'No benefit to taxpayer' from McKillen loans
Published 07/10/2010 | 05:00
NOBEL Prize-winning economist Dr Joseph Stiglitz has warned that the interests of Irish taxpayers were "likely to be injured" by the transfer of developer Paddy McKillen's loans into NAMA.
In a sworn statement submitted to the Commercial Court in support of Mr McKillen's landmark legal action against the toxic loans agency, the former World Bank president said that there was no benefit to the taxpayer in NAMA taking over good or performing loans.
Earlier this month, the Irish Independent revealed that Dr Stiglitz, professor of economics at Columbia University in New York, would express the view that Irish taxpayers "may be worse off" if NAMA underpaid for performing loans because of the likely increase in public costs of recapitalising the banks.
Dr Stiglitz, who has examined Mr McKillen's loan portfolio, said in his opinion the economic benefits of moving his loans were "questionable at best".
There were compelling arguments against transferring Mr McKillen's loans, said the world-renowned economist, whose views and that of other experts recruited by Mr McKillen have been challenged by a host of experts recruited by NAMA.
Mr McKillen owes €2.1bn to Bank of Ireland and state-owned Anglo Irish Banks, but is resisting transfer of some €211m of his Bank of Ireland loans to NAMA.
The property investor denies that he is an impaired borrower and says that he should not be subject to the NAMA scheme.
Yesterday, a special three-judge court convened to hear the case was told that Mr McKillen, who is convinced that NAMA would be "a disaster" for him and his companies, was "clearly distressed" at the prospect of his loans being taken over by the agency.
The Divisional Court, led by High Court president, Mr Justice Nicholas Kearns, was also asked by Mr McKillen's legal team, if necessary, to refer a decision of the European Commission approving NAMA back to the commission to clarify the meaning of an impaired borrower.
Last September, Fine Gael senator Eugene Regan received a letter, following an inquiry on the scale and scope of NAMA, from an official in the European Commission, who stated that a loan could only be transferred to NAMA if the borrower was "impaired".
Senior counsel John Gleeson, for Mr McKillen, who addressed the court on the European issue and Mr Regan's letter, said that a proper interpretation of the commission's decision meant that only borrowers who were impaired could be taken into NAMA.
If the court found against them on the direct effect of the commission's decision, said Mr Gleeson, they were formally asking that the impaired borrower issue be clarified with the European Commission, a process that could take several weeks or up to four months.
Yesterday, Anglo chief executive Mike Aynsley told the High Court of his disappointment that Mr McKillen had become "disillusioned, frustrated and alienated" because of the planned transfer of his loans to NAMA.
The Australian banker, who joined Anglo in September last year, described in court filings how the Belfast-born developer and investor was a high-net-worth individual who could "actively participate in Ireland's recovery".
Anglo, which is owed €800m by Mr McKillen, had objected to the transfer of his loans to NAMA and said that only €5m of the loans owed to it were land and development loans.
Mr Aynsley revealed in a sworn statement that he had urged NAMA in a letter last June to meet the developer and and explain the rationale for its decision to acquire his loans.
Lawyers for the developer, who did not attend yesterday's proceedings, detailed how the developer had sought, unsuccessfully, to meet with NAMA to secure an explanation for the reasons why his loans would be transferred and the criteria for the decision to take over his borrowings.