State faces Catch 22 situation if Quinn seeks more taxpayers’ money

SEÁN QUINN has a brass neck. The businessman would be central to any public investigation into the banking crisis that has crippled the country, yet he regularly opines publicly on what government and citizens need to do to rescue the country from a situation which he was involved in creating.

Quinn’s actions were a major contributor to the disaster at Anglo-Irish Bank. The circumstances in which his shareholding in the bank was reduced from 25% to 15% are the subject of an ongoing investigation by the Office of the Director of Corporate Enforcement and the gardaí (and have created hundreds of millions in euro of losses for the state because the 10 buyers of those shares borrowed the money from Anglo to buy them and cannot repay their debts to the now state-owned bank).

The manner in which Quinn secretly accrued the original shareholding – by gambling through a device called “contracts for difference” to avoid public scrutiny and apparently without the relevant permission from the Financial Regulator – created not only a major loss estimated at about €1 billion for him but contributed to the destabilising of the Anglo share price. Loans that his business empire received from Anglo at the same time as he was trying to arrange payment for those shares must also face legal independent scrutiny.

Quinn was the subject of the biggest ever fine levied by the financial regulator – €200,000 personally and €3.25m for his company – for the inappropriate way he used funds belonging to Quinn Insurance for the gambling on Anglo shares.

Quinn took a loan from Quinn Insurance reserves to use for gambling on Anglo shares. The money was later repaid, but it was a highly risky transaction undertaken without the relevant authorisation from the regulator. He was required by the authorities to step down as a director of the insurance company as part of his negotiated admonishment.

It is a long list of dreadful and calamitous mistakes, yet Quinn is indulged by sections of the media whenever he wants to hold forth. In the summer of 2008 he was part of an extraordinary series of first-person pieces published on the opinion pages of the Irish Times that told the Government how to solve the unfolding crisis. Quinn made reference to “losses” on the stock market as if they were significant to nobody but himself. The full reality of his situation – and the details of his censure by the Financial Regulator – emerged only later, but it was worth remembering that in that missive he lectured government on how to make Ireland more competitive. He was at it again last weekend when the Sunday Independent carried another personal missive from Quinn. There was little incorrect, per se, with what he said: few would disagree that the level of unemployment now, particularly in the under-25 age bracket, is deeply worrying. “It should be a priority at national level to develop plans and initiatives that can stem this draining of the future lifeblood of our economy and our society,” he said.

But it is difficult for the state to take the actions Quinn suggests when it has to invest billions in the rescue of the banks, particularly the self-same Anglo in which Quinn was a major player.

Quinn never misses an opportunity to champion the achievements of his company and its 5,500-strong Irish workforce and it would be churlish not to acknowledge that he has built something big, international and profitable.

Still, you have to be a little suspicious when, having lauded the benefits to Ireland of multinational investment, Quinn advises that “we must, however, become more successful in encouraging home-grown entrepreneurs to develop local manufacturing businesses and support local employment ... Policymakers should focus on investment for the creation of sustainable jobs and mechanisms need to be found to provide capital and support to budding entrepreneurs”.

I wonder if that is code for Quinn seeking some form of financial assistance for his own plans in the Republic?

Quinn has received massive grant assistance for the construction of major manufacturing facilities in England and Germany in recent years. Publicity about his losses at Anglo must have been noticed by other international banks. Maybe Quinn is looking to Ireland for his next phase of investment, but can he raise the required finance?

Any offers to invest in Ireland – particularly in the green technology he promoted in the article – are likely to attract government interest. But should Quinn get more state money, either by way of grants or more loans from the state-owned Anglo Irish Bank to which he already owes so much?

The state is in something of a Catch 22 position. It wouldn’t surprise me if the state decided it needed to help him in the hope that he can create a few jobs or felt it had to assist him in earning more profits to repay his debts.

In late 2008, just weeks after the introduction of the government guarantee to rescue the banks and the revelation of the fines against Quinn and his company, the hapless Minister for Trade, Enterprise and Employment, Mary Coughlan, travelled to Cork where Quinn Direct was opening a new office. She congratulated Quinn Direct for its “continued success and, most importantly, for their investment in Ireland in these difficult times”. She would have been better advised to stay at home. Even if she was unconcerned or ignorant about Quinn’s deep involvement in the Anglo debacle – which even at that stage she should have known because most of it was in the public domain – she should have been briefed, for example, about Quinn’s closure of the Barlo radiator plant in Clonmel shortly after he had bought it and the transfer of production to Wales.

IT is a very different picture from those TV advertisements extolling the self-proclaimed virtues of the Quinn group that regularly appear on television. Quinn is spending a lot on its image these days, including its sponsorship of the Late Late Show.

Yet the state does not want Quinn to fail. It employs too many people in Ireland, particularly in border regions where replacement jobs would be hard to provide. The state needs Quinn to prosper so it can earn the money to make the repayments on its loans to Anglo. The state, as owner of Anglo, holds a mortgage over practically all of Quinn’s businesses, but does it really want to own them?

Before Christmas it was revealed that Seán Quinn’s five children shared a €200 million payment from the main Quinn holding group in 2008. A spokesman for the company at the time said the payment to Colette, Seán Jr, Ciara, Aoife and Brenda was made “to facilitate the development of their independent wealth portfolios”. Lucky them. At least some young people are not going to have to worry too much about the scourge of unemployment.

But this raises questions as to why Quinn did not repay some of its borrowings to the state instead of moving its money out of the group to Quinn’s children. I’d imagine Quinn is fairly confident nobody in authority is going to press too hard for answers to that.

Matt Cooper, author of Who Really Runs Ireland?, one of the bestselling books of 2009, is one of the “Four Angry Men” who will be appearing at the Cork Opera House next Thursday evening.