Anglo vows to recover costs as McCaughey lawsuit fails
Published 28/07/2011 | 05:00
ANGLO Irish Bank has vowed to pursue Century Homes' founder Gerry McCaughey for legal costs of €4m after the High Court dismissed the businessman's $46m claim that the bank had acted fraudulently and negligently in relation to a failed New York property deal.
The decision effectively puts an end to hopes by 23 other investors who had hoped to progress related actions against the nationalised bank over their ill-fated hotel investments.
In a statement, Anglo said it was "determined" to recover its costs so the bank could "minimise the expense of this action to the taxpayer and the State".
Sources last night confirmed the bank would be pursuing costs in the region of €4m.
The legal battle stems from a 2006 deal, where 49 Irish people invested an average of $1m each in a fund that was promoted by Anglo Irish Bank to purchase and renovate two high-profile New York City hotels -- the Eastgate Tower Hotel and the Beekman Tower Hotel.
Among the investors was Mr McCaughey, who sold Century Homes in 2005 for €98m to Cavan-based Kingspan. Mr McCaughey had also sued Mainland Ventures Corp in the same action. It is the vehicle Anglo used in the US to hold its stake in a private venture fund acquiring the hotels.
In a near 100-page ruling yesterday, Mr Justice George Birmingham dismissed Mr McCaughey's action and cleared Anglo and Mainland of any wrongdoing, while acknowledging that the businessman now clearly regretted the investment.
"But investor remorse does not provide a basis for successful legal action," said Mr Justice Birmingham. "Had the hotels been disposed of at a time when they had increased in value very substantially and a profit had been recorded, his attitude might well have been different."
He also noted that Mr McCaughey now appeared to be facing a loss on his investment. "However, that is sometimes the lot of those who participate in high-risk investments," he added, telling the court that it did not follow that just because an investment failed to deliver the hoped-for returns that there must have been culpability on the part of a third party.
"Still less does it provide a basis for the belief that there has been fraud on anyone's part," he said.
Anglo yesterday vowed to recover its legal costs.
Anglo had agreed to secure $50m in funding for the New York hotel project. But renovation costs for the two hotels soared from an estimated $32m to roughly $100m within the space of two years.
Mr McCaughey sued Anglo and Mainland for $23m each.
Last month, it emerged that New York businessman Timothy Haskin, who spearheaded the hotel project, failed to secure $75m damages against Anglo.
The bank also secured his removal as principal of Delaware-based Peninsula Real Estate Fund I GP, which holds the two hotel assets.
Anglo then moved to appoint an asset manager to oversee the two properties.