Sale of Blackrock Clinic loan debts with IBRC is halted by US court case
EFFORTS by the IBRC's special liquidator to offload loans relating to the Blackrock Clinic have hit a major stumbling block following protests from one of the private hospital's main shareholders.
Lawyers for developer John Flynn moved last Friday to prevent the proposed loan sale, filing a formal objection in the bankruptcy court in the US state of Delaware.
Mr Flynn grounds his objections on the special liquidator's attempt to exclude him from having any involvement in the consortium, which they had already identified as the preferred bidder for the Blackrock Clinic loans following an auction process.
Mr Flynn claims that the IBRC's liquidators, Kieran Wallace and Eamon Richardson, "materially altered the terms of the Asset Purchase Agreement (APA)" once they had learned of his participation in JCS Investment Holdings XIV, the consortium that submitted the "highest and best bid" for the Blackrock Clinic loans.
Mr Flynn says the liquidators introduced a requirement into the loan sale agreement that he "not hold any interest in or have any connection with" the JCS consortium, which is being headed up by another of the Blackrock Clinic's major shareholders, medical consultant Joseph Sheehan.
The amended terms of the loan sale agreement introduced a demand that the special liquidators and a number of others be released from separate litigation being pursued by Mr Flynn and others against the IBRC in a federal court in New York.
Responding to the imposition of the additional terms to the sale of the Blackrock Clinic loans, lawyers for Mr Flynn argue that it is in violation of both the "spirit and the letter of the US bankruptcy code".
Commenting on this, they add: "The entire sale process has been tainted by the illegal exclusion of a successful bidder from acquiring the loans and the sale auction should be rerun" in a "fair and impartial manner".
Referring to the special liquidators' alleged treatment of Mr Flynn, they add: "Here, Flynn is being discriminated against simply because he is pursuing his right in the RICO action (in New York) to seek a remedy for the fraud perpetrated against him".
As part of that legal action, Mr Flynn and other former Anglo Irish Bank clients have accused both the IBRC and Nama, in an affidavit for the New York case, of continuing to demand payment of "fraudulent interest charges, threatening enforcement of fraudulent personal guarantees and threatening seizures of assets and properties".
The action, which is being taken under the US's Racketeer Influenced and Corrupt Organisations (RICO) Act, arises from what they claim was a "15-year criminal enterprise and conspiracy carried out by Anglo Irish Bank, IBRC, the bank's employees and a number of others".
While damages in excess of $12m (€8.7m) had initially been sought in the case, that figure rose to $36m last Monday with the submission to the courts in Delaware of an objection by Mr Flynn's lawyers to the IBRC's request that it be allowed to sell its remaining assets.
Pointing to the action in New York, Mr Flynn's lawyers contend that if approval is given to the special liquidators to sell the IBRC's US assets, "there will be no plan, no distribution to creditors and no investigation of the fraud perpetrated by the bank".
They say: "The court should make it a condition that any approval of the special liquidator's request to sell the IBRC's assets in the US should be preceded by the submission of a bond for $36m to protect the interests of Mr Flynn and his fellow plaintiffs."
The IBRC's special liquidators had already conceded that overcharging went on at the former Anglo Irish Bank for a 14-year period up to 2005.
Questioned on the matter in a bankruptcy hearing in Delaware last October, one of the liquidators, Kieran Wallace, outlined how, prior to its liquidation, the bank had to give refunds and compensation to customers in Ireland, the Isle of Man and the US.
Mr Wallace stressed in a statement, however, that he and his team had found no evidence of deliberate, systematic overcharging of interest to customer loan accounts in subsequent periods (after 2005).
Asked for comment on the objection filed last Friday by Mr Flynn in relation to the sale of the Blackrock Clinic loans, a spokesman for the IBRC special liquidator declined to comment on the developer's claim that he was being discriminated against.
On the liquidator's insistence that they be released from the litigation being pursued against them in New York, the spokesman said such a clause was commonplace in sale agreements.