Anglo Irish Bank faces claim of €1bn 'overcharging'
Specialist claims interest calculation errors found in all loans investigated
A case brought by well-known developers alleging overcharging at Anglo has highlighted what is claimed to be a wider serious problem at the disgraced bank.
"At issue is in excess of €1bn, which has been taken from customer accounts due to erroneously charged interest," claims banking specialist Eddie Fitzpatrick.
Top Anglo clients are believed to be among those who it is claimed have had surplus interest piled on to their loans.
Hundreds of Anglo loans combed over forensically by Fitzpatrick's company Bankcheck for more than 70 separate customers resulted in a potentially damning dossier being compiled.
The court case that flagged up this wider alleged issue concerns Anglo loans connected with high-profile developers John Flynn and Paddy Kelly, the Durkan, Pierse and McCormack families and Blackrock Clinic co-founder Joseph Sheehan, a brother of Jimmy. It names IBRC, Nama and senior executives past and present as defendants. It alleges "overcharging" on €150m worth of Anglo and Nama related loans through "overloading" and of interest rates.
If – and it is a big if – the case were to succeed, it could torpedo imminent plans for billions worth of IBRC and Nama loan book sales, Anglo and Nama watchers maintain. In that scenario, the knock-on effect for the already beleaguered taxpayer is unthinkable.
Nama is due to put a €1.5bn loan book on the market soon and the process to prep IBRC asset loans for sale is under way.
"We looked at €1bn worth of Anglo/IBRC loans and found problems in every single case," said Fitzpatrick. "My understanding is that some of these issues are continuing.
"We've brought this to the attention of the IBRC, Nama and the regulator," he said.
"We have looked at stacks of these and I can see no correlation between what was charged and what should be charged," Fitzpatrick told the Sunday Independent.
"If we take two customers, one borrowing from Anglo and one borrowing from another bank, on the same day at the same three-month Euribor plus 2 per cent rate, the Anglo customer will pay more interest than the non-Anglo customer even though both have borrowed at the same underlying rate," Fitzpatrick claims.
For the upcoming US case, where €8m of "overcharging" on circa €150m worth of loans is alleged, Fitzpatrick examined 83 loans related to property in Ireland, Britain and the US, where it is alleged issues were found with every single one. A company of international forensic accountants has validated his findings.
Separately, Bankcheck has submitted claims on behalf of Anglo clients to the tune of €16.5m.
The recent liquidation of IBRC presents a difficulty for pursuing the matter legally in Ireland. At least one case has been rejected by the Irish courts under the IBRC Liquidation Act that requires lawsuits to be approved by the High Court. An appeal to the Supreme Court is being considered.
The liquidation means that the IBRC liquidator can take the stance "we can sue you but you can't sue us," says Fitzpatrick.
"We believe the evidence we have is extremely strong and damning," Dan O'Neill, the lawyer for the developers in the US trial.
Anglo's Mike Aynsley acknowledged in 2010 that an overcharging issue occurred between 1990 and 2004, where the bank set aside €67m to deal with it. This is something that, it is claimed, is far bigger.
Nama and the IBRC's special liquidator have both said they will defend the claims by Flynn, Kelly and the other plaintiffs.