IT HAS taken some time, but it appears Nama’s obstinacy in resisting a wide-ranging public scrutiny over its handling of the sale of a big bundle of distressed bank loans advanced to property developers in the North, known as Project Eagle, could well lead to another state inquiry.
With opposition TDs now jumping on the bandwagon, the political fallout from the scandal has the potential to seriously wound Finance Minister Michael Noonan too.
As recently as June, Mr Noonan was offering his full endorsement of the controversial auction process behind the 2014 sale of the Project Eagle loans.
“The decisions made were a matter for the executive board of Nama and I have full confidence in the decisions they made,” he told journalists at the time.
The revelations of BBC Spotlight programmes and allegations made by Independent TD Mick Wallace in the Dáil were batted away by the Government.
Mr Wallace had alleged that monies in an Isle of Man bank account were meant to pay off political fixers in the North. The PSNI handed over its criminal investigation to the National Crime Agency late last year. A Stormont committee launched an investigation.
All were ignored by the Government.
For over a year, a public relations campaign by Nama has appeared to try to convince TDs and the public that the revelations out of Belfast were so much “Northern” business and held no interest for southern taxpayers.
Those revelations have included allegations about Frank Cushnahan, a former Nama representative of its now defunct Northern Ireland advisory committee, or NIAC. Mr Cushnahan has said he has done no wrong.
In the Oireachtas, the Public Accounts Committee, which has few investigatory powers, first quizzed Nama officials in July last year.
But what has finally led to a sea-change in Dublin is a report by the Comptroller & Auditor General (C&AG). It sent its examination of the Project Eagle sale to Mr Noonan early last month and is set to be published this week.
Its reported findings of “shortcomings” and “irregularities” in the Project Eagle sale pose a huge challenge to Nama. After all, the C&AG is all about working on behalf of taxpayers to ensure value for money. Its findings cannot be easily dismissed. The sale of the Project Eagle was a huge transaction.
The auction was at the time the largest ever undertaken by Nama of distressed loans advanced by Dublin banks during the boom years.
The loans which had a face value of £4.5bn (on the eve of the auction that sum was equivalent to up to €6bn) had been advanced to a number of mostly Northern commercial property developers.
The reckless lending by Dublin banks during the Celtic Tiger boom times that had sent the prices of Dublin development sites skywards had also transformed swathes of Lagan-side properties in Belfast city centre.
As is the way of such loan disposals, the Project Eagle bundle also contained a portion of loans advanced on near-worthless sites across the North.
The Government and Nama insisted the 2014 sale of the Project Eagle loans was based on a sound footing. Nama policed any reports that southern taxpayers were shortchanged in any way.
Nama chairman Frank Daly had repeatedly insisted the auction process had “competitive tension” and delivered value for taxpayers.
The auction officially got under way in January 2014. A few months earlier, Frank Cushnahan had resigned his post on NIAC .
Nine bidders, including Pimco and another huge US fund, Cerberus, were on the roster. The reserve price was set at £1.24bn. In early March, the roster had been whittled down from the nine potential bidders to a list of three US bidders: Pimco, Cerberus, and Fortress Investment.
Pimco then landed a bombshell.
Pimco had told Nama that a legal fee arrangement it had struck with its main legal advisers Brown Rudnick had included a payment of fees to Tughans — a Belfast firm of solicitors which was helping Brown Rudnick on the ground, as well as “to a former external member” of Nama’s Northern advisory committee. Pimco named the ex-NIAC member as Frank Cushnahan.
Pimco said that it had learnt there was a fee of £15m to be split three ways, including Brown Rudnick and Frank Cushnahan.
The Nama board scrambled and decided that its “serious concerns” about the fee arrangement proposals and “in particular” the proposed fee payment to Frank Cushnahan warranted the withdrawal of Pimco from the auction.
Now down to only two bidders, the auction nonetheless went ahead. In April 2014, Cerberus won by bidding a shade over £1.24bn and Fortress bid £1.1bn.
It later emerged that a short while after Pimco’s exit, Cerberus engaged Brown Rudnick as its lawyers to advise it in the ongoing auction. Cerberus said it didn’t know the circumstances of the withdrawal by Pimco. It also said that Brown Rudnick had told it that Brown Rudnick wanted to retain Tughans as its Belfast-based-based legal firm.
Brown Rudnick has said it did everything above board and that it was assisting all investigations.
Last summer, the Irish Examiner wrote of on the number of issues raised by Project Eagle sale.
Nama has stood behind the integrity of the auction. One big question remains: How can Nama be so sure that Pimco’s exit didn’t lessen the “competitive tension” in the auction in March two years ago?
Surely, Nama would have been wise to postpone the sales process when it first learned about the fee arrangements proposed by Pimco.
The Comptroller & Auditor General report has also focused on the auction process.
Nama and the Government may struggle to ignore the spending watchdog’s report.