Wednesday 21 August 2019

Top judges heavy losers in €90m Ponzi scheme scandal

More than 1,500 investors handed over up to €500m

Harry Cassidy: questioned by gardai
Harry Cassidy: questioned by gardai

Dearbhail McDonald Legal Editor

SENIOR judges are among those who lost at least €250,000 each in a massive investment company collapse.

A prominent High Court judge and at least two of his colleagues on the bench are confirmed to have lost money in an investment company which -- unknown to them -- was being run like an elaborate pyramid or Ponzi scheme.

The fallout from the collapse of investment firm Custom House Capital (CHC) is sending shockwaves through Ireland's elite.

Barristers, solicitors and prominent sports stars were all roped in by the investment firm with promises of attractive returns.

It is alleged that CHC, acting without its clients' authority, used their funds to cover property losses. Up to €90m of clients' funds may have been used to cover such losses.

The Irish Independent last night learned that judges, as well as partners in a host of leading Dublin law firms, were stung by the collapse.

These firms include blue chip names such as Arthur Cox and A&L Goodbody which were among a list of investors whose monies were managed by CHC.

It has now emerged that the Custom House collapse could be one of the biggest scandals involving ordinary investors since the onset of the financial crisis.

There was no minimum investment requirement for CHC clients, but they typically ranged from €250,000 to several million euro.

More than 1,500 investors handed over as much as €500m to be managed by CHC, now under investigation by the garda fraud squad.

The judges in question are now unable to preside over any legal actions involving the firm in the civil and criminal courts.

Some of CHC's investors lost all of their life savings following the collapse of company, which was one of Ireland's most exclusive boutique finance firms until it was investigated by the Central Bank and placed into administration in July 2011.

And yesterday, the High Court heard that if liquidators' fees and legal costs are taken from CHC client accounts, investors could be hit with additional tax liabilities -- on top of the sums they have already lost through the firm.

Tax liability

One investor, who had ploughed €600,000 into a property fund that he discovered "could be worthless", told High Court judge Mrs Justice Mary Finlay Geoghegan he was not in a position to face an additional tax liability because he had no income.

The Garda Fraud Squad and the Revenue Commissioners are investigating CHC, which was led by financier and career banker Harry Cassidy.

Mr Cassidy (56), who earned €430,000 a year as a director of CHC, was arrested last July and questioned by gardai but no charges have been laid against him to date.

It was the second time the qualified tax accountant had been arrested in relation to the collapse of CHC, which is now in liquidation. A High Court-appointed investigation by two inspectors from the Central Bank found there had been a deliberate misuse of some €66m of client money.

False accounting was used to hide the transfer of clients' monies to cover shortfalls in mostly German property investments, the inspectors found. Financial journalist Niall Brady, author of ebook 'House of Cards: The Inside Story of the Fall of Custom House Capital', said that he was struck by the ease with which wealthy clients entrusted their money to the firm.

"Nobody went in there (to CHC) without at least six figures," said Mr Brady, who added that the CHC clients had fallen into two classes: professionals such as judges and lawyers, and self-made business people as well as small investors.

Earlier this year, High Court judge Mr Justice Gerard Hogan sent the inspectors' report to the gardai, the Director of Corporate Enforcement and the Director of Public Prosecutions.

In doing so, the judge said that by the time CHC was wound up last October it was exhibiting "classic characteristics of a full-blown Ponzi scheme" with clients' accounts being raided to cover deficits elsewhere to create the impression that the company was solvent.

Irish Independent

Editor's Choice

Also in Irish News