News Courts

Monday 22 September 2014

KPMG may be requested as defendant in €6bn INBS case

Tim Healy

Published 07/07/2014 | 18:00

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Former INBS chief Michael Fingleton
Former INBS chief Michael Fingleton

A court application may be made to join accountancy firm KPMG as a defendant to an action arising from some €6bn losses at Irish Nationwide Building Society (INBS).

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KPMG acted as auditors for INBS for some 20 years.

Terence J. Cooney  is one of four former directors of INBS being sued, separately from former INBS CEO Michael Fingleton, arising from the losses.

Mr Cooney wrote earlier this year to the Minister for Finance claiming it was "preposterous" the two special liquidators of State-owned Irish Bank Resolution Corporation (IBRC), Kieran Wallace and Eamonn Richardson, both partners in KPMG, were not suing their own firm for alleged negligence.

Mr Cooney previously secured orders joining KPMG as a third party to the proceedings brought against him and the other former directors but he argues KPMG should be joined as a defendant to the case, brought by IBRC and INBS.

Yesterday, Edward Farrelly BL, for Mr Cooney, secured permission from Mr Justice Peter Kelly to bring an application to have KPMG joined as a defendant if the Minister does not direct the plaintiffs to do so before July 28 next.

Mr Farrelly said he understood solicitors Eugene F. Collins had been engaged last February to carry out an independent review as to whether KPMG should be joined as a defendant.

He was unaware whether the solicitors were advising the Minister for Finance or IBRC on that matter, counsel added.

If a decision on that issue was not made soon, his side would apply for a stay on the proceedings and on the hearing of legal disclosure (discovery) motions as they were running up costs while the uncertainty continued, counsel said.

Paul Sreenan SC, for KPMG, said it had delivered its defence to the third party claim made against it.

Mr Justice Kelly made directions for the hearing of discovery applications by Mr Fingelton and three former directors.  The judge also said Mr Farrelly had liberty to issue a motion seeking to join KMPG as a defendant if a decision on the solicitor's advice was not made by July 28.

In his letter to the Minister earlier this year, Mr Cooney asked the Minister to direct the special liquidators to bring a claim against KPMG on behalf of the State-owned bank.

If the legal action was "a serious attempt" to recover money for the taxpayer, it was "ridiculous" for it to be taken against a director with no possibility of satisfying any judgment in the hundreds of millions or billions being claimed. 

This was when the "culpable" auditors, a multi-national firm presumably with insurance, clearly do, the letter added.

Under the IBRC Act, the Minister is entitled to direct the special liquidators to pursue KPMG and it is "manifest" such a direction was advisable, the letter added.

IBRC, who took over INBS' loans, has brought the proceedings against Mr Cooney; John S. Purcell, David Brophy and Michael P. Walsh - over losses of some €6bn at the Society between 2008 and 2010. Mr Fingleton is being separately sued.

A key issue in both cases is an alleged excessive and unlawful delegation from 1981 of the powers of the INBS board to Mr Fingleton.

The directors, without prejudice to their denial of the claims against them, allege the Central Bank, Financial Regulator and KPMG were all aware of the alleged delegation and took no steps to have that revoked.

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