Business Irish

Saturday 16 December 2017

Investor loses case for $75m against Anglo over failed deal


John Mulligan

A New York businessman has failed to secure $75m (€52m) in damages against Anglo Irish Bank after an investment deal in which prominent Irish business people injected a total of $50m went sour.

Anglo Irish Bank has also succeeded in having the businessman, Timothy Haskin, removed as principal of Delaware-based Peninsula Real Estate Fund I GP and is poised to appoint an asset manager to oversee two troubled hotel investments in Manhattan.

The move is the latest twist in a long-running saga that was also played out here in a closely watched Commercial Court test case early this year.

About 50 Irish people invested an average of $1m each during 2006 in a fund that was promoted by Anglo Irish Bank to purchase and renovate two New York City hotels -- the Eastgate Tower Hotel and the Beekman Tower Hotel.

Among the investors were Mr McCaughey, the founder of Century Homes which he sold in 2005 for almost €100m. Malcolm Stuart, Gary McCaughey, Gerard Haughey, Paul Grimes and Glen Leddy also invested.

Anglo had agreed to secure $50m for the project, while Mr Haskin committed $750,000.

But renovation costs for the two hotels spiralled from an estimated $32m to roughly $100m within the space of two years and development of the sites came to a "grinding halt", according to Anglo.

In 2009 Mr McCaughey embarked on what was termed a "pathfinder" case for actions by 23 other investors. Mr McCaughey sued Anglo and Mainland Ventures -- the vehicle Anglo used to hold its stake in the private equity fund -- for $23m each. He claimed that Anglo had engaged in fraudulent and/or reckless concealment of the fund or misrepresentation of that fund. Anglo denied all the claims in court.

Judgment in that case was reserved and should be known in the autumn.

Separately, in the US, Anglo and Mr Haskin earlier agreed to enter arbitration proceedings. Mr Haskin sought $75m in damages from Anglo, alleging malfeasance by the bank, which he also alleged had effectively vetoed an opportunity to refinance the projects with UBS. Mr McCaughey is one of the investors who gave evidence at the arbitration hearing in favour of Mr Haskin.

The arbitration was unmoved by most of Mr Haskin's allegations and has found that some of his behaviour amounted to "willful misconduct". It also found that Anglo did not violate any duty of trust or fair dealing. However, it agreed that Anglo is liable for a $1.8m capital call made in 2009.

A solicitor representing Mr McCaughey was unavailable for comment yesterday.

Irish Independent

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