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IBRC claims asset conspiracy in Quinn case

Emotional display as former tycoon takes to the witness box over allegations that actions breached court injunctions

DURING his long and angry turn in the witness box in the High Court last week, Sean Quinn warned against the dangers of doing business in countries like Ukraine and Russia. It was one of the few claims Anglo was unlikely to dispute.

In the year since Anglo Irish Bank took control of the former tycoon's Quinn Group to recover €2.8bn debt, the Quinn children's foreign property portfolio continues to elude the teams of international lawyers, forensic accountants and investigators the bank put on their tail.

The Kutuzoff Tower, with a $20m (€15m) rent roll, was once the children's prize office block in Moscow but now is apparently controlled by an unlikely Ukrainian railway worker called Yaroslav Gurnyak. He emerged from the woodwork to stake his claim to the tower in January, just as Anglo -- now Irish Bank Resolution Corporation (IBRC) -- moved in on it.

When he had to testify by video-link from Russia to a Belize court in one of the myriad offshore legal actions taken by IBRC, Gurnyak claimed to be a corporate restructurer for 20 years but couldn't name a single company he had restructured and a judge found he had no knowledge of business.

The Univermag shopping centre in Kiev, Ukraine, is under the control of Larisa Yanez Puga, who was the long-standing manager of the family's Ukrainian properties: the modern office complex the Leonardo Business Centre, and a refurbished shopping mall, Univermag.

She earned a salary of $10,000 (€7,650) but $500,000 of company funds were transferred to her personal bank account the day before Anglo was to take control of the Quinn's Ukrainian assets. She was dismissed but reinstated by the Ukrainian authorities and although reportedly on sick leave, the bank believes that she continues to control the shopping centre and the lucrative €10m-a-year rent it generates.

How these unlikely individuals came to control what were once the most valuable assets in the Quinn children's international property portfolio goes to the heart of Anglo's ongoing legal bid to have Sean Quinn, his son and his nephew jailed.

It is just one strand in a battery of litigation between the Quinns and the bank they claim destroyed them.

According to IBRC, Gurnyak and Puga are pawns in a "sinister conspiracy" by the Quinns to put their assets beyond the bank's reach. The plot, the bank claims, involved labyrinthine business dealings encompassing the companies that owned the prize assets: valuable shares were sold for a pittance; company debts transferred to offshore companies in places like Belize and the British Virgin Islands.

IBRC obtained a court injunction in Northern Ireland to stop this alleged conspiracy of asset stripping in June but the bank claims the family continued regardless, and alleges that certain transactions were backdated. The bank's case to have Sean Quinn, his son Sean Jnr and his nephew Peter jailed for contempt for breaching court injunctions resumed in the High Court last week.

The Quinns admit trying to spirit their assets out of Anglo's reach but deny contempt, saying whatever they did predated the court injunctions. As Sean Quinn told it last week, he was destroyed, demoralised and betrayed when Anglo mounted a surreptitious takeover of his massive empire in his Cavan/Fermanagh heartland to recover debts of €2.3bn. Quinn borrowed the €2.3bn to stem his losses from a disastrous investment in Anglo shares. But he said he never thought the bank would oust him from his business.

Peter, who looked after the foreign properties, thought otherwise. In late March, the writing was on the wall: "I rang Petey and said, 'lookit Petey, whatever this agreement you and I had for the last six, 12 months, whatever advice you've been getting from Russia, if you can get that thing put together as quickly as possible it should be done'."

Quinn claimed that in the first week of April, Petey came around to his house. He had a pile of documents and he signed them, apparently not knowing or asking what they were. Some of them were in different languages. The documents were debt re-assignments.

"He was obviously a bit brainier than I was and he could see the writing on the wall. I was a bit more naive. I had believed the Anglo story and I always thought it would come good and I always thought they would honour whatever commitments they had made and they would stand over the problems and they would work with us."

Sore and angry, he retreated from the business and "passed on all responsibilities to the family". While he looked around for a "handy way" out and tried to get some "wee bit of pride back", his five children sat down together. Questioned about what his children had done, he claimed ignorance. He didn't ask, he didn't know, and he played no role in how they did it.

Peter Quinn, the bank claimed, was the mastermind. He went to Russia, where lawyers set up a deal reassigning $100m of debt owed by the company that owned Kutuzoff Tower to an Irish Quinn-owned company and from there to a shelf company in Belize called Galfis, and backdated the transaction to April.

When it emerged that Galfis was a shelf company at that time, and couldn't have been assigned the debts, it recruited Gurnyak, substituting his name for Galfis on the documents. IBRC claimed Gurnyak was working on a Moscow building site when he was asked to sign the documents for a "nominal fee" last summer, after the injunction was in place. Peter Quinn denied this. He claimed he signed over the debts to Gurnyak in April -- even though he had never met him -- on the advice of Russian lawyers. Quinn claimed they had a "gentleman's agreement" that the Quinn family would get 20 per cent of whatever Gurnyak stood to make from enforcing the debts.

The bank claimed that on August 30 last year, Sean Quinn, Sean Jnr and Peter went to Kiev to authorise the transfer of $500,000 from their Ukraine property company to the woman who managed it, Larisa Yanez Puga.

The bank later found a document in Quinn company records referring to her dismissal and $500,000 was purportedly compensation, even though her salary was just $10,000 a year. On August 31, Anglo took control of the building. On September 5, the $500,000 reached Ms Puga's personal account.

Sean Quinn denied he was ever there and his son gave an entirely different account of this meeting. "Peter Quinn would have spoken to me on a number of occasions and explained that he had concerns about Ms Puga's bona fides," he said. When he heard Peter was going to Ukraine to meet her on August 30, he went to give a second opinion.

They met in the Leonardo Building. He knew "absolutely nothing" about the transfer of $500,000.

"After the meeting of August 30, we approached our legal team and said we had concerns in relation to Ms Puga," Sean Jnr told the court.

The Quinn's legal team told Anglo's legal team but "we received no response back".

"We had two options," he said. "Option one was to do nothing. Option two was to keep close to Ms Puga to see what she was trying to do. We went over in early October to meet Ms Puga, and her attitude had hardened considerably.

"She made it abundantly clear that she felt threatened, her family was being threatened and that she felt the Quinn family could provide no protection for her and she would have to work for other individuals."

There was another "fraught" meeting with Ms Puga in Kiev in January, when Peter Quinn suspected her of forging his signature on documents, effectively transferring debts from the Univermag shopping centre to an offshore entity in the British Virgin Islands. "We knew Ms Puga was doing things in Ukraine, and we knew, we expected, we were going to get hung for it," he said.

Sean Jnr was not the only family member suggesting that the Quinns were victims of a conspiracy last week. His father claimed as much in an angry and emotional denunciation of Anglo -- stoutly refusing to call it by its new name.

His chin trembled and eyes reddened when he recalled the bank's covert operation to appoint a share receiver to the Quinn Group.

In court to defend himself against a charge of contempt, he used the packed courtroom to rehearse his own impending case against Anglo: that the bank loaned him €2.3bn to meet the colossal losses from his investment in Anglo shares, and that the bank did so to illegally prop up its own share price at a time when its fortunes tumbled.

The Quinn family has mounted its own case against Anglo and, last week, Quinn accused the bank of trying to "get him out of the way" before the real legal showstopper starts. "Why did they want rid of Sean Quinn? Why did they want rid of the whole Quinn Group? Who was behind it? And once I got my head around that there was something very sinister going on -- and I think it is very sinister -- the fact that they are still not willing to participate and they are trying to move forward on the big case, I think that there is something very seriously wrong here," he said.

"What you are trying to do is deflect the attention off the main problem or the main issue, which needs to be addressed in the interests of the Irish taxpayer."

IBRC's counsel, Paul Gallagher, told Quinn: "You lost money because you began directly investing in the stock market through contracts for difference and the share price went down."

And far from abdicating responsibility to his children, he orchestrated attempts to put his children's assets beyond the reach of the bank.

"I suggest that you breached the orders of the Northern Ireland court. As the patriarch of this family, as the man in ultimate control, these transactions would never have happened without your approval," said Gallagher.

The case continues before Ms Justice Elizabeth Dunne on Thursday.

Sunday Independent