THE "cavalier" attitude of Anglo Irish Bank in promoting an investment fund for two New York hotels explains how it "single-handedly brought this country to the position it finds itself in", the Commercial Court heard yesterday.
The claim was made by counsel for an investor in the fund, Gerard McCaughey, who is suing the bank and a related company for $23m (€16.8m) over alleged fraudulent and/or reckless concealment and/or misrepresentation.
The fund was set up to purchase and renovate the Beekman Tower and Eastgate Tower hotels in Manhattan.
Mr McCaughey is suing the bank and the Anglo-owned, Delaware-based Mainland Ventures Corporation (MVC) over the 'Anglo Irish New York Hotel Fund', a private equity investment in which 50 people invested an average $1m (€732,000) each in 2006. The claims are denied.
The action by Century Homes founder McCaughey, with addresses at Sandymount, Dublin, and Manhattan Beach, California, is regarded as a test action for cases by 23 other investors. It is expected to last six weeks.
It is claimed a "Black Brochure" given to 50 high-net-worth Irish individuals in September 2006 aimed at encouraging them to invest failed to disclose key risks and amounted to "conscious and deliberate dishonesty".
The brochure estimated the hotels' renovation costs at some $25m (€18.3m), but these turned out to be $103m (€75.4m) and led to works being halted, it was also claimed. Martin Hayden, for Mr McCaughey, handed in a copy of the brochure to Mr Justice George Birmingham yesterday.
Mr Hayden said the issue was the manner and fashion with which Anglo brought this project to the investors and how the project was arranged by Anglo Irish Private Banking with its New York office.
The "cavalier" ethos and attitude displayed in promoting and managing the fund "readily explains how Anglo single-handedly brought this country to the position it finds itself in", Mr Hayden said.
MVC was formed by Anglo to hold its interest in the fund in a "very sophisticated manner" to avoid any regulatory supervision of the "Black Brochure", counsel said.
Mr Hayden said the bank failed to tell the investors anything throughout 2006, 2007 and most of 2008 about problems being encountered.
That situation continued until December 2008, when Mr McCaughey visited the hotels. It was then he learnt that the bank had directed in June 2008 that no further works should be carried out, counsel said.
The case continues.