One heavily indebted individual described the process of filing for bankruptcy in the United States as akin to getting naked in public, such is the level of disclosure required by the US courts.
There is no doubt that property developer Seán Dunne was forced to bare his financial soul to creditors after filing for bankruptcy in Connecticut, where he now lives, on March 29th.
Just before close of business last Friday, Dunne filed 53 pages of documents in court as part of the process of revealing to his many creditors how much he owes each of them, what he now owns and where all the money went.
Friday’s filings are one of the most wide-ranging disclosures of the personal finances of an Irish developer since the property crash, resembling a financial autopsy report of a major business failure.
One upside from the trauma of revealing highly personal detail, ranging from the value of a watch, wedding band and cufflinks ($7,500) to how much he spends on clothes a month ($600), is that Dunne could emerge from bankruptcy later this year.
Asset transfer
This may still be the case, even if the court-appointed trustee liquidating his bankruptcy estate takes up the hotly disputed case the National Asset Management Agency fought in another court in Connecticut where the State loans agency claimed that he fraudulently transferred assets to his wife, Gayle Killilea.
That would mean that Dunne could start over and pour concrete again as a functioning developer in the US as the trustee liquidates the assets disclosed in Friday’s court filings for the benefit of creditors.
They will get nowhere near what they are owed, however.
Faced with total liabilities of $942 million, including $210 million due to himself as a lender to his own businesses, Dunne has just $55 million in assets. These include rugby tickets at the Millennium Stadium in Cardiff and Twickenham valued at $6,439.
Even in the unlikely event that the trustee recovers the full $55 million (less the $40,000 of items Dunne is claiming as exempt), creditors will recover at most just six cent in every euro they are owed.
Still, creditors will have an opportunity to grill Dunne on the disclosures he made on Friday at a creditors’ meeting in New Haven, Connecticut, on Wednesday. Dunne must attend, making it his first public appearance since he filed for bankruptcy on Good Friday to avoid legal action by Ulster Bank.
Ironically, Dunne’s hearing will coincide with another bankruptcy hearing up the US east coast in Boston where the case of former Anglo Irish Bank chief executive David Drumm is scheduled before the Massachusetts bankruptcy court.
The Drumm hearing is being held to set a date for his bankruptcy trial to determine whether he should be discharged from bankruptcy and let walk away with a fresh start.
Drumm lessons
Dunne only has to look at the Drumm case as a warning against not falling foul of a bankruptcy trustee. Drumm filed for bankruptcy in October 2010 and still faces the possibility of handing over future income to his former bank, now Irish Bank Resolution Corporation (in liquidation), amid disputed claims by the bank and the trustee that he failed to disclose transfers of certain assets to his wife.
Given the fervour with which Nama and Ulster Bank have pursued Dunne in the courts (both in Ireland and the US) and the amounts they are owed ($334 million and $393 million respectively), these creditors pose the greatest threat to the developer in the bankruptcy process. They will likely be poring over his bankruptcy disclosures, scouring for errors and omissions.
Nama claimed in its Connecticut action against Dunne that he – and not his wife – was behind various multimillion-dollar property deals in the US. Dunne and Killilea dispute this and there is no mention of any of these in the filings submitted by Dunne on Friday. The trustee is still weighing up whether there is any merit in taking up the legal action brought by Nama.
The filings contained many previously unknown facts and figures. Dunne owes almost $50 million (€39 million) in “domestic support obligations” relating to family law cases dating back to 2005 and 2009.
Dunne’s house “Ouragh” on leafy Shrewsbury Road in Dublin is valued at $9.6 million but he has debts of $15 million on the property.
He has guaranteed bank borrowings of $2.6 million owing by his children.
He owes building firm O’Flynn Construction, owned by developer Michael O’Flynn, $102 million, apparently relating to an option that the Cork company took on a tract of land at Celbridge, Co Kildare.
State agency IDA Ireland is owed $142,000, which is believed to relate to a proposed road at a planned major development at Charlesland near Greystones in Co Wicklow that died with the property market.
Dublin law firm Arthur Cox is owed $1.5 million .
Nama number 39
The only co-debtor listed on Dunne's bankruptcy filings is Seán Mulryan of Ballymore Properties, a top-five Nama debtor (Dunne is Nama's number 39). But, unlike Dunne, Nama is working through the Mulryan-Ballymore debts consensually with the developer.
Mulryan is listed as a co-debtor on the debts of 17 of Dunne’s creditors so it will be curious to see what effect, if any, Dunne’s bankruptcy will have on Mulryan and Ballymore.
Given what was disclosed on Friday, Dunne’s first appearance before his creditors as a bankrupt on Wednesday could be a lively meeting
