Pledge of QIL assets was a deliberate move, inquiry is told
Quinn Insurance Limited (QIL) assets were knowingly pledged as collateral for corporate loans, when they should have been ring-fenced as regulatory capital to cushion policyholders against losses, a Central Bank Inquiry has been told.
Yesterday, former Quinn Group CEO Liam McCaffrey was presented with evidence he was aware at the time that the QIL subsidiaries' assets, supposedly ring-fenced to underpin the firm's solvency, were used to guarantee loans to its parent.
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Mr McCaffrey was appearing at an inquiry into the role of senior executives before the collapse of QIL in 2010.
Referring to an email exchange, on which Mr McCaffrey was copied, and in which details of the term sheet of a loan made by Barclays Bank were laid out, Eoin McCullough, the senior counsel advising the inquiry said "it identifies in the most simple possible terms that QIL subsidiaries are giving guarantees".
"This is a very deliberate decision, there is no mistake here, a clear deliberate decision is being made to include the QIL subsidiaries," Mr McCullough told Mr McCaffrey.
Mr McCaffrey said he could not recall this specific email, to which Mr McCullough responded: "You have given evidence before about signing documents without really reading them. That can only go so far Mr McCaffrey."
"I wouldn't have placed a relevance on them giving the guarantees," Mr McCaffrey replied, although he later said this was the "definitive contractual document".
He was pressed by the chairman of the inquiry, Mr Justice Iarfhlaith O'Neill on his interpretation of the documents presented by Mr McCullough.
"I struggle to understand on what basis you didn't see the information put before you, why did you not at that point say, these companies the subsidiaries should not be here," he said.
In testimony last week, the inquiry heard that the board of QIL did not become aware that the assets of eight subsidiary companies directly or indirectly owned by the insurance company, or some of its entities, had been pledged as guarantee for Quinn Group loans, until 2010, when in the words Mr McCullough "matters became difficult".
The inquiry also heard that Quinn Insurance board meetings that were supposed to sign off on the loans did not appear to have taken place.
The Central Bank of Ireland later imposed a fine of €5m on QIL for its failure to maintain solvency margins and for the lack of management controls in 2013, but the fine was waived as the firm was in administration.
The firm was put into administration in 2010 and later bought by Liberty Insurance of the US for €1.
The public hearings stage of the inquiry will conclude this week.