Investors are suing BDO for negligence over property deal
'High net worth individuals' take €20m action over alleged lack of due diligence on Polish scheme
Published 05/04/2011 | 05:00
More than 40 Irish private investors are suing one of Ireland's biggest accountancy practices for €20m over alleged negligence on investment in Polish property developments.
The investors claim that accountants BDO, of Beaux Lane House, Mercer St Lower, Dublin 2, formerly practising as BDO Simpson Xavier, presented the Polish investment opportunity to a number of "perceived high net worth" clients and others with a view to making a profit within four years but failed to carry out adequate due diligence.
The investors allege breach of contract, negligence, breach of fiduciary duty and breach of trust by BDO on the investment known as 'Project Poland'.
It is claimed the investors were told Project Poland was to be managed by Howard Holdings, a company of businessman Brendan Murtagh.
However, the project was a "side project" of two directors of that firm, the investors claim. They also allege BDO had very little information about the project when allegedly recommending it to "valued clients" and others from late 2006.
Retired company director Denis McFerran, of Swords Road, Malahide, Co Dublin -- who invested €500,000 -- claimed in an affidavit that BDO gave investors the impression everything was under control when the project was running into serious problems.
Mr McFerran claimed the investors were told Howard Holdings and its directors would guarantee the investment sums, and net worth statements supplied for the Howard side in January 2007 put their estimated net worth at €115m.
However, when the investors sought to enforce a €28m judgment obtained against those guarantors, two were hopelessly insolvent and Mr Murtagh had "little to offer", he said.
Mr Justice Peter Kelly yesterday transferred the proceedings by the investors against BDO to the Commercial Court. BDO has said it will be fully defending the proceedings and does not accept the claims.
The biggest investment in the project was a €3m sum by Paddy and Emer Digan, a pharmacist and retired teacher respectively, of Baily, Howth, Co Dublin; while the lowest sum was €250,000 which was put in by, among others, solicitor Michael Staines, journalist Tom McEneaney, the Lisavaird Co-op Creamery Ltd and two pension funds the Ashley Glover and Ross Glover Pension Funds.
Retired property developer Pat Conway, of Kilbride House, Baldonnel, invested €1.5m while two other developers -- Brendan Colivet, of Punchestown, Co Kildare; and Paul Joyce, of Turnerstown, Athy, Co Kildare -- invested €1m and €500,000 each.
Several company directors, including David and Evanne Cahill, of White Park, Arklow; Stephen Fitzgerald, of Windgate Road, Howth; and David Moffitt, of Glenageary Hill, Dublin, all invested €1m.
Investment banker Derek Kehoe, of Cypress Road, Mount Merrion, Dublin, invested €1m while other investors, including Dr Frank Keeling, of Kileek, St Margaret's, Co Dublin; and property manager Martin Ryan, of Mount Eagle Drive, Leopardstown Heights, Dublin, put in €500,000 each.
In January last year, Loparco, a Luxembourg registered company through which the inves-tors provided some €20.75m for the Polish projects, secured judgment for €28.1m against Mr Murtagh, of Dunheeda, Kingscourt, Co Cavan; Greg Coughlan, of Fastnet, Ardbrack, Kinsale; and Brian Madden, of Well Road, Douglas, Cork.