Kingspan founder to sue international bank after €3.8m investment loss

KINGSPAN GROUP plc founder Eugene Murtagh is suing a leading international bank claiming it failed to disclose the “utterly unsuitable” nature of a €24.8 million investment which resulted in a loss of €3.8 million for him.

Mr Murtagh, Kingscourt, Cavan, has brought his proceedings against Merrill Lynch International Bank Ltd, Treasury Buildings, Lower Grand Street, Dublin, claiming breaches of various regulatory duties imposed on the bank under investment legislation.

He also alleges losses of €3.87 million, breach of contract and negligent misrepresentation.

The proceedings were admitted to the Commercial Court yesterday by Mr Justice Peter Kelly.

In an affidavit, Mr Murtagh said he had in February 2007 bought 5,000 “five-year non-interest bearing outperformance certificates” for a total purchase price of €24.875 million, including a €375,000 investment fee. The certificates were issued by Merrill Lynch SA (Luxembourg) on behalf of the bank’s Dublin branch.

He said he chose that product on the basis of representations made primarily by Merrill London’s “relationship manager” James Meenan to his son Paul, who manages his father’s Washington office, and to Edward Grant, who runs Mr Murtagh’s Dublin offices. The purchase was financed by a €22.7 million loan, also from Merrill Lynch, acting through its London branch.

Mr Murtagh claims that, before he entered into the investment, the bank failed to disclose its true nature and inherent risks and other features which meant the transaction “was utterly unsuitable.” Mr Murtagh says he suffered losses of €2.45 million as a result of having sold back to the bank the entire investment in tranches between January and July 2008. He suffered another €1.41 million loss in interest costs on the money he borrowed from Merrill to fund the investment.

Lawyers for Merrill told Mr Murtagh earlier this month they did not propose compensating him for his losses and High Court proceedings were then initiated.

In an April 2008 letter to John Thain, the New York-based CEO of Merrill Lynch and Co Incorporated, Mr Murtagh’s son Paul appealed to Mr Thain to resolve the dispute.

Paul Murtagh, who worked with Merrill Lynch’s New York and Sydney branches between 1996 and 2001, wrote that it was because of his own work with the company he had recommended to his father to put a “modest amount” – 2 per cent of his father’s net worth – into Merrill in London.