higher than normal discount rate applied to the sale, which was was needed compared to lower rates for better asset sales elsewhere.

Frank Daly, Nama chairman
Frank Daly, Nama chairman

C&AG staff who worked on the report also had no market experience of loan sales, argued Nama. Mr Daly said taxpayers had “absolutely” got full value for money with Project Eagle.

Opposition parties last night pushed for a full inquiry into the deal.

Fianna Fáil’s Michael McGrath said there were “very serious” questions over why the deal was not axed when Mr Cushnahan’s “inappropriate” involvement emerged.

Sinn Féin’s Mary Lou McDonald called on other deals to be examined to ensure the controversy was just an “outlier”.

Independent4Change’s Mick Wallace, who has raised the deal in the Dáil, called for Nama sales to be put on hold and for other deals to be investigated.

Taoiseach Enda Kenny is set to meet opposition leaders today about potential inquiry into the deal.

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