AT A TIME when so many people are suffering because private commercial losses have become a huge public debt, the idea that property developers with enormous bank loans might transfer valuable assets to their spouses is a potentially explosive political topic.
The National Asset Management Agency has assured the public that people who improperly move assets beyond the agency’s reach will be pursued. The agency is acutely aware that any reports to the contrary damage its reputation.
Last December, after a TV report on the subject, the agency said it had convinced three unnamed lenders to reverse transfers of assets with a combined value of €130 million. In July, Brendan McDonagh, the chief executive of Nama, revealed it had seized jewellery worth €200,000 that a developer had bought his partner.
There has been plenty of asset-transfer activity. In May 2009, Seamus Ross of Menolly Homes transferred the ownership of land in Co Longford to his wife, Moira. In July 2009, Gerry and Margaret Gannon, who had bought a house at the K Club in 2003, transferred it to Margaret’s sole ownership.
Nama holds loans of about €457 million linked to deals involving David Daly, who, in 2009, transferred €80 million worth of assets to his wife, Mary, for tax reasons.
Obviously, not all asset transfers made by wealthy debtors were done because people saw what was coming. Some were done for valid reasons that had nothing to do with bank debt.
However, by moving assets that have not been used as collateral against his loans to the sole ownership of his wife, a debtor can prevent those assets being seized by Nama in the event of him not being able to service or pay off his loans. This would leave the public with the unpaid loans, and the developer and his wife, taken as a unit, still significantly wealthy.
This “asset divestation” worry is the reason a section of the Nama Act allows the courts to direct that property be returned to a debtor’s ownership. Nama has to show only that the effect of a transfer has been to move the asset beyond the reach of a creditor.
Whereas conveyancing law allows for the undoing of transfers that were designed to defraud a creditor, the Nama Act does not require the agency to prove the intent of the transfer, only the effect.
In the next law term, it is expected that the agency will initiate actions against a number of debtors who have failed to co-operate with the agency to the extent it demands. As part of these actions, according to one source, the public is likely to see the court being asked for the first time to order that assets which were transferred from a debtor’s possession – for example, into the possession of a spouse – be moved back into the debtor’s ownership.
However, the agency has to be careful, as a loss in the courts, which is always possible, will weaken its hand in its negotiations with other debtors.
The Fianna Fáil spokesman on public expenditure, Seán Fleming, who is a member of the Dáil Committee of Public Accounts, says the agency is not being as tough as it should be with debtors who move assets. “We are now seeing the beginning of a cosy relationship between Nama and the developers whose affairs they are managing.”
Fleming says Nama debtors need to be treated harshly if it is known they have moved assets to family members recently. While family homes should be protected, he wants to see a “severe attitude” in relation to other property.
Nama must work with developers to maximise the return on the properties that back the loans it now owns, but Fleming is concerned by the relationship that is forming between Nama and the developers with whom it will be working in the future. “There’s too much of a cosy relationship there already,” he says.
THE DECISION TOcreate Nama was announced in April 2009, and the legislation setting up the agency was signed into law on November 22nd, 2009. The Nama Act is not retroactive, so it cannot be used to force the reversal of transfers that occurred before that date. So, looked at cynically, this means anyone who was quick off the mark and acted between April and November 2009 could have placed assets beyond the reach of the agency.
As the Nama chairman, Frank Daly, has explained to the Dáil Committee of Public Accounts, the agency is anxious to agree business plans with debtors. The idea is that the best way for Nama to maximise its return on the property assets that lie behind the loans it now owns is to involve the developers. As part of the business-plan process, debtors must provide sworn statements to Nama in which they outline all their assets and all the transfers they have made in recent years. It is a criminal offence to provide incorrect information.
Prior to the agreement of any business plan between the two sides, Nama can demand that assets that were transferred outside the debtor’s control in recent times are returned to his control. Any debtor who fails to achieve this will not be able to agree a business plan with Nama, Daly has made clear. “The key issue is whether there is trust or not,” says one source.
However, while the powers included in the Nama act are significant, Patricia O’Brien, a solicitor with PJ O’Driscoll & Sons in Cork, says the commercial power that Nama wields is as great if not greater than its legal powers. Having represented clients whose loans have been moved to the agency, she makes clear that she has never been asked for advice by clients who have tried to move assets beyond the reach of the agency.
It is because there are no other sources of credit for most developers that Nama’s commercial position is such a powerful weapon in its dealings with debtors, says O’Brien. Furthermore, she points out, when debtors had bank loans with various institutions, they could select what collateral they were going to give against particular loans. The two parties involved had an understanding of the level of risk. Now, however, Nama has collected all the debtor’s loans and is in a position to ask the person to list all their assets. If the debtor refuses, Nama can call in all their loans and close them down.
O’Brien and a source close to Nama both say the majority of Nama debtors did not get involved in asset divestment. However, the source says most of Nama’s larger borrowers did do this. O’Brien says debtors are under great pressure from Nama to reduce the size of their borrowings but are finding it very difficult to do so when there is so little market for what they have to sell.
Nama’s own business plan envisages it reducing its debts by 25 per cent by 2013, by 40 per cent by 2015 and by 95 per cent by 2018. Corresponding pressures are being put on the debtors.
“People who have lost so much are very broken up by what has happened,” O’Brien said. “It is the decent thing to do to recognise that most did not get involved in asset divestment. A lot of them have lost everything, and it is hard for them to find themselves being demonised on top of that.”
Building for the future? Where some assets have been transferred
Over the past few years some high-profile developers with significant bank debts have transferred property to their wives.
Publicly available records show that some of this property has since been returned, while other properties have become collateral against loans owned by Nama while remaining in the names of developers’ wives.
Requests for comments were submitted to the Gannons, Cosgraves, Dalys, Dunnes and Rosses during the week but met no response. Attempts to contact the Carrolls were unsuccessful.
Seán Dunne
Sean Dunne’s Mountbrook group has been granted permission to redevelop the Jury’s hotels site in Ballsbridge that his group bought at the height of the property boom.
In December 2008 Dunne transferred his sole ownership of land in Goatstown, Dublin, to that of his wife, the former social diarist Gayle Killilea.
Last July properties owned by Dunne were among a number to which Nama appointed receivers. The Dunne properties were Hume House office block in Ballsbridge, in Dublin, and the Riverside IV building, on Sir John Rogerson’s Quay, in Dublin.
The Cosgraves
Michael, Joe and Peter Cosgrave ran one of the largest residential construction businesses during the boom. Many of their loans have since been transferred to Nama.
In December 2009, Michael Cosgrave transferred a number of properties in north and south inner-city Dublin to his wife, Nadine Cosgrave. In July this year, Nama registered charges against other properties the land records show are in the sole ownership of Nadine Cosgrave. Also in July, ownership of a house, 7 Hillside Drive, Rathfarnham, was transferred from Nadine to that of her and her husband, and shortly thereafter a charge from Nama was registered over the property.
Joe Cosgrave transferred property in Dún Laoghaire-Rathdown, Dublin, to his wife, Denise McDonnell, in September 2009. Nama is registering a charge against the property. Lands at Blanchardstown and Rathdown and apartments on Gardiner Street and at Harcourt Green, Dublin, were transferred from the joint ownership of Joe, Peter and Michael Cosgrave to that of their wives, Denise McDonnell, Oonagh Cosgrave and Nadine Cosgrave, in July 2010, and were transferred back to the three men in August of this year. A charge in favour of Nama against the properties was submitted for registration in the same month.
A number of properties jointly owned by the three women have had charges registered by Nama this year.
In July this year, Oonagh Cosgrave transferred property in Sandycove, Dublin, to the ownership of her and her husband, Peter; a few days later a charge against the property was registered in favour of Nama.
David Daly
Property is not the only type of asset that can be moved and that Nama might want to use as collateral against loans it owns. Last month the High Court heard that the Malahide-based developer David Daly transferred assets worth €80 million to his wife, Mary Daly, in 2009, for tax reasons.
Nama holds loans of about €457 million linked to property deals involving Daly. During the case, the court heard that the assets transferred to Mary Daly included €17 million. Nama wanted these assets transferred back to Daly’s ownership so they would be available to the agency. The current state of the negotiations between Nama and the developer are not known.
Seamus Ross
Menolly Homes was huge housebuilder owned by Seamus Ross that has had its substantial debts transferred to Nama. Like Gerry Gannon, he is one of the “Maple 10”, who borrowed money from Anglo to buy shares in the bank, in the months before its collapse. In February 2009 he transferred ownership of property in Rathmines and Lucan in Dublin to his wife, Moira Ross. In May 2009 he transferred to her the ownership of land in Drumlish, Co Longford; in July he transferred that of a house on Harrington Street, Dublin; and in September 2009 he transferred that of a house on Haddington Road, Dublin.
Gerry Gannon
The housebuilder and property developer Gerry Gannon, of Gannon Homes, is one of the first 10 debtors to have their loans moved to Nama. He is also one of the “Maple 10”, who were loaned money by Anglo Irish Bank in 2008 to buy shares in the bank, before the bank’s collapse.
Records show that in 2003 Gannon and his wife, Margaret Gannon, became owners of a property in the Village at the K-Club in Straffan, Co Kildare. No mortgage was registered against it. In July 2009, ownership was changed so the property came under the sole ownership of Ms Gannon. This month an application was submitted to the Property Registration Authority to register a charge in Nama’s favour.
Similar changes of ownership took place in 2009 in relation to land in Ballyleague, Co Roscommon, where Gannon had once planned a housing development on the site, to apartments in the Anchorage and Spinnaker developments in Malahide, and to land in Dún Laoghaire-Rathdown.
In May 2009 a property at 36 Elgin Road, Dublin 4, was transferred from Mr Gannon’s name to that of his wife. In August of this year, Nama registered a charge against it.
Liam Carroll
Zoe Developments and Danninger, two companies run by the property developer Liam Carroll, were among the largest apartment builders in Dublin for the duration of the boom. The companies were known for building one- and two-bedroom apartments in poorer parts of the city. Both companies have since been placed in receivership. Many of their loans are owned by Nama.
In March 2009 Carroll transferred ownership of two houses in Mount Merrion, Dublin, to his wife, Róisín Carroll. One remains in her possession; the other appears to have been sold.
