Kingspan's Murtagh settles €3.8m dispute with Merrill
Published 22/04/2010 | 05:00
KINGSPAN Group plc founder Eugene Murtagh has settled a legal action over an international bank's alleged failure to disclose the "utterly unsuitable" nature of a €24.8m investment which resulted in a loss of more than €3.8m for him.
Mr Murtagh, of Lios na Carraige, Kingscourt, Co Cavan, sued Merrill Lynch International Bank Ltd, of Treasury Buildings, Lower Grand Street, Dublin, claiming breaches of various regulatory duties imposed on the bank under investment legislation. He also claimed losses of €3.87m over alleged breach of contract and negligent misrepresentation.
The bank denied the claims.
The proceedings were due for hearing before Ms Justice Mary Finlay Geoghegan at the Commercial Court this week but the judge was told by counsel for both sides that the case had settled and could be struck out with no order. No details of the settlement were revealed.
In an affidavit, Mr Murtagh said he had in February 2007 bought 5,000 "five-year non-interest bearing outperformance certificates" for a total purchase price of €24.875m, including a €375,000 investment fee. The certificates were issued by Merrill Lynch SA (Luxembourg) on behalf of the bank's Dublin branch.
He said he chose that product on the basis of representations made primarily by Merrill Lynch's "relationship manager" James Meenan to his son Paul, who manages his father's Washington office; and to Edward Grant, who runs Mr Murtagh's Dublin offices. The purchase was financed by a €22.7m loan, also from Merrill Lynch, acting through its London branch.
Mr Murtagh claimed that before he entered into the investment, the bank failed to disclose its true nature and inherent risks and other features which meant the transaction "was utterly unsuitable".
Mr Murtagh said he suffered losses of €2.45m as a result of having sold back to the bank the entire investment in tranches between January and July 2008. He suffered another €1.41m loss in interest costs on the money he borrowed from Merrill to fund the investment.
Mediation efforts to resolve the dispute over those alleged losses took place in October last year but failed. The court proceedings were initiated after lawyers for Merrill told Mr Murtagh they did not propose compensating him for his losses. In an April 2008 letter to John Thain, the New York-based CEO of Merrill Lynch and Co Incorporated, Mr Murtagh's son Paul appealed to Mr Thain to resolve the dispute.
Paul Murtagh, who worked with Merrill Lynch's New York and Sydney branches between 1996 and 2001, wrote that it was because of his own work with the company he had recommended to his father to put a "modest amount" -- 2pc of his father's net worth -- into Merrill in London.
Paul Murtagh added that if he was still working for Merrill he would immediately recommend it reassess the selling of these types of products. The Murtaghs were "extremely hurt by this debacle" and felt they were completely ignored by Merrill.