State facing €20m bill for investment firm's failure
THE company set up by the State to compensate investors for losses when an investment firm fails expects to pay out €20m to those who lost money from the collapse of Custom House Capital.
Thousands of people are expected to make claims to the Investor Compensation Company. But the most these people will be able to claim is capped at €20,000 each.
Court-appointed administrator to Custom House Capital Kieran Wallace has to certify the investor losses, but poor record-keeping in the investment firm has meant this is taking longer than expected.
However, the first compensation payments could be made within the next two months.
Investors in Custom House Capital, which collapsed last year, face losses of almost €58m of the €85m invested in various funds.
A High Court-appointed investigation by two Central Bank inspectors into the firm found the "systemic and deliberate misuse" of €66m of client money through false accounting to hide the transfer of the money to cover shortfalls in European property investments, mostly in Germany.
Mr Justice Gerard Hogan in the High Court said that by the time the company was wound up last year, it was exhibiting classic characteristics of a "full-blown Ponzi scheme", with client accounts being raided to cover deficits elsewhere to create the impression the company was solvent.
The inquiry found "improper transactions" concerning €56m in client funds and a further €10.4m was owing to clients on an investment bond.
Now chairman of the Investor Compensation Company Limited (ICCL), Jim Bardon, says payments following the failure of Custom House Capital are expected to be close to €20m.
"The failure of Custom House Capital has had a significant impact on the reserves of the ICCL with expected compensation payments of up to €19.7m."
He added that the reserves of the compensation company fell by €9.3m in the year to last July, taking the total reserves to €29.4m.