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Wednesday 27 August 2014

Dunne soft bankruptcy in US causes a furore

Cormac McQuinn

Published 01/04/2013 | 05:00

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Sean Dunne pictured in New York over the weekend
Sean Dunne and Gayle Killilea
ONE-TIME MOGUL: “If life is equated to a game of golf, I feel I still have the back nine to play,” says Sean Dunne, pictured on New York’s Park Avenue yesterday.

DEVELOPER Sean Dunne could be discharged from his debts as early as July after he filed for bankruptcy in the United States.

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Mr Dunne lodged bankruptcy papers at the weekend, saying he was forced to do so by financial institutions pursuing him for hundreds of millions in debts incurred during his property investment spree.

But the bust developer has insisted that his "debt to the Irish State is clear". And it has emerged that he could be discharged from bankruptcy in just four months.

Fianna Fail finance spokesman Michael McGrath described Mr Dunne's bid for a quickie bankruptcy as "a very dangerous precedent".

However, if his application is contested by his creditors, the bankruptcy petition could be subject to a lengthy legal battle.

Mr Dunne filed his Chapter 7 petition in Connecticut where he and his wife, Gayle Killi-lea, moved after the collapse of his building empire.

In his bankruptcy petition, Mr Dunne estimates that he has liabilities of between $500m (€390m) and $1bn (€780m) over assets of between $1m (€780,000) and $10m (€7.8m).

Documents show he filed the petition after completing an online credit counselling course, less than four hours before the court system recorded his application on Friday. Credit counselling prior to bankruptcy applications is required by law in the US.

Once dubbed the "Baron of Ballsbridge", Mr Dunne used a company which advertises online credit counselling, which can be completed in one hour for only $9.95 (€7.75).

The news comes after the Irish Independent revealed on Saturday details of the new Personal Insolvency Service guidelines. Under the guidelines, homeowners with mortgages they cannot pay face giving up their homes to get a debt deal.

And in stark contrast to Mr Dunne, who has been living in a luxury rented mansion in the millionaire's enclave of Greenwich, Connecticut, families of four face the prospect of getting by on food spending of just €20 a day, or €5 per person under the guidelines.

Fianna Fail finance spokesman Michael McGrath described Mr Dunne's filing for bankruptcy as "a spectacular fall from grace for somebody who was the pin-up developer of the Celtic Tiger years".

"My primary concern now is to ensure that NAMA and the other Irish banks that he owes money to get as much money back as possible. I think it would set a very dangerous precedent indeed if a developer was able to get a quickie bankruptcy secured in the United States and washed himself of all liabilties to Irish taxpayer in a short number of months."

Mr Dunne is the second high-profile Celtic Tiger-era figure to file for bankruptcy in the United States in recent years. The former chief executive of Anglo Irish Bank, David Drumm, petitioned for bankruptcy in the state of Massachusetts in 2010.

His case was held up after his former bank – the rebranded Irish Bank Resolution Corporation – contested his petition. The case was delayed again after IBRC went into liquidation in February.

Writing in the Sunday Independent yesterday, Mr Dunne said he had not planned on filing for bankruptcy, saying: "I did not see much point as I have no assets to distribute among the banks I owe money to."

But he said that Ulster Bank "forced me into this position" by applying to have him made bankrupt in Ireland.

He said: "Unlike Jesus, I don't expect to rise again in three days, but certainly hope to make great strides within the next three years, debt-free with a clean slate and with my fate back in my own hands."

He also said that "I consider my debt to the Irish State to be cleared" and argued that he had paid "close on €100m in personal taxes".

Mr Dunne added: "I estimate that I employed over 200 people annually over a 25-year-period in the Irish economy and contributed €250m to the Irish exchequer.

"The idea that the Irish taxpayer would then be made liable for developers' and bank debts was equally incomprehensible and beyond anyone's worst nightmare.

"I am truly sorry that any decisions I made contributed to any Irish person's economic woes."

It currently takes 12 years to be discharged from bankruptcy in Ireland. Imminent changes to legislation will reduce that wait to three years, still far longer than in Connecticut in uncontested cases.

According to the US Bankruptcy Court's District of Connecticut guidelines, Mr Dunne could be discharged in as little as four months.

"A general rule of thumb in a Chapter 7 case is that a debtor's discharge will be entered about 120 to 150 days after the case is filed," the guidelines state.

They also say that this "may take longer if a debtor's entitlement to the discharge is contested".

Chapter 7 bankruptcy actions are used by applicants who have "no hope for re-pairing their financial situation", and a debtor's credit report can be affected for as much as 10 years.

Ulster Bank is pursuing Mr Dunne for a €275m loan it provided to buy the Jury's and Berkeley Court Hotels site in Dublin in 2005.

He is also being pursued by NAMA over a €184m judgment relating to his borrowings from banks bailed out by the taxpayer.

Neither Ulster Bank nor NAMA would comment last night when asked if they would contest Mr Dunne's US bankruptcy application, saying they did not comment on individual cases.

Meanwhile, Mr Dunne took a swipe at both financial institutions, saying: "For NAMA and Ulster Bank the infliction of pain is more important than getting money back."

He said they were "wasting shareholders' money on what they consider will divert attention away from their own failings". And he complained that they were pursuing "innocent third parties", citing his wife and his three adult children from a previous relationship.

He said "they fail to distinguish be-tween me and my wife as separate entities who own separate assets".

Irish Independent

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