Nama faces possible investigation into sale of Project Tolka

Nama is facing the prospect of an investigation into a €455 million deal where a number of those who owed the agency money played a part in selecting bidders for the loans that it sold.

The State's financial watchdog, Comptroller and Auditor General (C&AG) Séamus McCarthy, is considering whether to examine Nama's sale of loans due from developers including John Flynn, Paddy Kelly and the McCormack family, to US-based Colony Capital for €455 million earlier this year.

The office confirmed that it is weighing whether to examine the sale, known as Project Tolka, as part of a regular review of Nama's operations under that sections 226 of the Act establishing the agency.

If the C&AG does scrutinise Project Tolka, it would be his second review of a Nama deal. A report by his office into the agency's sale of its Northern Ireland loans to US company Cerberus for €1.6 billion led to a Dáil Public Accounts Committee inquiry which found that the process was "seriously deficient".

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Project Tolka prompted a series of questions when it emerged that it was not done on the open market, which is Nama's normal policy. Instead, the agency followed a recommendation from its advisor, UK firm Eastdil Secured, that a closed process would result in a better price. Nama is obliged to get the best value possible when it sells loans or properties.

Shortly after the sale went through, the Minister for Finance, Michael Noonan, told the Dáil that following the advice of its lawyers and Eastdil, Nama agreed a list of nine potential bidders for the assets with some of the 186 debtors whose loans were included in Project Tolka.

Commercial buildings

Responding to questions from Fianna Fáil finance spokesman, Michael McGrath, the Minister said that once the auction got under way, bidders were barred from contacting debtors without Nama's written consent.

“I am advised that no such consent was sought,” Mr Noonan added.

The debts were secured on high-profile commercial buildings such as the Burlington Plaza office complex in central Dublin and the Clarion Hotel in Liffey Valley. The fact that the price was a 70 per cent discount to the actual value of the loans themselves also sparked questions about the transaction.

Nama and its advisors feared that a sale on the open market could have left buyers at risk of legal action from debtors. There were problems with title to properties against which some loans were secured. At the same time there was a large number of debtors involved because syndicates and partnerships owned several of the buildings.

An agency spokesman pointed out that the C&AG was carrying out his section 226 review and it was open to him to look at Project Tolka or any other transaction.

Fianna Fáil TD, John McGuinness, said that it was a question of whether or not taxpayers got value for money.

“The C&AG has insight into this and has decided that this deserves to be investigated,” he argued. “I have no doubt that there are going to be more investigations.”