Finance freezes W&R Morrogh investigation

The Department of Finance has frozen its investigation into aspects of the collapse of Cork stockbroking firm W&R Morrogh by the Department of Finance. It follows moves by Anglo Irish Bank indicating that it may appeal a High Court judgment that affects the bank's chance of recovering money lent to Morrogh partner Mr Stephen Pearson.

The Minister for Finance, Mr McCreevy, had asked officials in his Department to study issues raised in Mr Justice Roderick Murphy's High Court judgment with representatives of the Central Bank and the Investor Compensation Company.

These include the security of electronic-based shareholdings and in the investor compensation process.

The court ruled that receiver Mr Tom Grace could use client funds in electronic nominee accounts to meet the costs of the receivership.

The Investors Compensation Company is investigating whether it can reimburse clients for such losses.

However, Anglo Irish Bank has now lodged a notice of intent to appeal the ruling with the Supreme Court.

That move has caused the Department of Finance to defer any investigation of the Morrogh case.

A spokeswoman for the Department said any examination of the issue would have to await the outcome of the appeal, if it goes ahead.

Anglo was seeking payment of money realised through the sale of 40,000 shares on the London Stock Exchange and subsequently lodged at the instruction of the Central Bank in a client nominee account at Morrogh.

It contended that the stock exchange shares should not have been sold as they had been pledged to the bank as security by Mr Pearson for loans advanced to him.

Mr Pearson's fraudulent trading eventually crippled the brokerage and his partner Mr Morrogh sold the shares to try to reduce its losses.

Anglo wants the money from the sale of the shares to go towards meeting Mr Pearson's debt.

However, Mr Justice Murphy rules that Anglo Irish was a creditor and, as such, ranked below the brokerage's clients in priority.Investors have also indicated that they will appeal the High Court ruling.