Peter Mathews’ complex contribution yesterday to the Commission of Investigation into certain IBRC transactions included a number of fresh allegations about overcharging at Anglo Irish Bank/IBRC and revelations about the purchase of Blackrock Clinic loans.
Economist Constantin Gurdiev translates below.
I want to talk about how the so-called profits of IBRC were inflated for a period starting in 1993 and travelling forward to the present date.
There were two ways this was done.
First was the direct manipulation of interest charges and the concealment of loaded interest, which happened in the majority of cases. An extensive exercise carried out by Bank Check revealed this.
It was an excellent exercise and gives the key facts as follows: there were 113 variable DIBOR and EURIBOR loans and 17 LIBOR-based transactions. Some 494 separate DIBOR-EURIBOR rates were reconciled and found to be loaded to a degree ranging from 0.5% in the early 1990s to between 0.03% and 0.05% in 2002 and 2003.
Some 80% of all the loans examined, relating to many clients, were found to have this loading. The statements which clients received never showed the breakdown of the base rate and the DIBOR 3-month rate plus a margin, which had been agreed by loan agreements, plus the reserve asset cost, RAC, if and when it applied.
The quantum of the loaded overcharging was in the order of 0.3%. A margin of 1.5% would comprise two elements, namely, the amount that goes to cover overheads, which is usually about 0.9% of the 1.5%, and the remainder, 0.6%, which is the profit of the bank.
A loaded secret dark pool profit of 0.3% would represent one third of the overall profits, including that dark pool profit.
That means the market valuation of Anglo Irish Bank in the 14 years up to 2002 when this was going on was overstated by one third. If it had been discovered by proper auditing the market would react with a collapse, like the St. Valentine’s Day massacre, of at least one third of the value of the bank and this would affect the shareholders, creditors and depositors.
That would happen irrespective of whether there was an international credit bust and a freeze of credit. This has been brought to the attention of the NTMA, NAMA and others but it has been ignored to date. I have the evidence here and it is shocking.
There is a superbly authoritative letter about the second element of the overcharge by Anglo Irish Bank, now IBRC. Interest was charged for 365 days across the board, when it should have been 360 days.
In the case of IBRC v. John Morrissey, this was the decision of Ms Justice Mary Finlay Geoghegan. It has been brought to the attention of the bank, which has been asked to explain what has been done about this in relation to other clients, but it has been ignored.
The terms of reference which the Government has outlined for the investigation cover the period from 2009 to 2013, which is absurd. I am ashamed that this is the case as it excludes the professional conduct of the special liquidators.
I have other examples of where clients of what was Anglo Irish Bank and is now IBRC are being mauled while special preferential treatment has been given to certain bidders on loans.
I cite the Blackrock Clinic in this respect, which is now the subject of open court proceedings. I have the court depositions and it appears from the evidence that the senior accounting advisers of Larry Goodman are former KPMG partners and very close to the special liquidators at KPMG, Mr. Richardson and Mr. Wallace.
It appears there was preferential treatment in the bidding for some of the loans of the investors in the Blackrock Clinic. This should also be investigated as there is too much darkness and too much selective, narrow stuff.
On the day after the six-month stay on involvement in any property transactions relating to NAMA loan assets, the chief loans manager of NAMA, Mr. John Mulcahy, joined the advisory team of Denis O’Brien.
KPMG were the auditors of Irish Nationwide Building Society, which had a balance sheet of €14 billion. They made losses of €6 billion which were put on the backs of the Irish people. That is wrong.
In conclusion] This is from Black solicitors, following the John Morrissey case:
‘It appears numerous illegalities have been carried out by Anglo Irish Bank and its successors over these 25 years. You, Mr. [Kieran] Wallace, have acknowledged under oath in US Court proceedings the overcharging of interest by the bank. As the overcharging has continued under your watch, you are jointly and severally liable for same, together with the Minister and Department of Finance, the Central Bank of Ireland and the Financial Regulator.’
This is really serious stuff. No response has been received to letters that issued to NAMA on 7 January 2015, to the Central Bank on 22 January 2015, to the Minister for Finance on 3 March 2015, and to the Central Bank on 9 March 2015.
We are now in June. This is serious stuff. There are loans that are being operationally processed by the originators of those loans. Now those loans are owned by third parties, including hedge funds, and they are calculating interest on an unlawful basis, even though it has been brought to their attention. This is shocking.
There is other evidence that NAMA knowingly… allowed the information memorandum for the Chicago Spire to be negligently misleading, which has resulted in unnecessary huge losses for both the Irish people and the developer. I have the evidence for that….”