Pensions Authority to investigate Irish investor losses in GPG collapse

The Irish Pensions Authority has confirmed that it is investigating potential "pension scheme trustee issues" in relation to the collapse of Hanover-based German Property Group (GPG), which resulted in 1,800 Irish investors losing as much as €107 million.

GPG, formerly known as Dolphin Trust, collapsed last year after taking €1.5 billion from investors in the Republic, the UK, Asia and elsewhere since it was set up by businessman Charles Smethurst in 2008. Mr Smethurst's home was raided by German police in March as part of an ongoing investigation into suspected investment fraud.

Irish investments were administered by Wealth Options Trustees Ltd (WOTL), based in Naas, Co Kildare. The investments were originally distributed in the Republic by a Cork-based company, Dolphin IG, through scores of brokers, who dealt with individual investors. WOTL took over distribution in addition to administration in mid-2018.

Special purpose vehicles

The Irish investments were channelled to the German group through two special purpose vehicles (SPVs), MUT 103 and Dolphin MUT 116, registered to the same address and each sharing the same directors as WOTL: Eanna McCloskey and Brian Flynn. A third director, Paul Dunne, died last October.

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MUT 103, an investment vehicle for €41.3 million of retail savings, was put into liquidation in March, and Dolphin MUT 116, responsible for €65.8 million of pension savings, entered liquidation at the end of last month.

The Pensions Authority only has authority to investigate WOTL, a Revenue-approved pensioner trustee, in relation to Dolphin MUT 116, the pensions vehicle.

“The authority is aware of this matter and is investigating if there are any pension scheme trustee duty issues of concern,” a spokesman for the organisation said.

The Daily Mail reported on Tuesday that the Pensions Authority was planning to go to court to take action against WOTL. The spokesman declined to comment, while WOTL did not respond to a request for comment.

When GPG collapsed last year it was sitting on 70 properties, mainly run-down and not developed, according to a report submitted to the Bremen bankruptcy court by a preliminary insolvency administrator, Gerrit Hoelzle, last October.

“The originally pursued business model collapsed years ago,” Mr Hoelzle said. “Obviously as a result of the increasing financial shortage, the business model, which was initially focused on real estate transactions, gradually developed into a pyramid scheme.”

Missed interest payments

When it first emerged in July 2019 that Dolphin Trust had missed interest payments in the UK, WOTL issued a letter to brokers highlighting how Irish investors were protected, saying it only passed on money to Germany "when we have security in place for a value in excess of the funds loaned".

When Dolphin Trust told WOTL in late 2019 it would miss interest payments due to Irish investors, the Naas-based firm hired a number of advisers, including law firm Dentons, to try to protect the interests of investors in the Republic.

Dentons' advice provided to the High Court in March said the GPG insolvency administrator believes that all of the loan claims of the Irish MUTs – which owe Irish investors €107 million – against the German group's companies are "subordinated and therefore the granted securities could be challenged".

The liquidation of GPG is expected to take years.