For an organisation that has never really been popular in Ireland, the past few weeks must have seemed like a nightmare for the National Asset Management Agency (NAMA). It turns out that one of the organisation’s longest-serving officers, who was responsible for due diligence on loans transferred to it by Irish banks and borrowers, had acquired a property as his principal private residence from a NAMA debtor.
In a statement last month, NAMA said it considered the failure by its former employee – named as Enda Farrell in the Irish press – to disclose the transaction as a breach of internal procedures. It also noted that, during the course of an investigation by accountant Deloitte, it had become aware that confidential data may have been taken by him without authorisation.
The issue is serious for Farrell. Making matters worse, Farrell’s wife works for Ernst & Young, which has been earning fees from advising NAMA.
Proceedings began last month in the High Court against Farrell and his wife, seeking an Anton Pillar order directing the defendants to give up all documents and communications relating to NAMA. The organisation also said a criminal offence may have been committed under section 202 of the NAMA Act 2009. It is reporting the matter to Ireland’s Garda police and to the Office of the Data Protection Commissioner.
Meanwhile, confidence in the organisation set up in 2009 to work out billions of dollars in Irish-banked loans has been hit by the case. According to one real estate executive with contacts at NAMA, the lack of proper controls over confidential information has surprised people, as well as the volume of data that has “walked out of the door.”
It is said that NAMA chief executive Brendan McDonagh has taken it very personally, given that Farrell was considered a long-standing and loyal team member of the National Treasury Management Agency, under whose auspices NAMA operates. Since the scandal, all the senior relationship managers have been required to update their personal statement of interests, added the source.
As well as setting NAMA back, the scandal also threatens to cast a shadow over Forum Partners. Farrell left NAMA earlier this year to become the private equity real estate firm’s Ireland representative. A press release in March said hiring the former portfolio manager was part of the firm’s plans to expand its presence in the European debt space. In the newly-created post, Farrell was to perform a number of roles, including sourcing loans from Irish financial institutions and creating new products for investment in Ireland.
In addition, Farrell was to help assist the Crown Group, a European loan servicer, build a platform for Irish banks. Forum controls Crown through Forum European Realty Income III, a value-added vehicle that closed on €443 million in equity in 2009. “We’ve been looking to enter the Irish market for some time, and steps have been taken by the Irish government to restructure the market to a point where there may be intriguing investment propositions there,” said Russell Platt, Forum’s chief executive officer, at the time.
Forum is now distancing itself from Farrell. The firm said it would not be commenting, but it is thought that Farrell never did engineer a deal for the firm. Signs are that he will have no further part to play at the firm, as he is no longer listed as being part of the European team.
In Ireland’s media, there has been outrage that a NAMA employee might have gained an advantage by purchasing a house and land from a NAMA developer. The facts, however, appear to suggest otherwise.
Deloitte believes that Farrell paid the “market rate” for the property and that the transaction was approved by NAMA in accordance with normal procedures. The problem, however, is that the review also found that the former employee did not disclose the transaction “at any time either prior to or following the transaction.”
In addition, the scandal has re-opened the issue of leaks at NAMA. One source recalled how the full list of Anglo-Irish debtors was leaked two years ago, causing a certain degree of embarrassment. That was interesting because private equity real estate firms contacted by PERE in 2010 said one avenue to do deals with Irish-banked assets concerned striking up conversations with borrowers whose assets were either about to go into NAMA or already had been transferred. The Farrell case, therefore, opens a can of worms regarding how those firms knew who to contact and how they knew details of those loans.
That said, the NAMA case can be seen as nothing more than a sideshow to private equity firms excited about a large portfolio sale that is moving ahead. Lloyds Banking Group is selling a €2.3 billion Irish loan portfolio, dubbed Project Pittlane, compromising more than 700 individual loans made by Bank of Scotland during the middle of the last decade. Deloitte, which investigated the NAMA leaks, is advising Lloyds on the sale.
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