NAMA's reaction to alleged wrongdoing in €1.6bn Northern Ireland property sale came up short, Irish financial watchdog finds
The Republic of Ireland's most powerful financial watchdog says NAMA’s response to initial reports of alleged wrong doing surrounding the sale of its Northern Ireland portfolio came up short – with the agency not even contacting the businessman at the centre of the events to find out what was happening.
The report from the Comptroller & Auditor General (C&AG) into the controversial Project Eagle sale has questioned Nama’s reaction to the emerge of allegations that businessman and Nama advisor Frank Cushnahan was involved in an arrangement to share fees with law firms Brown Rudnick and Tughans (or the managing partner of Tughans) if a sale went ahead.
The case has sparked investigations in the UK and in the US, where prospective buyers were based.
The allegation “warranted more action by NAMA” when the matter came to light, such as seeking advice from a sister unit within the National Treasury Management Agency (NTMA) responsible for providing compliance support to the agency, or even writing to Mr Cushnahan to seek confirmation or an explanation.
Nama’s financial advisor Lazard was not briefed on the disclosures, or asked for its assessment of the potential implications, the C&AG said .
“NAMA appears to have taken a narrow approach, focusing on what were its legal obligations, rather than on what were the options for action that should be considered,” the C&AG said.
The long awaited report also questioned the valuations placed on loans to be sold by Nama.
NAMA released a statement in which it “categorically” rejected key conclusions of the C&AG report.
It claimed that the report’s key finding was based on an incorrect assumption about the discount rate used to value Northern Ireland loans.
“It incorrectly assumes NAMA should apply the same discount rate to poor quality Northern Ireland loans as it did to much higher quality assets in Dublin and London,” said the statement.
It also claimed that the report was “carried out by C&AG staff with no market experience of loan sales”.
And it said that if the evidence of market experts the discount rate was accepted, then the price actually achieved on the Project Eagle sale was the best achievable in the market.
“The Board remains of the strong view that the sale of the Project Eagle portfolio for STG£1.322bn was the best achievable outcome,” it said.
And it pointed out that the C&AG report made no findings of “irregularities” in the sales process.
NAMA chairman Frank Daly added: “NAMA has the utmost professional respect for the C&AG and his staff. The C&AG has performed a very important role in scrutinising our decisions and auditing our accounts over the past seven years but regrettably, the key conclusions in this report are without the relevant loan sale expertise and as such we have no option but regretfully to reject them categorically.
Ulster Unionist Finance Spokesperson, Philip Smith MLA, welcomed the report.
Mr Smith, who sits on Stormont’s Finance Committee, said: "I welcome the publication of this report by the Republic’s Comptroller and Auditor General. The fact that it has already been met with a commitment from the Irish Government that they will be setting up an investigation into the sale of Project Eagle stands in stark contrast to the pitifully slow response from the Northern Ireland Assembly and Executive.
"What little credibility the Northern Ireland Assembly has left to investigate this matter is now rapidly draining away. The public distrust regarding the NAMA sale has been further compounded with the revelations surrounding Daithi McKay and those recently broadcast by BBC NI Spotlight.
"The Committee for Finance has still not resurrected their own inquiry, despite it being 6 months from the Committee inquiry being placed on ice, and the NCA/PSNI investigations are progressing at a sluggish pace. Now with the Republic commencing its investigation it is ironic that it is only the Northern Ireland Assembly that is not progressing its own investigation despite the impact on our political and business reputation.
"During the meeting of Wednesday’s Finance Committee, I asked whether there was even a will or desire amongst the members to proceed with an investigation with teeth, and the response I received suggested not.
"If Stormont’s Finance Committee, influenced primarily by its DUP and Sinn Fein members, continues to procrastinate on this crucial issue then it’s time to take the investigation from it and ask the Assembly’s Public Accounts Committee to take this forward.
"There is a massive requirement to build public and investor confidence following the revelations to date and the longer that the Assembly prevaricates the more damage is done."