US road to redemption for Dunne may be a dead end
Published 06/06/2013 | 17:00
SWIFT deliverance from his debt mountain must have seemed tantalisingly close to Sean Dunne. There he was, good to go with a US bankruptcy application, when a judge looked at where the money is owed – Ireland – and where the assets to be divided up are located – Ireland again – and said "hold your horses, cowboy". Or words to that effect.
One of the State's highest-profile debtors, champing at the bit to make a fresh start in the US, has been pulled up short. Bad news for him, but good news for the Irish taxpayer, owed €185m by Mr Dunne through a debt to NAMA.
That's only the tip of the iceberg compared with the €718m Mr Dunne owes overall. No wonder he was described in that Connecticut courtroom as a "prodigious borrower". Although the other side pointed out, with some justification, that prodigious lending was also involved.
On Tuesday, Judge Alan Shiff rejected the argument from Mr Dunne's award-winning lawyer that a dual bankruptcy would be expensive, cumbersome and not in his client's best interests.
Instead, he granted an application from the largest creditor, Ulster Bank, owed more than €300m, to continue proceedings to have Mr Dunne declared bankrupt in Ireland.
If approved by the Irish courts, the property developer will find himself in the groundbreaking position (and he has attended a few groundbreaking ceremonies in his day) of being bankrupt on both sides of the Atlantic.
Two bankruptcy processes will not offer the speed-of-light debt forgiveness he was angling for, with a view to getting that new beginning under way.
Judge Shiff's decision is equally trailblazing. It sends up a flare that the US route is no handy loophole for individuals who rack up huge debts they cannot repay, but feel entitled to a hasty exit from bankruptcy. Otherwise known as 'forum shopping'.
David Drumm of Anglo Irish Bank hatched a similar plan to pull off a quickie bankruptcy in the neighbouring state of Massachusetts. But the "best-laid schemes o' mice an' Mr Micawber's gang aft a-gley", as Robert Burns nearly said.
Mr Drumm is the former Anglo chief executive who refuses to return to Ireland for questioning about his catastrophic management of the bank which had to be nationalised. His €10m debts include an €8.5m loan from Anglo, leaving the taxpayer on the hook yet again.
He filed for bankruptcy in Boston in October 2010, hoping for a debt-free fresh start after one year. But Anglo objected, and its concerns were heeded by the US court. A date for the hearing has still to be set. So much for fast-tracking.
Both the Dunne and Drumm experiences reveal how US courts are paying attention to creditors who raise counter-arguments. Another common denominator between the two cases is that court-appointed bankruptcy trustees are no pushovers, particularly if they feel they are being given the run-around.
The Drumm trustee has made it clear she is unhappy with his conduct. As has the trustee in the Dunne case.
Mr Dunne's trustee, Richard Coan, has already sought a subpoena to compel Swiss banks to answer questions about his affairs. At issue is the purchase of an apartment in Geneva, bought in joint names with his wife Gayle Killilea, and subsequently transferred to her sole ownership shortly before it was sold.
In addition, Mr Coan has complained about his non-cooperation in relation to documents required, including bank statements and information about his wife's income, and has asked the court to order Mr Dunne to produce them.
Nor was he impressed by the Carlow man's refusal to sit down with his creditors to discuss his debts. State loans agency NAMA and Ulster Bank representatives flew to the US for a creditors' meeting with Mr Dunne last week that did not take place. Now Mr Coan is asking the court to compel his attendance at a rescheduled meeting on June 19.
Mr Dunne, who filed for bankruptcy in the US on Good Friday, wrote a self-serving piece in the 'Sunday Independent' two days later, claiming NAMA and Ulster Bank were engaged in "a game of persecution" against him.
"Both of these banks have me on a wanted list and, like the Americans in Iraq, Sean Dunne is the ace of spades," he said, comparing himself to Jesus and Saddam Hussein, with a hint of James Bond for good measure.
Clearly, the ace of spaces won't appreciate being shuffled into place to answer NAMA's and Ulster Bank's questions at that creditors' meeting. But he is no longer in a position to call the shots. For which Irish taxpayers have cause to be grateful.
If he believed himself singled out for harassment by creditors earlier this year, he will feel doubly victimised now with a dual bankruptcy impending. It means he certainly will not be open for business within months, as bullishly predicted.
The US is now the arena of operations for Mr Dunne – debtor No 39 on NAMA's books – who has lived there for the past three years and is eligible to apply for a Green Card, which he intends doing.
His borrowing bonanza was laid bare recently in his statement of financial affairs to the US bankruptcy court, showing liabilities of $942,000 (about €720,000) and assets of $55,000.
In it, he said he was currently employed by Mountbrook USA, a property company headed by his wife, that well-known developer. His total monthly income was given as $22,003 and his expenses at $21,807 – high expenditure for somebody meant to be belt-tightening.
Whatever the state of his finances, we know he exonerates himself – he told us so in that 'Sunday Independent' article: "I consider my debt to the Irish State to be cleared."
Forgiveness is the first step on the road to redemption, of course.
But where debt forgiveness is withheld, the road can prove somewhat rocky.