Despite the visceral boom to bust Celtic experience, Wallace still lives by his motto of ‘work hard, play hard’
EVERY MORNING Mick Wallace takes The Irish Times, the Financial Times and the Guardian and pores through each newspaper searching for solutions to the global economic crisis.
He doesn’t need much encouragement to rail against German chancellor Angela Merkel’s fiscal policies or the “crazy” behaviour of the banks. Closer to home, though, the roots of his personal financial calamity are equally complex.
The latest stage in the slow collapse of his business empire comes later this month with the publication of the Revenue Commissioners’ list of tax defaulters. The name of MJ Wallace Ltd, the independent TD’s building firm, is likely to figure near the top of the list, with a massive settlement of more than €2.1 million.
Wallace knows how it looks. Here is a TD who is telling others how they should live their lives with egg on his face. He knows ordinary people won’t distinguish between MJ Wallace, the company against which the settlement has been made, and the individual, Mick Wallace. They won’t understand how the company, which is liable, has no money while the TD, who is on a handsome salary, has.
There is “no hope” of the money being paid, he admits, so he can expect another round of thundering denunciations from the opinion writers. Not to mention more media intrusions on his privacy, the most recent of which occurred when a Sunday newspaper named his teenage son after he was expelled from a south Dublin school.
Sitting on a bench in one of his wine bars in the Quartiere Bloom by the Dublin quays, Wallace is surprisingly calm as he explains where it all went wrong.
Back in the days of the boom, the flaxen-haired builder was celebrated as much for his unconventional views as for his high-quality developments in inner-city locations. The former teacher, who studied history and philosophy before switching careers, unfurled banners on his buildings in support of the Palestinians, founded a soccer club in his native Wexford and set up cafes and wine-bars to enhance the quality of his developments.
Despite the publicity, Wallace was never a big developer. He focused on one large development a year, funded by sales from earlier jobs and growing bank borrowings.
The first signs of change came in 2008, when he was working on a job on the North Circular Road. In April, ACC Bank sanctioned €7.5 million for the project but by July, as the storm clouds gathered in the economy, they asked him to stop work on it.
The following year, his company was finishing off an apartment block on Russell Street, by Croke Park. “The bank was tightening up on the supply of money and wasn’t giving us enough to finish out the project,” he says.
He’d taken in deposits of about €40,000-€50,000 on each apartment sale and used this money to fund other work but when the sales were completed a VAT liability arose on each one.
“The bank was taking all the sale money and we had spent the deposit money and so we couldn’t pay the €1.4 million that was due in VAT,” explains Wallace.
“I remained confident that we could pay the money, but I didn’t think the value of property would sink as much as it did.
“If this had happened earlier [before the crash] they would have worked with us. They used to talk all the time about the relationship with the customer. They used to talk about ‘we’. Then, in 2007, that all stopped and it was ‘us’ and ‘you’.
“They used to meet me here in the Quartiere Bloom but now I had to go to their offices. If I rang up, they’d say they would ring back and then put me on speaker-phone. I believed my calls were being recorded.”
Normally, Wallace would have sold off a few apartments to pay the big VAT bill that arose at the end of a development. But the last 10 wouldn’t sell and he tried to buy time: “So I filled in a false VAT return, something I’m going to get murdered for.”
He says he has no complaint with the Revenue’s approach. He couldn’t have paid the tax man anyway because the banks, to whom he has given personal guarantees, would have taken anything.
He was also at loggerheads with his subcontractors, who he owed €3.4 million to. He got this down to about €1 million through negotiation. Ultimately, all the subcontractors were paid but MJ Wallace was fined €7,000 last year for late payment of his workers’ pension contributions.
In October 2010, Wallace went to the Revenue and revealed his under-declaration of VAT. “We opened up our books . . . that’s one of the reasons they didn’t throw the book at me.”
MJ Wallace agreed to pay off its debts to the Revenue in monthly instalments. However, last November ACC Bank secured a €19.4 million judgment against the company.
“That finished us off. When that happens, you don’t tick the boxes any more. You can’t get State work. And we could no longer make the monthly payments.”
Consequently, the Revenue moved to claim its money, and a €2.1 million settlement was agreed last February. Wallace says the Revenue categorised his behaviour as “careless” rather than “deliberate” so the maximum fine wasn’t imposed.
“I don’t feel good about the fact that I owe Revenue that money but it was outside my control.”
The other banks the company owes money to are now closing in. With Wallace’s permission, Ulster Bank is selling properties it funded. Wallace says the Revenue will get €450,000 from these sales and Dublin City Council will get €360,000.
AIB is also looking at selling off property, again with his permission, while Bank of Scotland, which is less exposed, has yet to make a decision.
His wine bars are run by Wallace Calcio Ltd, a separate company. It is tax compliant, he says, though many of the cafes are in buildings that were owned by MJ Wallace but are now being sold. They continue to trade.
He doesn’t understand the rationale of the banks and believes there is serious undervaluation in the property market. A site on which he owes €8 million is on the market for €1 million. Apartments that cost €230,000 to build before site costs are being sold for €100,000.
None of this matters much now, as he is reduced to the role of spectator while his former business is dismembered.
He still lives by his motto “work hard, play hard”, making sure his cafe bars “wash their face” and attending to his Dáil work. “I lived simply. I never went crazy, or flew around the place in a helicopter.”
There remains, too, his lifelong passion for soccer, which will bring him to the European Championships in Poland next week.
