Thursday 20 July 2017

Handshakes, gifts and family ties - inside the case against Harry Crosbie

The businessman was grilled in court by Nama for four hours last week about his financial dealings, writes Tim Healy

Evidence: Archetypal entrepreneur Harry Crosbie’s €400m business was taken over five years ago by Nama and he wants to ‘start again’ Picture: Jason Clarke
Evidence: Archetypal entrepreneur Harry Crosbie’s €400m business was taken over five years ago by Nama and he wants to ‘start again’ Picture: Jason Clarke

Tim Healy

Generosity. A word never used but one that often came to mind during businessman Harry Crosbie's four hours in a High Court witness box explaining his financial affairs.

This was a generous man who looked after his family, business colleagues and employees before and since his €400m business was taken over five years ago by the government-appointed property market rescuer Nama.

His arrangement with Peter Aiken, the promoter who put on most of the shows at Mr Crosbie's "last remaining asset", Vicar Street, in Dublin, was "by handshake".

It had been so for 30 years as it had been with Peter's late father Jim, said the archetypal entrepreneur who is anxious to "start again". That is once he has sorted out his issues with both Nama, which took over most of his assets, and Ulster Bank, which owns Vicar Street, but which was not included in Nama.

Vicar Street is an architectural head-turner on what had been a withered section of Thomas Street, opened in 1998 it has hosted musical giants such as Bob Dylan, Neil Young and Paul Simon.

"I consider myself to be Vicar Street," Mr Crosbie told Paul Sreenan SC, for Nama, which had brought him before the court last week to answer questions about his finances.

It was part of Nama's efforts to get some of the €77m he owes under a judgment it obtained against him in 2014.

He told of having given a gift of a couple of fields in Kileek, north Dublin, to a loyal employee who had worked in his and his father Henry A Crosbie's haulage business for many years.

Another man who worked for him for 25 years as "an unpaid consultant" was given half-a-million "as a gift".

He had bought his son Simon's house in Booterstown for him for his work in Vicar Street and in the haulage business, which Simon took over. However, it was a "grave error of judgment" to put that house in the father's name to minimise stamp duty because it was placed at risk because of Harry's debts. "It's Simon's home, he has always lived there with his wife and four children," Mr Crosbie said.

The Point Village Picture: Gareth Cheney
The Point Village Picture: Gareth Cheney

His generosity included mortgage payments for a house his wife, Rita, owns in Wexford and for his daughter Alison's home, also in Booterstown. Some €341,000 was paid in 2015-16 from monies he took from Vicar Street in the form of "drawings".

He also paid property tax on all three properties of his wife and children but did not know why and said it should not have happened.

Some €1.7m was drawn by him from the Vicar Street business between January 2013 and September 2016 at a time when total revenue was just over €8m. Mr Crosbie said: "Yes, I was told I can take it out as drawings. It was not to be taken as profit or salary and I was advised how to do it."

The drawings, which also "pay my legal fees and to have money to live on", would all have to be paid back, he said.

He paid for Alison's mortgage as she was a mother of two young children. "I helped her out which is what any father would do. I hope to get the money back as soon as she is up and running," he said.

Some €340,000 was transferred to Rita during this time for her Cafe Bar H, in the Grand Canal Dock, as part of an arrangement whereby they transfer funds between their businesses to make best use of their combined resources.

Asked by Mr Sreenan why substantial monies were spent from Vicar Street towards Rita's Wexford property, he said: "Because she is my wife, we share everything."

He was adamant he was entitled to do this because "we done a deal with Nama" and he was advised he could make such drawings from Vicar Street as "all the other successful businesses have been shut down".

He didn't know there was a difference in tax treatment between drawings and taking a salary but that is what his accountants advised him to do.

He was reminded by Mr Sreenan that his tax bill for 2013 was €23,000, just €2,588 in 2014 and €2,453 in 2015, despite substantial revenues at Vicar Street. That was only because the rent was not being paid to Ulster Bank, his landlord, he said.

When that matter is sorted he was going to "refinance the whole business and start again and that is the plan I had been advised to adopt".

Substantial transfers of money between Rita's operating company Fastwell had occurred, and Vicar Street at one point owed €1m to Fastwell. However, he insisted: "Fastwell has nothing to do with me or Nama and if money was being moved over and back, it could be the other way, too." The accountants, he said, "move money as they see fit".

The family home in Hanover Quay, bought for €18,000 25 years ago, was now solely in his wife's name. He did not know how much it was worth and did not want to "because I was in Nama".

He agreed there were "asset transfers to third parties" of some €2.97m since 2008, at which point an argument developed as to his understanding of the agreement with Nama that he would not dispose of assets as long as it was trying to recover the €77m debt. He did not see these transfers as being affected by the Nama agreement.

After Mr Justice Brian McGovern intervened to ask did he understand that cash was also an asset, Mr Crosbie said: "What I meant was in reference to the way Nama operates, in the sense of property - I may be wrong in that but I apologise."

He insisted he had been fully open with Nama and was "hiding nothing". He repeatedly referred to his Nama agreement, which includes that Nama released any claim over both his son's home and over Hanover Quay.

He reminded the court of his successes in setting up the Point Depot, Vicar Street and the Grand Canal Theatre, and how good things had been before the crash.

"We had €20m in cash on deposit and then Nama came along," he lamented.

He had a business, he said, worth €400m and if Nama would stop "denying me ­information about what they have belonging to me", he believed there was more than enough there to clear his debts.

It had included the Point Village, which has a hotel, cinemas, a shopping centre, 120,000 sq ft of offices and 900 car park spaces. It was extremely valuable and that was not even including the 3Arena, which had already been sold by Nama for €35m and has gone towards paying his debts, he said.

In the meantime, he was still operating as sole trader, Henry A Crosbie, trading as Vicar Street, a status he now regards as "singularly unwise but we are where we are".

Aiken Promotions pays him "€400,000-odd, maybe €420,000, €430,000" as rent and there is no formal contract.

Mr Aiken runs the shows, Mr Crosbie operates the bars for the venue, as he does for a number of outdoor events around the country for which Vicar Street uses its drinks licence and gets 5pc of the bar sales.

The only reason Crosbie could do all this was because he was not paying rent due on Vicar Street which caused arrears of €4.1m to build up. "But that would have to be put right when we come to an arrangement with Ulster Bank," he said.

Mr Crosbie revealed details of what the court heard was a tax-driven arrangement between him and Ulster Bank which led to the establishment of Vicar Street under which the bank set up a company called Norgay to which Mr Crosbie paid rent. Unlike most tenants who do not pay their rent over a prolonged period, the court did not hear of any eviction threats or actions by Ulster Bank.

It was the bank that actually approached him about creating Vicar Street based on what Mr Sreenan said was a "put-and-call" arrangement, he said.

It involved the bank claiming capital allowances on tax with Mr Crosbie getting double rent allowances, although he believed it was the bank that got the rent allowance, too.

"We went up (to Thomas Street) because the land was cheap and I am not sure what they (Ulster Bank) did or why they did it," Mr Crosbie said.

He found, however, that under this structure, while it was "a very successful" venue, it would have had to close after 20 years.

But the economic crash came and it never got that far and Ulster Bank, he said, wanted to leave Ireland.

The last rent due had risen to €830,000pa, but even when it was €700,000, it was not viable, Mr Crosbie said. He added: "Some new solution would have to be found."

The complicated arrangement with the bank also involved splitting the rent into "additional" and "formula" rent which he said he understood as "a sinking fund and it was supposed to be enough to buy them (the bank) out but that did not happen".

The business could not support the rent sought and it was not paid but any arrears which had built up would be cleared as part of any buyout deal under the "put-and-call" option. The bank was looking for €4.6m, including the €4.1m rent arrears, but he was looking for a deal for €3.5m.

He was asked if Ulster Bank been "sitting back" in relation to all this.

Mr Crosbie said: "No, I had long and many discussions with them. I tried my best and I could not come up with a solution that suited them."

When asked by the court why the €400,000 paid to Aiken Promotions was presented in his accounts as trading rather than rent, he replied: "I don't know about it," adding that it was a matter for his accountants.

It remains to be seen what Nama does with the information that has been garnered from Mr Crosbie's evidence.

Sunday Independent

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