Thursday 14 December 2017

NAMA's reaction to alleged wrongdoing in €1.6bn NI property sale came up short, State watchdog finds

The Treasury Building on Grand Canal Street Lower where NAMA is based. Photo: Tom Burke
The Treasury Building on Grand Canal Street Lower where NAMA is based. Photo: Tom Burke

Donal O'Donovan and Gareth Morgan

The State’s most powerful financial watchdog says NAMA’s response to initial reports of alleged wrong doing surrounding the sale of its Northern Ireland portfolio came up short – with the agency not even contacting the businessman at the centre of the events to find out what was happening.

The report from the Comptroller & Auditor General (C&AG) into the controversial Project Eagle sale has questioned Nama’s reaction to the emerge of allegations that businessman and Nama advisor Frank Cushnahan was involved in an arrangement to share fees with law firms Brown Rudnick and Tughans (or the managing partner of Tughans) if a sale went ahead. 

The case has sparked investigations in the UK and in the US, where prospective buyers were based.

The allegation “warranted more action by NAMA” when the matter came to light, such as seeking advice from a sister unit within the National Treasury Management Agency (NTMA) responsible for providing compliance support to the agency, or even writing to Mr Cushnahan to seek confirmation or an explanation.

Nama’s financial advisor Lazard was not briefed on the disclosures, or asked for its assessment of the potential implications, the C&AG said .

“NAMA appears to have taken a narrow approach, focusing on what were its legal obligations, rather than on what were the options for action that should be considered,” the C&AG said.

Frank Cushnahan, former Nama adviser
Frank Cushnahan, former Nama adviser

Read more: NAMA’s €1.6bn Northern Ireland property sale is to be officially probed – the Government has announced

The long awaited report also questioned the valuations placed on loans to be sold by Nama.

NAMA released a statement in which it “categorically” rejected key conclusions of the C&AG report.

It claimed that the report’s key finding was based on an incorrect assumption about the discount rate used to value Northern Ireland loans.

“It incorrectly assumes NAMA should apply the same discount rate to poor quality Northern Ireland loans as it did to much higher quality assets in Dublin and London,” said the statement.

It also claimed that the report was “carried out by C&AG staff with no market experience of loan sales”.

And it said that if the evidence of market experts the discount rate was accepted, then the price actually achieved on the Project Eagle sale was the best achievable in the market.

“The Board remains of the strong view that the sale of the Project Eagle portfolio for STG£1.322bn was the best achievable outcome,” it said.

And it pointed out that the C&AG report made no findings of “irregularities” in the sales process.

NAMA chairman Frank Daly added: “NAMA has the utmost professional respect for the C&AG and his staff. The C&AG has performed a very important role in scrutinising our decisions and auditing our accounts over the past seven years but regrettably, the key conclusions in this report are without the relevant loan sale expertise and as such we have no option but regretfully to reject them categorically

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