THIRTY-FOUR YEAR old Peter Darragh Quinn has been feeling the pressure in the witness box of court six in the Four Courts this week.
He has been the subject of sustained questioning by the former attorney general, Paul Gallagher SC. Gallagher is acting for the State-owned Irish Bank Resolution Corporation which is seeking to have Quinn, his uncle, the former billionaire Sean Quinn, and his cousin, Sean Quinn jnr, sent to jail for contempt of court.
At the heart of the case is the Quinn family’s acknowledged efforts to put multimillion euro foreign property assets beyond the reach of Anglo Irish Bank (now part of IBRC), to which the family owes €2.88 billion.
On June 27th last year, Mr Justice Frank Clarke ordered the family to stop. The bank alleges that the three Quinns continued in their actions, something that the three men deny.
Peter Darragh Quinn told the court that, from 2010, he believed that Anglo would eventually seek to seize all the Quinn family’s assets. He was managing an international portfolio of property worth approximately €500 million that was owned by the five Quinn children, and he thought some of these assets could be protected.
Gallagher questioned Quinn about a Russian company, Finansstroy Investment, that formed part of the Quinn property group and which owns a number of valuable Russian properties, including the Kutuzoff Tower in Moscow which has a value of up to $180 million.
In order to facilitate getting money out of Russia, the property group included a Co Fermanagh company, Demesne Investments Ltd, of which Sean Quinn was a director, and which was owed very large amounts by Finansstroy.
According to Peter Quinn, he got advice about protecting Quinn assets in Russia from a Russian solicitor, Alexander Khokhlov, whom he met in the Kutuzoff Tower on March 16th, 2011. An interpreter was used.
“I was advised by Mr Khokhlov that, in order to protect the Russian property assets, it would be prudent to assign the intercompany debts due to Demesne to a separate entity.”
Some days later, Khokhlov told Quinn he was engaging a Russian firm of solicitors, Attorneys and Business, or AB, to assist. If the debts were to be assigned from Demesne, somebody, according to Peter Quinn, had to be found to assign them to. AB, which he had never heard of before, was going to do this.
According to Quinn, on April 4th, 2011, he received by courier to his office in Derrylin, Co Fermanagh, a large package containing assignments and other documents, all or most of them in Russian.
Quinn, who was the general director of Finansstroy, said he signed these documents as did Sean Quinn for Demesne. He said he flew to Moscow with the documents on the evening of April 14th, 2011.
That morning Anglo Irish Bank had seized the Quinn Group from its founder and his family in an unexpected move carried out with an almost military level of preparedness.
Quinn handed the documents to someone in the Kutuzoff Tower whom Mr Khokhlov sent to him for that purpose. He had no further dealings with the solicitor until February 2012, he said.
According to Quinn, the documents signed on April 4th assigned debts of more than $100 million owed by Finansstroy to Demesne, to Yuroslav Gurnyak, a person neither he nor Sean Quinn had ever heard of before. He said he could not remember if he told Sean Quinn to whom the valuable rights were being assigned to.
IBRC has said Gurnyak was working on a building site in Moscow when asked by a Russian lawyer to sign the documents for a nominal fee, and that he told this to an agent of the bank when interviewed. Gurnyak, according to the bank’s agent, said he had signed the documents during the summer of 2011.
According to Peter Quinn, he has a “gentleman’s agreement” with Gurnyak, with whom he has never discussed the matter, that the Quinn family would get 20 per cent of any money the Ukrainian national secures from the assignments.
Quinn told Gallagher that this deal, although risky, was better than the certainty of losing everything if the family had just waited until the bank made its move.
On June 20th, 2011, Peter Quinn flew to Dubai, arriving early in the morning and leaving that evening. He met a man he had never met before, Michael Waechter, of Senat Aktiengesellschaft, to discuss the creation of a trust which would hold assets for the grandchildren of Sean Quinn. Quinn, he said, wanted to get back into business at this stage, and wanted a vehicle that would allow him to do so.
A trust was established, in Switzerland, but was not put to use because of all that has happened since.
According to Quinn, AB knew of his intended trip and asked him, while there, to request Senat to acquire an offshore company for Gurnyak.
Quinn could not tell Gallagher why the firm would ask him to do this, rather than just go and organise it themselves. Nor could he explain why a firm of solicitors was asking him to get involved with the affairs of another of its clients, or why Senat, on June 22nd, got back to him rather than AB, to tell him it had purchased a Belize company for Gurnyak called Galfis Overseas Ltd.
Gallagher asked Quinn what he thought of the fact that the man to whom he’d assigned debts worth so much money and with whom he had an undocumented “gentleman’s agreement” was setting up an offshore company.
Quinn said he didn’t think about it. He rejected Gallagher’s assertion that the truth was that Galfis was being set up for the Quinns.
Documents signed by the Quinns not only assigned the debts due from Finansstroy,and other companies, for nominal $100 payments, they also doubled the interest rate that was to apply to the loans to 30 per cent, and backdated that increase to 2007.
Quinn accepts the doubling of the interest rate was not to Finansstroy’s benefit and increased the debt of that company by some €40 million.
On July 22nd, 2011, Galfis Overseas told a bankruptcy court in Moscow that it was owed $107 million from Finansstroy, citing a Russian arbitration award dated June 7th, 2011, which was based on the assignment of debts from Demesne to Galfis on April 4th. (The bank believes this was part of a process whereby Finansstroy would be put into bankruptcy and the creditor would end up with the Kutuzoff Tower.)
The documents produced in Moscow indicated that Finansstroy had been told of the pending arbitration award and had asked that the claim be processed without it being represented, even though the company had never had any dealings with Galfis.
Peter Quinn, who was general director of Finansstroy at the time, told Gallagher he had no involvement in the apparent award and “hadn’t a clue” how it could have come about.
The date of the supposed arbitration award, June 7th, was prior to Quinn’s trip to Dubai and his dealings with Senat. Up to Senat buying Galfis, it had been a shelf company and so could not have been involved in any assignments or arbitration case.
“Somebody is involved in a very serious fraud,” said Gallagher.
Gallagher said there was no reason why Gurnyak could not use his own name in the arbitration case, if what Quinn had said about the assignment of debts to the Ukrainian in April was correct.
Quinn said Gurnyak might have tax reasons for using the offshore company, but agreed this was only speculation.
Gallagher said AB was acting for Gurnyak and, on Quinn’s evidence, knew that Galfis didn’t exist on June 7th. Furthermore, he pointed out, AB was also, on Quinn’s instructions, acting for Finansstroy in the bankruptcy procedure. Is AB complicit in the fraud, asked Gallagher. “I am not aware of what went on,” Quinn said.
Gallagher suggested that what had, in fact, happened was that it was Quinn who produced to AB the assignment to Galfis, which would explain the law firm’s actions. “That’s not what happened,” said Quinn.
It is the bank’s case that an examination of the facts supports this suggestion. The bank’s case is that the Finansstroy debts were transferred in July, not April, and to offshore companies that remain under the control of the Quinns.
It believes the documents substituting Gurnyak for Galfis were created after the bank discovered that Galfis, because it was a shelf company at the time, could not have entered into any agreements in April 2011.
This version of events is rejected by the Quinns. Peter Quinn says he and his uncle signed documents assigning the debts to the Ukrainian on April 4th. He says his signature on the document used in the bankruptcy proceedings and which shows the debts being assigned to Galfis, is a forgery, and that a handwriting expert has confirmed this.
As an accountancy graduate, Quinn has conceded in court that he knew some of the actions he took were not of benefit to the companies involved, but said the intention was to benefit the Quinn family as ultimate owners of the assets.
The case is being heard by Ms Justice Elizabeth Dunne, who must come to her decision at the criminal level of proof – beyond reasonable doubt.
CONTEMPT ORDERS AND THE WITNESSES
THE ORDERS for contempt against the Quinns are based on allegations that, contrary to a High Court order of June 27th, 2011:
Seán Quinn snr and Peter Quinn, on or after July 20th, 2011, were involved in the assignment of loans worth $130 million to a Belize company (Galfis) and the application of a retrospective and “extortionate” interest rate, in relation to Russian companies Finansstroy, Logistica, and Red Sector.
That the same men were involved in an assignment on or after July 6th, 2011, of a loan of €45.2 million, to a Northern Ireland company (Innishmore Consultancy) with the objective of making the new creditor take priority over IBRC in relation to debts due from a Ukrainian company, Univermag, that in turn owns a Kiev shopping centre.
That Seán Quinn jnr and Peter Quinn were involved in $500,000 being paid from a Quinn property group company on August 30th, 2011, into the personal account of the general director of Univermag, Larisa Yanez Puga, contrary to the interests of IBRC and immediately prior to the Quinns losing control of the group company.
WITNESSES:
Peter Quinn is the first witness called in the case and is expected to complete his evidence today. Sean Quinn snr is expected to follow him into the witness box when the case resumes after the Easter break, with Sean Quinn jnr also giving evidence. Whether some of the foreign people involved in the matters being examined give evidence, possibly by way of video link, is not clear.
Paul Gallagher SC and Shane Murphy SC, instructed by McCann FitzGerald, are acting for the bank. Bill Shipsey SC and Brian O’Moore SC, instructed by Eversheds, are acting for the Quinns.
LEGAL DRAMA: THE MAIN PLAYERS
SEAN QUINN(65) used materials quarried from the small farm that he grew up on in Derrylin, Co Fermanagh, as the springboard for a manufacturing and financial services group that he built up over the course of his adult life and which at one stage made him the richest man in Ireland.
However, disastrous investments by way of contracts for difference in the shares of Anglo Irish Bank have led to his being declared a bankrupt in the Republic and to his Quinn Group, which was owned by his five adult children, being seized by the bank.
By way of personal guarantees his children, who at one stage owned assets worth hundreds of millions of euro each, have ended up owing Anglo, now IBRC, more than €2.88 billion. The family, however, is contesting the legality of its debts to the bank.
PETER DARRAGH QUINN(34) is a former senior county footballer for Fermanagh and an accountancy graduate who managed an international portfolio of property investments on behalf of Sean Quinn's five children. The portfolio is estimated to have a value of up to €500 million and is the sole remaining family asset of value that the bank has not yet seized.
He has told the High Court that, since 2010, he had been expecting Anglo to one day seize the Quinn family’s assets and had urged them to take steps to put assets beyond reach.
He has also said information was deliberately withheld from a court case last year before Mr Justice Frank Clarke.
SEAN QUINN JNR(33) was involved in the running of the Quinn Group with his father and was at one stage the owner of the prestigious Belfry golf and hotel resort in England, bought for £186 million in 2005. His father and his cousin Peter are the alleged "prime movers" in the case currently before Ms Justice Elizabeth Dunne.
Sean Quinn jnr’s alleged contempt, which he denies, involves the payment of $500,000 to a Ukrainian woman, Larisa Yanez Puga, who managed valuable properties in Kiev for the Quinns, at around the time that the bank was seizing control of the company structure that owned the Quinn children’s international property portfolio. Efforts by the bank to replace Ms Puga’s role in running a valuable shopping centre in Kiev have encountered repeated obstacles.
