Early in the US civil trial of bankrupt developer Seán Dunne and his wife, Gayle Killilea, her lawyer brought up the bestselling book The Big Short, about a group of investors who foresaw the 2008 financial crisis and made a killing off it. He did it again in his closing statement.
Lawyer Peter Nolin's point: virtually no one saw the coming crashes in the global financial market and the Irish property market, including Dunne. If Dunne didn't anticipate the collapse, then he and Killilea couldn't have plotted – as plaintiff Richard Coan, Dunne's US bankruptcy trustee, alleged – to transfer millions of euro of assets to her to evade creditors, Nolin reasoned.
So why did Dunne give Killilea much of his fortune – €68 million when all was said and done? Love and affection, along with Killilea’s wish for her own wealth independent of him and his businesses and a desire to provide for their children’s future. That drove the gifts, not a scheme to stiff creditors as Dunne’s business empire collapsed, their defence lawyers argued.
"This is a case about a man who sought to provide security to his wife and children and did," Dunne's lawyer, Brian Spears, said in his opening statement. He repeated it as he closed the case before a 10-member jury in the New Haven, Connecticut, courtroom, an ocean away from where most of the events recounted at the trial occurred.
The couple's defence ultimately rested on two pillars: an unwitnessed agreement the couple say they wrote out by hand during a 2005 holiday in Thailand, in which he promised her a large share of his wealth, and expert testimony that Dunne was personally solvent until at least the end of 2008, by which time virtually all the assets had been transferred.
The trustee of Dunne’s US bankruptcy in 2013 told a completely different story. Facing huge and growing losses in his property development empire as the Celtic Tiger – as one witness put it –“ran out of road”, Dunne was broke by late 2007 or early 2008.
He and Killilea reacted by concocting and carrying out an elaborate and years-long scheme to hide and shield from creditors tens of millions of euro in assets by transferring them to her. Coan's lawyer, Thomas Curran, accused Dunne and Killilea of being serial misleaders and dismissed as "bogus" a series of handwritten agreements central to their defence, including the 2005 document that the couple say governed the wealth transfers.
Marital problems
The pair even went so far as to pretend they were having marital problems to secrete wealth from Dunne to Killilea, Curran suggested.
Curran urged jurors to compel Killilea to disgorge the assets for distribution to Dunne’s creditors, who are still owed millions of euro from the collapse of his Irish businesses a decade ago.
In the end – after hearing three weeks of testimony, reviewing hundreds of documents and deliberating for four days – the jury sided with the bankruptcy trustee on eight counts and with Dunne and Killilea on 10. They were unable to decide on one.
The fight, however, may be far from over. The loser will now have to decide on an appeal, potentially causing the case to drag on for years longer.
The stakes were huge for all the participants in the month-long legal drama
In testimony from Dunne, Killilea and other witnesses, the jury heard of Dunne’s meteoric rise from small-town boy to immensely wealthy man and his equally dramatic fall, as well as the couple’s meeting, marriage and the trials and tribulations with unwanted publicity – the justification given throughout the proceeding for their often secretive behaviour and gypsy lifestyle.
The story included a multimillion-euro Swiss condominium, a South African resort, millions of euro in bank transfers, marital discord, Dunne’s apparent pull with prominent Irish politicians, including former Taoiseach Bertie Ahern and family drama involving an ex-wife and a treacherous cleaning woman.
As if that weren't enough, there were also tales of the couple's move to the United States, their subsequent fraught foray into American real estate, including property development in one of the US's most exclusive communities, and the mind-numbingly complicated purchase and sale of Walford, the most expensive home in Ireland.
Huge stakes
The stakes were huge for all the participants in the month-long legal drama: Killilea faced losing much of her fortune. For its part, the law firm of bankruptcy trustee Richard Coan, which tried the case, stood to earn 3 per cent of any assets recovered, potentially more than $900,000 (€799,000 ).
Then there was Nama, the State agency that took soured property loans off the balance sheets of our domestic banks post the 2008 crash, and Ulster Bank, one of Dunne's biggest creditors. They underwrote the litigation to the tune of $2 million, hoping to win tens of millions of euro against the massive amounts Dunne still owes.
Some of the trial’s most compelling moments centred on handwritten documents that served as the linchpin of the defence of Dunne and Killilea. They provided, the couple’s lawyers said, the reasons as well as the legal framework for the wealth transfers, proving they were not some nefarious scheme.
The first and most important was entitled "Property Transfer Agreement between Seán & Gayle Dunne – March 23rd, 2005", drawn up during a holiday in Thailand.
In that agreement, which lacks the witness signatures and notary seal typical of such documents, Dunne promised to give Killilea 70 per cent of the profits from six hugely valuable properties when he sold them. The document goes on to say that Dunne retained the right to give her cash and other properties in lieu of profits from those properties, which is essentially what he ended up doing.
Killilea testified that Dunne promised her about 20 per cent of his wealth at the time – more than €60 million.
“This transfer of money/assets is to secure the financial independence of my wife & children and to secure their independence from my property investments,” the document reads.
The defence traced all the wealth transfers, including the subsequent purchase of Walford on Shrewsbury Road in Dublin, for €58 million, a 3.5 million Swiss franc condominium in Geneva, and millions of euro in cash given to Killilea, back to the agreement.
At one point, Curran asked Killilea if the agreement covered her full ownership of the Swiss condo, which wasn’t purchased until three years after the document was drawn up. Her reply: “Yes, in theory.”
Coan’s lawyer scoffed at that assertion. The notion that Dunne, a sophisticated businessman who bragged of paying lawyers millions of euro a year, would codify such enormous life decisions without consulting solicitors stretches credulity, Curran argued. He noted that the agreement and similar ones remained undisclosed for years, charging they were actually written “to be held in secret in a drawer and revealed only if and when [Dunne] wanted to”.
Curran, however, never presented evidence directly challenging the authenticity of the agreement or other handwritten documents entered into evidence.
Simple explanation
Dunne and Killilea had a simple and deeply personal explanation for the agreement. Married less than a year before, the couple had discussed a prenuptial contract but were advised Irish law did not recognise such documents. The matter re-emerged when Killilea’s best friend was killed in Thailand in the deadly December 2004 tsunami. That, they testified, combined with the birth of their first child led them, in March 2005, to conclude the agreement.
Why all the secrecy? Why not bring in lawyers? To avoid publicity and guard their privacy, the couple said. They complained repeatedly about what they regarded as relentless, unfair scrutiny from the Irish media. Killilea, a former journalist, spoke at one point of being “hounded”.
Documents, even from lawyers’ offices, could leak, they said. Dunne cited an example of a cleaning woman who had provided confidential documents to the press.
Looming over the trial was Walford, the most valuable asset at stake, and the complicated history of its purchase and sale. Dunne steadfastly insisted that Killilea always owned the home, which he testified he bought for her over 2005 and 2006 for €58 million as part of their 2005 agreement.
As proof, the couple pointed to another 2005 handwritten document drawn up by them, this one witnessed by Dunne's then-teenage son from his first marriage, John Dunne. In it, they created a trust that put ownership in her hands.
The trial portrayed a couple and their young children flitting around the world from one luxury abode to another
The plaintiff, however, challenged the document as insufficient to convey ownership and maintained Walford was always legally his, thus making the sale proceeds subject to seizure.
Adding to an already convoluted picture, the couple used a device under which they didn’t take legal title of the property until Walford was sold on in March 2013 for €14 million. Their stated reason was, once again, to thwart publicity.
Layering on even more complexity, Killilea first conveyed the property to a Cypriot special purpose vehicle, in which Dunne’s son John, was the shareholder. That vehicle, which Killilea testified enabled her to take a tax write-off, finally sold the property, with John receiving nothing. The plaintiff made much of the timing of the sale – the same month Sean Dunne declared bankruptcy in the US.
American sojourn
Dunne and Killilea’s American sojourn came in for considerable scrutiny during the trial. Even after his move to the US in 2010, Dunne insisted to Nama that his domicile remained Ireland, according to agency meeting minutes entered into evidence. He also failed to disclose to Nama, as required after it took possession of his debts, his conveyance of numerous valuable assets and millions of euro in cash to Killilea.
In his testimony, Dunne said he believed some of the properties, including Walford, were outside the look-back period and that cash gifts were not covered by the requirement, a statement Curran mocked in his closing statement.
Once in the US, Killilea set up a number of companies that developed projects in Greenwich, Connecticut, one of America's wealthiest communities, neighbouring New York state and New York city. The plaintiff, who wants to tap profits earned by those projects, introduced emails and other documents that he said showed Dunne really owned and ran the entities, an allegation the couple strongly denied.
Curran put the move to the US in the worst possible light, suggesting that Dunne had “absconded” to escape his Irish debts.
Dunne and Killilea remained composed throughout their days of testimony, expertly parrying efforts by the plaintiff’s attorneys to trip them up or make them angry. At points, however, their answers were head-scratchers: Killilea, a qualified lawyer, insisted at one point that she didn’t understand a simple English-language Swiss property conveyancing document or know what a notary stamp – a basic part of many legal documents – looked like. Dunne couldn’t recall when he had told his lawyer about the trust under which he says Killilea owned Walford and also didn’t remember transferring a large amount of money used to buy the Swiss condo.
On a more personal level, the trial portrayed a couple and their young children flitting hopscotching around the world from one luxury abode in one exclusive enclave to another. The reason once again was privacy, specifically a desire to escape media scrutiny in Ireland.
Asked why the Irish press paid undue attention to the couple, Dunne attributed much of it to him being “the old fat guy” who had married an attractive younger woman.
