Pyramid scam helped buy up properties all over the globe

By Grainne Cunningham, Tim Healy and Dearbhail McDonald

Tuesday January 13 2009

A DAZZLING list of exclusive properties, from Paris to Dubai and from Dublin to the Caribbean, are among the €36m assets of pyramid investment scheme operator Breifne O'Brien, according to figures he supplied to the Commercial Court yesterday.

Among the high-end addresses, some owned jointly with his wife Fiona Nagle, Mr O'Brien listed the family home in the Dublin suburb of Glenageary, an apartment on Vico Road, Dalkey, a house in Barbados and a 20pc share in three apartments under construction at the G Tower in Dubai.

But despite the glamour of their personal property portfolio, Ms Nagle is apparently having trouble making ends meet because of the freezing orders affecting the accounts of the smooth-talking financial adviser who admitted to "living a lie".

Ms Nagle, a public relations high-flyer who has publicly confessed to a passion for designers such as Chanel and Gucci, will apply next week to vary the freezing orders in order to pay household bills and meet the expenses of raising her five children. Counsel for Ms Nagle told Mr Justice Peter Kelly that the freezing order had also frozen the household accounts.

Meanwhile, Mr O'Brien told the court that he held commercial properties in his own name in Monkstown and Sandyford, in Dublin, in Reading and in Paris. His assets also include syndicated property invest-ments in Berlin, Boston, Spain and Belize, as well as several properties owned with others, including his father.

The portfolio outlined to the court yesterday offered an insight into the kind of lifestyle enjoyed by the socialite couple who, until recently, mixed with celebrities, politicians and those in the top echelons of the business world.

Art work valued at €50,000, an Aston Martin car valued at €70,000, €1.3m shares in Maltese Holdings, Jersey, and €2.2m in Fund Investments Anglo Irish Private were among the assets listed.

However, the Irish Independent has learned that investors who claim they were duped by Mr O'Brien may seek to prevent his disposing of any foreign assets in a bid to safeguard their investments.

Extension

The couple still live in Invergarry, on Glenageary's Silchester Road, where, as late as December, a team of builders were completing an estimated €1.5m two-storey extension.

Mr O'Brien allegedly operated a scheme over 15 years in which millions were misappropriated from several investors to fund his personal lifestyle, including a Christmas break for his wife and himself to the world's only seven-star hotel, at the Burj Al Arab, in Dubai, as well as his business interests. Yesterday, Mr O'Brien agreed to the continuation of court orders restraining him reducing his assets below €20m, the amount for which he is allegedly liable. He has estimated his assets at €36m.

He also supplied a three-paragraph affidavit and statement of affairs to the court relating to proceedings against him by a long-time friend David O'Reilly, who is among several businessmen seeking the return of monies given for investment.

Mr O'Brien said he had received some $3m and €1.6m from Mr O'Reilly, all of which was transferred to the London bank account of Brian Reid, "to whom I owed substantial sums of money".

Gabriel Gavigan, counsel for Mr O'Brien, said his client substantially complied with the court order to disclose his assets.

Mr O'Brien revealed that some 10 investors are suing him for €15m. He listed the claimants as Evan Newell, brothers Robert and Louis Dowley, David O'Reilly, the Bell family, and also named five other potential claimants -- Patrick Doyle, Suzie C Callaghan, Martin O'Brien, Eamon Connor and Robert Dennison.

Proceedings were brought against Mr O'Brien last month just days after he told solicitor Brian Quigley, representing some investors, he had been "living a lie" for up to 15 years in relation to investments made for others, and calculated his total liabilities to 11 people as between €16m and €19.

He allegedly said it was easy to "pull the suckers in when the economy was booming" but the change in the economy made it impossible to continue.

Time to end the gravy train for our TDs

Tuesday January 13 2009

The first full working week of January is over, and many more Irish workers find themselves out of a job.

However, 166 lucky Irish workers haven't come back to work yet; but they didn't lose their jobs, nor were they docked pay, because they are TDs.

In the lead-up to Christmas there was much discussion over the difference in euro and sterling prices for the same goods in the same shops.

So considering that the Irish parliamentary system is a copy of the British one, how do our TDs compare with MPs, and are we being ripped off in politics as much as we are in the shops?

In 2008, the Dail sat for 97 days, compared with 155 days for the House of Commons.

The House of Commons sat for 19 four-day and 12 five-day weeks. In contrast, the Dail only managed one lousy four-day week during 2008.

Naturally, TDs will excuse their behaviour by saying that they have to attend to constituency business, and that rural TDs have long distances to travel.

But MPs have to attend to constituency business too, and look at the distances that Scottish and Welsh MPs have to travel. Also, each TD has only an average of 25,500 constituents to attend to, but an MP has over 94,000.

So, if MPs sit 50pc more days, have longer working weeks and shorter holidays, have nearly four times more constituents to look after and have to travel vastly longer distances, they must be on fantastic pay.

Well, an MP gets around €70,000 compared to €105,000 for a TD; a British minister gets roughly €160,000 compared to €240,000 for an Irish minister; and the prime minister earns €220,000 compared with €310,000 for the Taoiseach.

We have a deepening financial crisis and much debate of late is for radical cuts in public sector pay and numbers, more taxes on Irish workers, and calls for patriotism as a solution.

I ask all TDs to take a good, long, hard look at themselves in the mirror and ask if there shouldn't be radical cuts in both the numbers and pay of Irish politicians.

If an MP is paid €450 for each day the House of Commons sits, then a TD's salary would be cut by nearly 60pc to €43,650.

JASON FITZHARRIS

SWORDS, CO DUBLIN

at the (Irish) boom's zenith in 2007, 93,000 new homes were thrown up in a single year in a country of 4.5 million people

Ireland turns to bankruptcy tourism
Bankruptcy in Britain offers a way out for Irish entrepreneurs crushed by debt from heady property boom

Lisa O'Carroll in Dublin
guardian.co.uk, Friday 18 February 2011


A newbuilt ghost town in County Leitrim left by the collapse of the property bubble in Ireland A newbuilt 'ghost' estate in Co Leitrim left unfinished by the collapse of the property bubble in Ireland. Photograph: Kim Haughton/Polaris/eyevine

Niall is 31 and manager of a successful fruit farm just outside Dublin. He is thinking of emigrating to England – not because he is out of work but because he is so heavily in debt that he wants to declare himself bankrupt.

He bought three houses as a buy-to-let sideline between 2004 and 2006. Although he earned a modest salary of €25,000 a year (less than £17,000 then), the banks gave him two mortgages of more than €300,000 and another one for more than €200,000 – a loan-book worth 32 times his salary.

The fantasy of becoming a property millionaire did not last long and now the farm manager is in negative equity to the tune of €250,000 and with a glut of empty properties on the market, he has no hope of meeting monthly repayments from rent.

The first house cost €215,000 and his mortgage is €1,284 a month. He rents it out at €800 a month – a loss of close to €500 a month. "If I sold it today, I'd get between €160,000 and €170,000. I'm down €100,000 apiece on the other houses. If I look forward 10 years I don't think I'll ever make my money back, so I want to get rid of it completely. It's a noose around my neck," says Niall, who asked that his name be changed to protect his identity.

Declaring himself bankrupt in Ireland is not a realistic option: bankrupts must wait 12 years before they are discharged from their debts. But under European Union law he can file for bankruptcy anywhere in Europe. If he relocates to London or Manchester he can be free of his debts within 12 months, courtesy of the "progressive" UK law.

Niall's case is far from unique. "Bankruptcy tourism" is the talk of Dublin and the conversation is being held across all strata of society.

Jim Stafford, at the corporate recovery practice Friel Stafford, said: "Personal bankruptcy was virtually unheard of 10 years ago, now it's everywhere: politicians, high-level civil servants, buy-to-let investors, doctors and lawyers."

A chartered accountant, he advises clients to seek bankruptcy in one of three scenarios: a creditor is being vindictive and will not cut a reasonable deal; if a client in difficulty is expecting a large inheritance – "you can go to the UK, come back in 12 months and it will still be there for you; that's a factor for some people" – or if a client has a large pension, because a pension is not included in the estate divided up by courts in Britain, whereas it is in Ireland.

Stafford says he started getting calls about filing for bankruptcy in Britain and the US in September 2008 following the collapse of the investment bank Lehman Brothers. "The phone started hopping and it hasn't stopped since."

There are no official statistics on how many Irish are relocating to Britain – the courts do not document this – but there have been a few high-profile cases including that of the Cork-based property developer John Fleming. He and his construction firms owed €1bn to the banks and in December it emerged that he had relocated to Billericay in Essex and filed for bankruptcy.

Barry Cahir, a partner with the Dublin law practice William Fry, said: "Irish people are turning to places like the UK because it is a friendlier regime – if you behave yourself and co-operate with the trustee you can be out of the woods in less than a year."

In testimony to the fact that insolvency professionals have replaced wealth management as the new experts in demand, he and three colleagues briefed about 180 clients this week about bankruptcy in Britain.

According to Louise Brittain, a partner in Deloitte's insolvency team in London, all Niall – or others in the same situation – has to do is relocate to Britain for about six months to prove his "centre of main interest" (the main legal requirement in bankruptcy law) is in the UK. Like Cahir, she was in Dublin two weeks ago briefing about 150 clients at Deloitte's offices on this.

Figures released this week show that as few as 29 people (including Seán FitzPatrick, the former head of the Anglo-Irish Bank) were made bankrupt in Ireland last year, demonstrating how unattractive bankruptcy in Ireland is. This compares with the 79,000 people in Britain who were made bankrupt last year. "The law is just incredibly penal," said David Carson of Deloitte's insolvency unit in Dublin.

Going to Belfast to file for bankruptcy is also an option but the solicitor Toby McMurray, who briefed clients at William Fry, said it risked social stigma. "We have a heck of a lot of inquiries from people in the south, many who are high-profile people, but they look at Northern Ireland and opt for the UK because it's more anonymous," he said.

"There is only one court in the north where you can file for bankruptcy so it is easy for creditors to go through the lists, whereas if you go to England or Wales you can go to a court in any region you like."

The law in Britain was changed three years ago inspired by the American principle that failure in business is part of the normal entrepreneurial process.

"The idea is to get entrepreneurs back in the market quickly. It's about rejuvenation; it's about removing the stigma. If you are Irish, why would you go bankrupt for 12 years, when you can do it in one year?" she says.

She predicts that the number of Irish people seeking bankruptcy will rise sharply later this year when those relocating now, or at the end of last year, have been resident long enough to prove to the court that their "centre of main interest" is Britain.

The rise in bankruptcy tourism puts into sharp relief the absence of debt forgiveness in Ireland. Several banks in the last month have made it plain that they will not countenance restructuring of personal debt. Bankruptcy will just force it upon them.

Niall said: "If I sell the houses now, the banks get the equity and I still owe the shortfall. If I go bankrupt, I don't owe the shortfall and the banks get the equity. The end result is the same thing for the bank.

"But if I keep going, my life will be a misery. Why should I do that for the banks, which to be honest, shouldn't have given me the mortgages in the first place – I only earn €25,000." [If you were completely honest, you would admit that you were a greedy little so and so with riches in your eyes and hence complicit in the entire arrangement - Judd]

His attitude is mirrored at the high end of the spectrum on consumer debt. One Dublin accountant, who preferred not to be named, said: "I know of several failed developers, some high profile, who are just treading water. They have set up a UK postal address, UK bank account, have all the ducks in the row. They are struggling and when it comes to a point when they fall out with the bank, they will just get on a plane."

'Teeth in Poland, bankruptcy in UK'

It is not just the Irish like Cork developer John Fleming who are drawn to going bankrupt in Britain. The last two years have seen a flurry of bankruptcy tourism from Germany, where small advisory firms such Insolvenz Agentur have controversially advertised the benefits of individuals relocating to the UK before going bankrupt. The lure is a far shorter spell before a bankruptcy is discharged – just a year in . The period in the UK, compared with seven in Germany and 12 in Ireland.

Mike Gerrard, an insolvency partner at of Grant Thornton, said: "We are certainly getting more calls from Ireland. It's not every day but the inquiries are coming." Reports of a flood of insolvency tourists arriving in Britain, however, are premature.

It is fairly easy for applicants to satisfy a court that their "centre of main interests" has permanently transferred to the UK, even after moving to a British address for a few weeks. However, Insolvency Service officials have been watching for abuse and have taken a number of cases back to the courts and successfully overturned initial bankruptcy orders.

Stephen Baister, a senior UK bankruptcy judge, suggests it may be harder for the authorities to spot Irish bankruptcy tourists than it has been identifying Germans because of the large Irish diaspora. "If an O'Neill or a Joyce turns up and gives an address in the UK, you think no more of it.". He added that said there was nothing illegal about indebted Irish individuals genuinely relocating to the UK and seeking bankruptcy, regardless of their creditors' location of their creditors. "If you prove you have a genuine tenancy agreement or if you have gainful employment and prove you are settled here, you can fill in the forms and say you can't pay your debts and we will make you bankrupt," he said.

Frances Coulson, vice-president of insolvency professionals' trade body R3, says: "People can come to the UK to take advantage of our bankruptcy rules just as we might go to Poland to get our teeth done."

Located in Dublin's main tourist drag, Temple Bar, it would have fetched up to €250,000 at the height of the "Celtic Tiger" boom. But a studio flat in one of the busiest and best-known parts of the city is now on the market for just €80,000 – a staggering fall in value that encapsulates the dramatic collapse of Ireland's property market.....

................. Patrick Honohan, the chairman of Ireland's central bank, was clearly not exaggerating last week when he described the total injection of state cash as "one of the costliest banking crises in history".

A key factor in creating that crisis was the excessive and aggressive lending by banks to developers during the boom. Property makes up about 60% of the toxic loans in Ireland's debt-ridden banks. ...Ordinary Irish citizens, too, played their part in the collective mania to make money fast by investing in bricks and mortar, and not only at home. It is estimated that as a result of years of economic expansion,, at least one in 10 Irish citizens now owns at least one property abroad. Many of these investors remortgaged, sometimes more than once at home, to obtain holiday apartments, villas and even farmland in locations as far flung as Bulgaria and South America......

New warning for credit unions on loans from the Central Bank

By Charlie Weston, Personal Finance Editor

Thursday October 13 2011

AUDITORS of credit unions have been issued with strong warnings by the Central Bank to make sure they do not sign off on any accounts unless proper provisions are made for bad debts.

In a six-page letter, seen by the Irish Independent, the auditors were told that "a significant number" of credit unions were not making proper provision for bad and doubtful debts.

The caution to the auditors comes a week after the Government said it was preparing to pump between €500m and €1bn into a number of credit unions that were at risk of going under due to loan arrears.

The number of loans in arrears is increasing at the State's 407 credit unions, with payments on around 18pc of the €5.2bn total loan book 10 weeks or more in arrears. This represents around €1bn.
Now the registrar of credit unions James O'Brien, who is part of the Central Bank, has told auditors extra provisions need to be made for bad debts.

In the letter he refers to a probe of the loan book. "The results of the inspections indicated that a majority of credit unions did not have adequate provisions," the letter states.

A number of credit unions need to bump up their bad loan provisions by a quarter, with some needing to increase their provisions by half.

"In forming an opinion on the adequacy of the bad-debts provisions determined by the directors, auditors need to be mindful of practices such as loan rescheduling, top-up loans, single/lump sum repayment loans, bullet type repayment loans, interest-only loans and connected party loans," the letter says.

Up to 80 credit unions are at risk of failing because they are unable to put of insufficient funds to cope with bad debts.

Elderfield orders banks to stop hiking variable mortgages
By Charlie Weston
Friday October 14 2011

BANKS are to be stopped from targeting 200,000 variable mortgage holders with repeated rate hikes which are costing families an average of €120 a month in additional repayments.

In a dramatic intervention today, Central Bank Deputy Governor Matthew Elderfield is to outline a new clampdown on banks who are piling the pressure on hard-pressed homeowners.

He fears the repeated variable rises are pushing more people into arrears.

It is the first time that the regulator has put pressure on lenders not to raise rates.

Pressure

The get-tough policy by Mr Elderfield also means he will put pressure on lenders to cut variable rates when the ECB lowers eurozone rates, a move that could happen before Christmas.

Banks have been hiking their variable rates -- some to as high as 6pc [Wow! - Judd]-- as they desperately try to make up for losses.

Since the start of the year most lenders have hiked rates numerous times over and above the increases by the ECB.

This means variable rate customers with a €200,000 mortgage are paying €120 a month more than those on trackers and fixed rates because the banks can't touch those.

The Central Bank has no legal powers to force banks to cap rates -- but Mr Elderfield will threaten lengthy and messy probes of the banks' loan books if they move to hike rates -- effectively making it almost impossible for them to do business.

And it comes as new official figures show that rises in mortgage costs helped push annual inflation to 2.6pc last month.

The squeeze on banks -- to be announced in a major speech by Mr Elderfield in Cork today -- is set to frustrate plans by AIB to raise its variable rates.

The lender had been expected to hit its variable rate customers on the double as it is the only lender yet to pass on the two ECB rises this year.

Imposing the two rises would have added €60 a month to the repayments on a €200,000 mortgage. Some 200,000 homeowners have variable mortgages across all lenders.

Lenders have repeatedly pushed up variable rates since 2009, with Permanent TSB now charging some customers 6pc.

There have been two ECB rate rises this year of 0.25pc each, but variable rates have gone up more often and by greater amounts.

Repayments

A family with a €200,000 variable mortgage with Permanent TSB will have seen its repayments shoot up by €180 a month since the start of this year.

But somebody on a €200,000 tracker will be paying an extra €60 a month.

In other words the variable is being hit for an extra €120.

EBS raised its variable rate for the third time this year at the start of this month to 4.93pc even though the European Central Bank rate is 1.5pc and likely to fall in the short term.

The EBS rate increased by 0.6pc in February and by another 0.25pc from August 1.

Bank of Ireland has also increased its variable rates several times this year.

Some 40,000 people are six months or more behind on their mortgage repayments, according to Central Bank figures.

Bosses of five leading lenders -- AIB, Bank of Ireland, EBS, KBC, Ulster Bank and Permanent TSB -- have already been called into the Central Bank and told by Mr Elderfield of his concerns regarding rising variable rates and mortgage arrears.

Another 12 lenders are to be written to in the next few days outlining the new get-tough regime.

The move will not have any impact on those with trackers, which can only move when the ECB moves rates. And those on fixed rates will be unaffected.

Banks will also be ordered to have strategies in place by the end of next month to deal with people who have no hope of getting on top of their mortgage arrears.

Mr Elderfield is concerned that the reluctance of banks to force repossessions means people with unsustainable mortgages are ending up deeper and deeper in debt.

When they do eventually have to give up possession of their homes the amount they still owe will have ballooned.

But he is also to explain that the lack of a modern personal insolvency framework means people are holding off on doing deals with banks when they can no longer afford a mortgage.

Mr Elderfield believes that if the new bankruptcy laws are too favourable to the heavily-indebted it will lead to thousands of homeowners taking advantage of it and banks will have to get more state funding.

Some €10bn has been provided to Irish banks to cover losses on residential mortgages.