‘FOOL me once, shame on you. Fool me twice, shame on me,” the saying goes.
In fact, as the Comtroller and Auditor General’s report into the Project Eagle debacle reveals, the Irish Government and its alter ego, Nama, was fooled three times, resulting in consecutive losses to the Irish taxpayer.
In the first instance, Nama acquired Eagle loans valued at the height of the Celtic Tiger at €5.6 billion for a much discounted price of €1.9bn. That should have allowed it to make a tidy profit when it sold them on.
Instead, it managed to snatch defeat from the jaws of victory by making a loss of around €300m for the Irish taxpayer by selling them on to Cerebus, a US private equity concern, fondly referred to as a ‘vulture fund’.
Vulture is the right word. In Greek mythology, Cerberus, often called the “hound of Hades”, is a monstrous multi-headed dog that guards the gates of the underworld, preventing the dead from leaving.
The objective of vulture funds is simply to make as much money as possible. While patience and perseverance might have allowed Nama to make a profit from the sale, they chose to offload to Cerberus at a loss. In turn, Cerberus sold on the loans they had acquired for a handsome profit.
Not only that, but they also were given preferential tax treatment on the profits they made from the sale. Cerberus paid taxes of €2,500 in 2014 by availing of Section 110 tax status. That means the taxpayer was hit three times: first by bailing out the banks, then by transferring ‘bad’ loans worth over €5bn to Nama for less than one fifth of their value and, finally, by the fact that Nama then sold them on at a substantial loss to a US fund that quickly made a profit on resale for which they paid even less tax than Apple.
It is little wonder that it has finally been decided that Nama’s Northern Ireland sales need a thorough investigation. Whether that will take the form of an official inquiry or commission has yet to be decided but the Irish people have a right to know.
The whole transaction points to an unseemly haste by Nama in disposing of these loans in a transaction that is shrouded in secrecy. There is no explanation as to how Nama arrived at a valuation of €1.6bn and, according to the C&AG’s report, they did not seek any external advice on the matter. As well as that, they offer no explanation as to why they increased their normal sell-on discount of 5.5% to 10%.
It is also extraordinary that Nama allowed its agent Frank Cushnahan to continue to act on their behalf while also acting for a US company seeking to buy the state agency’s Northern Irish property portfolio.
What Finance Minister Michael Noonan must explain when he comes before the Public Accounts Committee is why sales of impaired loans by Nama was suddenly accelerated in 2014 and whether political pressure resulted in Nama propelling loan sales to such an extent that there was little hope that they could achieve their directive in getting best value for the Irish taxpayer.
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