MATT COOPER: Banks left with financial headaches as borrowers skip repayments

THE stories are mainly to be found in the business pages these days, but the lengths to which some of the formerly rich are going to hang onto their assets while not repaying the money borrowed to purchase those trophies, are extraordinary.

The exception that often makes the front pages has been the remarkable claims being made about the behaviour of Sean Quinn’s family — which I’ll leave for now, but which deserves further examination at a later date once the courts sift through some remarkable claims and evidence.

But there are other incredible stories abounding that should make every Irish citizen worry about the ability of the State-backed banks to recover what is essentially our money.

Most notable this week is the one about how Bono’s neighbours in Killiney have left the country. The occupants of Gorse Hill on Vico Road in the south Dublin coastal suburb, solicitor Brian O’Donnell and his wife Dr Mary Patricia, have left for Britain where they have taken advantage of less onerous laws to be declared as bankrupt.

They failed to turn up at the Commercial Court in Dublin on Wednesday to answer very pertinent questions about the €75m-plus they owe to Bank of Ireland and have not repaid it despite a court order to do so. They have been ordered by an angry Justice Peter Kelly to turn up on Apr 17 and may face a chastening experience. Kelly is not happy that they failed to turn up for another hearing last December but that, within days, O’Donnell was telling his tale of woe on the Marian Finucane radio show — of waiting for letters from the bank to arrive and of people in similar situations “sitting there in quiet desperation” — and making all sorts of allegations about his treatment by Bank of Ireland to whom he had failed to make promised repayments.

Now that they live in Britain one wonders what will happen to their Killiney mansion (and if they paid the household charge of €100 before they left the country). But here’s the strange one. That home, it now turns out, is in the ownership of an Isle of Man company called Vico Limited which just happens to be “beneficially owned” by the couple’s four children.

It’s all very complicated, as these things tend to be when people are trying to keep assets for themselves and are hoping to avoid surrendering them to cover non-payment of a debt. But the court heard that Vico provided a guarantee to Bank of Ireland in March 2011 covering all of the liabilities of the O’Donnells to the bank.

However, in February 2012, the bank was told the guarantee is “likely to be challenged” by the trustees and beneficiaries of Vico. Indeed, it also seems that it is being claimed now that the “beneficial owners” of at least some of the collection of properties that the O’Donnells collected in a €1bn bank financed spending spree were actually the children.

That would seem to imply that the children are likely to claim that they should not be made financially responsible for the debts of their parents. In his December RTÉ interview O’Donnell said that “this is a corporate debt, not mine personally”.

On Wednesday Justice Kelly said there were “alarming” discrepancies between the two statements of affairs submitted by the O’Donnells to the bank in March 2011 and February 2012.

The O’Donnells said in their February 2012 statement of affairs that Gorse Hill was valued at €30m in 2006, but that the current market value of the property is €6m to €7m. The 9,000 square feet house, which appears to have been his main domestic residence, features all the Celtic Tiger additions to “elite” Irish homes — such as a swimming pool, tennis courts and its own gym and sauna.

Its full size and external glory is best seen from the Dart railway line or the beach below. It first came to public prominence in 2000 not long after he moved in. O’Donnell was forced to deny that a landslide on Killiney Hill, which temporarily closed the Dart line, had anything to do with the extensive renovation works at his property. O’Donnell had demolished a house on the site above the railway line to make way for the new dwelling and waste water treatment plant, but denied that his site work was responsible for the landslide.

This house is not the only one that was purchased by the family or its corporate interests with borrowed money.

The couple also owned Gortdrishagh House, described in brochures as “a lakeside country estate” at Oughterard on Lough Corrib, which has been available for rent since the downturn hit. The seven-bedroom house sits on 800 sq metres and includes a guest lodge, extensive stables and barns, garages, a boat house and two kilometres of lake frontage, with 16 acres of gardens. It has been described as one of the best estates in the west of Ireland.

The O’Donnells also bought a house on Ailesbury Road in Dublin 4, which at the height of the madness often traded for more than €10m, depending on size. (It was on this road that former IRA hunger striker Tom McFeely, responsible for the substandard development at Priory Hall, also lived before he took advantage of his British citizenship by declaring himself bankrupt out of this jurisdiction).

The O’Donnells also bought a ski chalet in Courchevel in France, which they had estimated to be worth €13.2m, but which they put on sale about three years ago. O’Donnell was not a builder. He was a legal professional — who left William Fry to set up a personal practices in 1999 — who saw opportunities to borrow cheaply and then buy commercial properties, mainly oversees, that would provide a solid rental yield from so-called “blue-chip” clients to cover the borrowings while benefiting from an increase in property values.

By 2005 he was more interested in doing it for himself rather than acting as an adviser to others and as investor in larger consortium.

In the space of just 16 months the O’Donnells acquired three office blocks in London, mainly with borrowed money. First they spent €200m to buy Westferry Circus, home to Morgan Stanley, in London’s Canary Wharf district. Then they acquired a 200,000 square foot development called Columbus Courtyard, home to Credit Suisse, in 2005 for about €185m.

FORTUNATELY the Irish taxpayer is not on the hook for all of this borrowed money. According to his 2010 filing with the court the O’Donnell loans with US investment bank Morgan Stanley amounted to €457m and there was €235m due to German property bank Aareal among their total borrowings of €886m. Bank of Ireland, taking the action against him, was owed “just” €69.5m (it has since increased because of interest) but AIB had a debt of €97.7m owed to it.

As O’Donnell complained bitterly that Bank of Ireland was not giving him a chance to make repayments he claimed that he had net property assets of more than €110 million.

“Bank of Ireland’s actions have been ill considered and have severely damaged our business and damaged our ability to recover,” he claimed last year.

That he has chosen bankruptcy suggests that the bank understood the reality of the position better than he did. But, as with so many other cases, does the bank have the correct security to ensure that it can get the assets to sell so as to recoup most of the loans? Or have the clever holders of those assets outsmarted them?

The boardroom at O’Donnell’s Merrion Square headquarters includes chairs with the motto “non magni pendis quia contigit” inscribed. It means: “One does not value things easily attained”.

What are the mottos to describe things purchased with money borrowed far too easily?


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