THE IBRC has come in for sharp criticism from a US judge for failing to produce witnesses in court to support an application for protection from its creditors.
The IBRC's special liquidators Kieran Wallace and Eamon Richardson applied for US Chapter 15 bankruptcy protection on August 26, in an effort to protect the broken bank's estimated $1bn (€0.73bn) in US assets from seizure by creditors during the current liquidation process. In the absence of such protection, those assets could be vulnerable to claims from creditors.
While the bank's application had been due to be heard last Friday evening, Delaware Judge Christopher Sontchi reluctantly agreed to impose a two-week stay on the proceedings after hearing that the IBRC needed to delay the matter following objections from number of the IBRC's public debt holders and borrowers, a report carried in the New York-based legal journal Law 360 said yesterday.
The IBRC's US attorney Van Durrer told the court that while an agreement had been reached with the majority of those objectors on a form of provisional relief, a number of the bank's borrowers, led by the developer John Flynn, remained opposed to it being granted
Mr Flynn, who developed large parts of Dublin's Smithfield, is among a number of clients of the former Anglo Irish Bank bringing a legal action in New York in which they have alleged that the bank engaged in "systematic, organised, and comprehensive fraud" against borrowers.
In opposing the IBRC's petition, Mr Flynn said in an affidavit that he and his fellow plaintiffs believed the special liquidators were seeking "to frustrate the prosecution of the federal action against IBRC in New York".
Addressing the court in Delaware last Friday, Mr Flynn's attorney, Dan O'Neill, said the proposed stay on the Chapter 15 petition hearing would be an "unnecessary" and debilitating impediment to the New York case.
Mr Durrer countered that delaying the bank's liquidation would be more harmful, however, as it would give rise to additional costs.
Having listened to representations from both sides, Judge Sontchi said that "reluctantly, feeling to a certain degree painted into a corner", he would impose a temporary stay on the objecting creditors until October 8, when he would hold a full hearing on the provisional relief being sought by the IBRC.
Judge Sontchi was critical of the bank, however, saying: "I'm frustrated in part by the infirmities in the presentation of evidence by the foreign representatives." He said that it would have gone a long way even if the witnesses had been available to his court over the phone. He added that the declarations made by the IBRC's representatives in support of a stay on the proceedings were little more than hearsay without them being present.
Apart from the group led by Mr Flynn, the IBRC's US bankruptcy petition is facing a significant challenge from Burlington Alpha and Burlington Beta.
The two subsidiaries of US billionaire Paul Singer's hedge fund, Elliott Management, hold subordinated IBRC debt with a face value of $75m (€55m) and have filed a preliminary objection to the bank's petition in which they claim, among other things, that the Government's emergency IBRC legislation "stripped away most of the protections typically available to creditors under the Irish liquidation law of general application".
They are now seeking "discovery" of information on the IBRC's assets and the role played by Finance Minister Michael Noonan in the liquidation and "potential conflicts of interest that may be hanging over the Irish process".