Belfast Telegraph

Friday 1 August 2014

Quinn's multi-billion saga heads for court

Sean Quinn

Sean Quinn’s retiring family is about to explode onto the front pages when wife Patricia and their five children do battle with Anglo Irish Bank in the aftermath of an ill-fated stock-market gamble.

During the excesses of the Celtic Tiger years, Northern Ireland's richest family was also the most retiring. Sean Quinn, who became a billionaire on the back of a Fermanagh gravel pit, rarely gave interviews.

When he did, he spoke in home-spun platitudes, espousing hard work and common sense. He met his wife Patricia at a dance in Galway in 1974. She is reputedly as retiring as her husband, favouring local causes over the high-society charity carousel where those worth a fraction of her wealth paraded the latest in designer frocks. In court papers, she described herself as a “homemaker”.

Their five children appear to have inherited these traits. Now in their 20s and 30s, they grew up in an age in which money equalled celebrity but they never seemed to be photographed on red carpets or at society events. Instead, they were encouraged in business by their parents, who set them up with their own property portfolios.

Colette, aged 36 and living in Cavan, owned the Ibis and Hilton hotels in Prague. Ciara, 35, owned the Hilton Hotel in Sofia. Aoife, 29, owned the Holiday Inn in Nottingham. Sean, 32, the Belfry golf course in Birmingham and Brenda, 24, acquired the Slieve Russell, the family hotel in Cavan.

Brenda, her brother and another sister have relatively modest addresses in Castleknock, Dublin. Aoife's wedding to the solicitor Stephen Kelly in the Slieve Russell was distinctly unstarry, barring a couple of Rolls-Royces to ferry the bride.

Now, however, the image of the retiring Quinn family is about to change. In the coming months, Sean Quinn's wife and children are about to explode onto the public stage in a legal saga that is likely to run and run. It will dwarf anything the Commercial Court has seen — in terms of the money, the players and the acrimony.

It's the Quinn family versus Anglo Irish Bank and a €2.8bn debt run up by Sean Quinn's ill-fated gamble on the bank's share price during the heady days of the Celtic Tiger. Having ousted Sean Quinn and his family from the Quinn Group in April by appointing a share receiver, Anglo is now pursuing the family's €500m overseas-property portfolio. And the fight is getting dirty. For a family held in such high esteem in the neglected border counties where Quinn rooted his empire, they are now being accused of a “sinister” plot to put their assets beyond reach of the bank. And as the bank is nationalised, that means beyond reach of the taxpayer.

Patricia Quinn and her children are fighting back. Within weeks of a receiver being appointed, the family launched a legal challenge to oust the receiver. They claimed that the €2.3bn loans were illegal because they were used to prop up the bank's share price but were disguised as property loans.

Sean Quinn is the elephant in the room; his name is absent from the legal proceedings, although he is an unrelenting presence. When he gambled on Anglo Irish Bank's share price, he did so through companies owned by his children. And so when he could borrow no more from his own companies to cover his losses, Anglo allegedly loaned the money, not to Quinn but to his children in whose name the share dealing was done. And it was his wife and children who signed personal guarantees for the loans — even though they now, in effect, say didn't know what they were signing. Ciara, Colette, Aoife, Brenda and Sean Junior all claim that they didn't know about the transactions, had no appreciation of the loan documents they were signing and had never met anyone from Anglo to discuss them, according to the family's statement of claim.

In court papers, they claim that when Sean Quinn ventured into “contracts for difference” in 2005, they received tax advice that it should be done through a company in Madeira held in the names of his children, because it would be more tax-efficient.

Contracts for difference — or CFDs — allowed Quinn to bet on shares without buying them outright. They didn't have to be disclosed and were tax-free. The returns were big if he got the bet right but expensive if he got it wrong. Then, the broker would make the dreaded margin call when more funds would have to be put up. Quinn bet that Anglo's shares would rise and got it wrong, allegedly unbeknown to his children.

He initially funded his bets with €750m in loans from Quinn Group and family companies. But when the financial markets plunged into chaos in mid-2007 and Anglo's shares started falling, he began running out of cash. Market rumours of Quinn's secret CFD stake didn't help, encouraging hedge fund bets that drove Anglo's share price down.

This disastrous confluence prompted Anglo's then chief executive David Drumm and Sean FitzPatrick to find out what Quinn was playing at at a meeting in the Ardoyne Hotel, where Quinn revealed his 24% CFD stake. From then on, the family claims,

Anglo took control of Sean Quinn's CFD gamble “for the dominant and/or sole purpose of supporting and maintaining its own share price''. They allege that Anglo loaned hundreds of millions to cover the Quinn losses to protect its share position, consulting with executives in the Quinn Group on the size of the margin call and the loan required to meet it.

The family claimed that the loans were in the “false guise” of property acquisitions but were “knowingly advanced by Anglo to meet the CFD margin calls”.

All of this is denied by Anglo, which admits lending money to Quinn but claims that this was as working capital and equity release on property — and not to fund the losses he incurred on CFDs.

When, in December 2007, the children's signature was needed on a €500m advance, the Quinn children claim that an Anglo official arrived at the head office in Derrylin and Quinn Insurance in Blanchardstown with two big boxes of loan papers for them to sign. Brenda, the youngest, who was then just 20, couldn't even remember signing them. The children claimed that even though they were signing up for a €500m loan, Anglo never explained the documents to them or met them personally.

This practice continued, they claimed, over the following months as the loans mounted: €350m over the St Patrick's Day massacre when international stocks tumbled; €200m in June 2008. Usually, they say, they were only given the signature page to sign, “which would be returned to Quinn Group staff and then to Anglo”.

The ill-fated punt on Anglo shares came to a halt in July 2008 when David Drumm finally pressed Sean Quinn to convert the CFDs to actual shares. They were bought by Patricia Quinn and the five children through companies registered in Cyprus with a €500m loan.

Mrs Quinn and her children personally guaranteed the loans but now they claim that they received no independent legal or financial advice before doing so. Mrs Quinn says she never even knew the shares were being put in her name.

“If they had been made aware of the potentially dire personal circumstances in which they could have found (and do find) themselves as a consequence of executing the documentation, they would not have signed it,” they said.

Anglo, which denies all of the Quinn family's claims, countered that the Quinn children are “wealthy, educated adults with business experience” and had “the full capacity” to enter into the transactions.

It says that the money it loaned to Quinn companies related to property and the list is staggering: a $39m (€28.25m) loan relating to the Prestige Shopping Mall in Istanbul; $169m for the Ivana Franco tower in Moscow; €135m in September 2007 for “acquisitions in Eastern Europe”; €149m drawn down by Quinn family companies in November 2007 and €500m in December 2007, which Anglo says was drawn by Quinn property companies. But the Quinns say the money was used to repay inter-company loans used to meet Sean Quinn's margin calls.

While the Quinn family has taken its legal action to the Commercial Court, Anglo has moved the battleground overseas as the bank pursues the family's substantial assets. The bank has secured injunctions in Ireland, restraining Sean Quinn and his family from making changes to their overseas business structure. The litigation has followed them to Sweden, Russia and Cyprus, amid allegations that they are trying to strip their companies of assets.

Richard Woodhouse, Anglo's executive head of corporate projects, claimed that new information was coming to light “on an almost daily basis” about the Quinn “conspiracy” to put their assets beyond reach of the bank. Aoife and Peter Quinn are accused of “conspiring” to develop and implement a “large-scale strategy” aimed at diluting assets in Russia. He claimed that the Ivano Franko property in Moscow was moved to a company controlled by Peter Quinn, Sean Quinn's nephew, in July — even though the shares in that company had been pledged to Anglo. Legal actions in Ukraine relating to a shopping centre were likely “another limb of the conspiracy being orchestrated from this jurisdiction”.

In early June, nine new companies were registered in Ukraine. The general director was “a servant of” the Quinns and the registered shareholders included extended members of the Quinn family — yet another facet of the “conspiracy”, claimed Woodhouse. “When viewed as a whole, it is very clear that there is a sinister pattern in Sweden, Russia, Ukraine, India and Cyprus of the personal defendants conspiring from Ireland to act unlawfully to put valuable secured assets beyond the reach of Anglo,” he claimed.

There is still substantial sympathy for the Quinn family. Despite its vast riches and foray into foreign properties, the family remained steadfastly rooted in the border hinterland. The family companies were headquartered there, generating employment in the flat local economy.

The disputed Anglo loans occurred under the questionable stewardship of Sean FitzPatrick, the former chairman, and David Drumm, the ex-chief executive who is now in exile and trying to declare himself bankrupt in the US. Both feature in the garda investigation into Anglo.

But since the bank was nationalised, the Quinns' astronomical debts are to the taxpayer. If the Quinns win, and Anglo loses, taxpayers will ultimately have to pay.

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