People Before Profit Press Release -20th Sept 2016
There is more than a whiff of corruption arising from NAMA. The most obvious case has already been highlighted with Project Eagle in Northern Ireland.
Here a giant US company Cerberus paid a €7 million fixer fee to secure assets originally worth €6.5 billion for just €1.34 billion. Even though Michael Noonan was informed that another company had withdrawn from the bidding after it was asked for a ‘fixer fee’, he still allowed the sale to go ahead.
The main fixer was Frank Cushnihan, a well connected insider among the Northern political elite. It is alleged that Peter Robinson and his son Garret stood to benefit from this fee. Astoundingly, Cushnihan was also acting as an advisor for 58% of NAMA’s Northern debtors.
Soon after getting this deal, Cerberus went on to snatch up Project Arrow – a portfolio of just under 2,000 mainly residential properties in Southern Ireland. This has originally been valued at €6 billion but NAMA ’s reserve price was just €1 billion. There were apparently just two ‘valid’ bids for this project – one from Cerberus and the other from Apollo.
When it was established NAMA took over €74 billion of loans for a write down price of €34 billion. The strategy adopted by Fine Gael was to sell off the loans as quickly as possible in order to show a small profit.
Their principle mechanism for doing this was to invite in US vulture funds to buy up the loans. They could squeeze the bankrupt original owners and take over the property.
Department of Finance officials met with vulture funds on sixty five occasions and Michael Noonan personally attended meetings with Lone Start Capital, Kohlberg Kravis Roberts and Appollo Investments.
The last company is headed up by Brian Goggin, the former chief executive of Bank of Ireland, but is controlled by Leon Black — one of the richest men on Wall Street.
Goggin was one of the bankers who helped wreck the country – but after receiving a pension of over €500,000 a year, he is now heading up a vulture fund. In that capacity he benefits from the crash he helped to provoke.
RETURN OF THE ZOMBIE’S
The ‘Return of the Zombies’ would be a good film title for the extraordinary pattern by which indebted Irish businessmen come back to life –with the help of the state. It might even be suggested that this was the real purpose of NAMA.
NAMA, for example, made a fund of €3.5 billion available in soft loans to bankrupt developers to help them complete their projects. In a previous report the Comptroller and Auditor General estimated that €2.6 billion of that fund was actually drawn down by 2015. This was at a time when no bank would lend them a cent.
Sixty six developers were also paid salaries of over €10o,ooo a year to work for NAMA. 41 of them received an average of more than €1 million in ‘overhead costs’ for repairing or improving their properties.
9 Million euro a month was paid out on rent for NAMA properties but these funds were not automatically impounded to help pay off loans. Instead, developers were able to keep a substantial proportion in ‘maintenance fees’. The Comptroller and Auditor General estimated that in 2011 in a sample of just six cases, developers managed to skim off an additional 2 million euros in unanticipated costs.
Another way that the zombie builders come back to life is by fronting up vulture funds that are buying up 300 billion of Irish property. The builder Joe O Reilly, for example, is heading up a fund known as Chartered land which is buying up property in Ballsbridge and is backed by the Abu Dhabi Investment Authority.
The main reason for Fine Gael’s quick sale strategy was to revive the Irish property market. Most of the Irish rich invest in property because it can bring easy money – especially if you have the political influence. They had lost heavily in the crash of 2008 and were left with big loans on distressed property.
By bringing in the US vultures, demand on Irish property helped push up the prices. This was combined with other policies to help stimulate the market. These included cut backs to council housing and a greater reliance on the private rental market through HAP and RAS schemes to house those in need. The overall effect was to re-heat the property market and help the wealthy recover some of their money.
But it came at a considerable cost – and some of the mechanisms by which this occurred are only beginning to leak out now.
It is estimated that 90% of NAMA property has been bought up by US vulture funds. And the same mechanisms that were used to bring in companies like Apple were used to attract them.
In 2013, the Fine Gael/Labour government brought in a special tax relief for Real Estate Investment Trusts. These are big US mutual funds which buy up distressed property around the world –mainly for rental income. The government’s 2013 measure reduced their tax bill considerably.
But that was only half the story. As early as 2010, Ireland’s tax planning industry was telling the vultures that they could use other mechanisms such as Section 110 provisions and a mechanism known as a Qualifying Investor Fund to cut their tax bill to near zero.
Clearly Noonan knew about these tax dodges when he met the vulture funds.
If he did not know that Irish tax planners were openly advertising how to pay no tax, he was incompetent. Does anyone seriously belief that the man who encouraged the US vulture funds to buy up 90% of Nama property did not also point them in the direction of the Section 110 measure?
It is time to clean up the stink of dirty money that seeps out of every pore of the Irish state