Fingers

by Richard Curran

  Dennis has also secured approval for a development at Peruvian Wharf in the London docklands, at the fourth attempt. Irish Nationwide provided some of the finance for the original purchase of the site. He has owned the land, which at one point was touted as a site for Britain’s first giant casino, since 1999. A £67 million development in Liverpool was also completed by Dennis in 2006.

  But his most spectacular luxury purchase, which also went wrong, was financed by Irish Nationwide. In 2006 Dennis bought the abandoned Le Provençal hotel in Juan-les-Pins on the Côte d’Azur. Built in 1925 by the American millionaire Frank Jay Gould, it was a landmark on the French Riviera, nestled between Juan-les-Pins and Cap d’Antibes. It had been host to an array of celebrities, including Charlie Chaplin, Winston Churchill, Coco Chanel, Édith Piaf and Ernest Hemingway. Juan-les-Pins was at the time a luxury getaway for the rich, made famous from 1969 by the lyrics of the song ‘Where do you go to, my lovely?’ by Peter Sarstedt.

  But in recent decades the town had gone somewhat downhill while the neighbouring Cap d’Antibes was booming. Since the glory days of wealth and excess, when F. Scott Fitzgerald took the Le Provençal orchestra hostage and Charlie Chaplin entertained his lover May Reeves on the beach, the town had really lost a lot of its five-star appeal. Cap d’Antibes has sprawling villas, electric gates, and high hedges, but the forests of Juan-les-Pins have been replaced with ugly 1970s apartment blocks, and whatever rich or famous do still visit have to sunbathe on concrete pontoons in front of the decaying hotel. ‘Nothing has changed in forty years, yet people still come here and sit on the concrete like sardines,’ Dennis told one journalist.

  Le Provençal was part of that story. In the 1970s the hotel staff pushed for a pay increase. In response its eccentric owner, the Parisian jeweller Alexandre Reza, closed the place, never returned and refused to sell. Along came Cyril Dennis and Michael Fingleton, who planned to change all that. In 2006 Dennis bought the building through a company registered in Luxembourg called Provençal Investments SA. The purchase price was never disclosed but was reported to be in the region of €50 million. Two years later Fingleton attended the lavish launch party for Dennis’s plan to redevelop the old hotel as fifty luxury apartments that would sell for between €2 and €40 million each. Fingleton was on the beach mingling with the local worthies and enjoying what the Irish Times called a ‘break from the dire economy at home.’

  Dennis described the potential for the building at the time.

  It may be in disrepair, but you still feel the sense of its elegant past when you enter the huge reception. There is a spirit and soul in the walls. We are bringing back the historic splendour to Antibe and the old spirit of Juan-les-Pins, to recreate the days when Le Provençal was frequented by people who made a difference in our world—Churchill, the Kennedys, Marlene Dietrich.

  He said it was a sleeping beauty, waiting for someone to breathe life into it again. Under the original plan a site beside the old hotel would be developed, with ‘cheap’ apartments priced between €2 and €6 million. It was extraordinary old guff. Buyers from such places as Russia, India and the Far East were expected as the company began selling off the plans. But nothing really happened. Four years after buying Le Provençal the company tried to stamp out speculation that it would never happen. The developer said he would open up parts of the development and wanted to adjust his plan for new market requirements and realities. Instead of the fifty gigantic apartments at €2 million plus there would be seventy smaller units. Accounts submitted in Luxembourg for Le Provençal SA show that at the end of 2010 the company had total assets of €127 million and total liabilities of €155 million, including bank borrowings of €147 million.

  Irish Nationwide had a charge over the shares but once again no sign of a personal guarantee sought from a man who remains quite wealthy. The loan was based on repayment of the capital at the end of the loan, and quarterly interest payments were due.

  Confidential documents show that Cyril Dennis had total borrowings from the society at the end of 2009 of €486 million, and the society had at that point made a provision of €137 million, suggesting the amount it believed at the time it might not get back.

  A SHARD OF GLASS: SIMON HALABI

  Simon Halabi was regarded as one of the richest men in Britain. A native of Syria, he had made a number of successful property deals in London. In 2007 his wealth was estimated at £3 billion. Big deals included the Aviva Tower and the European head office of J. P. Morgan at London Wall.

  Halabi put these up for sale in 2006 with a price tag of £1.8 billion. But as the credit crunch came and his highly leveraged position was exposed, his wealth crumbled. His advisory business Buckingham Securities was placed in liquidation. Halabi himself disappeared after being made bankrupt.

  His business deals tended to be accompanied by a degree of complication and sometimes strife. He was a major backer of the Shard Tower in London. Its construction began in March 2009 and was completed in March 2012. Standing 310 metres (1,017 feet) high, it is the second-tallest completed building in Europe. Halabi’s 50 per cent stake was half-funded by Irish Nationwide. His partners, Irvine Sellar and the Swedish group CLS, thought he had only a 25 per cent stake. There was a huge legal battle, ending with each taking a third after it emerged that Irish Nationwide had sold its 25 per cent to Halabi.

  After Halabi’s collapse Irish Nationwide ended up taking a legal action in Jersey to secure the repayment of £7 million (€8.4 million) from companies linked with Halabi. The action opened the way for Irish Nationwide to consider moving on Halabi’s luxury holiday home development in the south of France, which was used to secure a £2½ million (€3 million) loan. The society had advanced the money to a Jersey company called Stormex Holdings in 1997, court documents showed. As part of that deal Halabi and one of his Luxembourg companies provided guarantees.

  The Luxembourg company, Immofra, owns the Château des Bois Murés development in Grasse, north of Cannes. Accounts for Immofra show that Irish Nationwide has a charge over it. At the end of 2009 it was listed as being worth almost 9 million Swiss francs (€7.4 million). Stormex Holdings is also linked to the French property.

  UPSIDE-DOWN LENDING: UPDOWN COURT

  When it comes to getting it spectacularly wrong, Updown Court is perhaps one of the most insane banking propositions for an Irish building society ever to have financed. Bought out of receivership in 2002, the unfinished mansion in Surrey cost its new owner, Leslie Allen-Vercoe, also known as Les Allen, approximately £20 million (€22.6 million). Allen met the head of British lending at Irish Nationwide, Gary McCollum, to tie up the deal. With the backing of Fingleton, who had to ratify major loans, the society bankrolled the project to the tune of about £40 million. Further loans and accrued interest meant that by the end of 2009 the society was owed about £61 million.

  The project was simple and ridiculous at the same time. Allen planned to spend £20 million buying the place and another £30 million doing it up. He would then sell it to a billionaire buyer for £70 million. Irish Nationwide even had a profit-share deal with Allen on the proceeds. There was only one snag: there was no billionaire buyer.

  The house went on the market in 2005. To avoid time-wasters, Allen had a leather-bound brochure printed that cost £500 to buy. Savills were hired to find a buyer. A tour of the house took two-and-a-half hours, and Savills were happy to arrange for prospective buyers to be driven to Updown Court in a Rolls-Royce or flown in by helicopter.

  The house has 103 rooms, 22 bedrooms, 27 bathrooms, five swimming-pools, a heated marble driveway, a fifty-seat cinema, eleven acres of landscaped gardens, fifty acres of parkland, a double staircase modelled on Gianni Versace’s mansion in Miami, and enough marble to satisfy Emperor Augustus, as one newspaper put it. The marble alone cost £6 million. ‘If Elton John were a house, he would be Updown Court,’ Allen told the Evening Standard in March 2005.

  Allen is a larger-than-life character. He enjoyed the trappings of wea
lth and, not unlike Fingleton, was known for his love of expensive watches. He told the newspaper that he had forty-two British companies, flew in jet helicopters and used to have his own plane. He said his assets included forests in Russia, coal mines in Ukraine and land in Latvia. At the time he said he was a preferred bidder to buy Antwerp Airport.

  The British press were curious to know how this relatively unknown businessman had ended up selling the country’s most expensive house. The son of a bricklayer, Allen originally became an estate agent. He had been involved in a court case in 2002 because he wanted to build luxury houses on land in Chelsea that had been bequeathed to the local borough by the aristocratic Cadogan family solely for the purpose of providing housing for the working class. Lord Cadogan objected to Allen’s plans. Allen argued that there was no definition of working class. ‘Is it because you wear a flat cap? Is it because you earn less than so much a week? Is it because you speak with a funny accent?’

  He was quite calm about the prospect of finding a buyer for Updown Court when the Evening Standard interviewed him, just as the £70 million folly went on the market. He arrived in a £100,000 Mercedes coupé (one of his six luxury cars) and wore ‘a £12,000 Cartier gold watch.’

  ‘My estate agents tell me it will be gone in six months,’ he told the paper. ‘We’ve already had interest from buyers from Russia and the Middle East. And three Chinese called to enquire this morning.’

  But there were no takers. Accounts for the company behind the project, Updown Court Ltd, paint an interesting picture of how things went wrong. It was owned by Allen and his former associate John Anton, who died in 2004. The company had no real income and has never had any turnover. Its only real source outside funding came from Irish Nationwide loans. The company accounts disclose that the loans were secured on the property but were non-recourse to Les Allen. He was able to walk away from any losses.

  Between 2003 and 2009 the property increased in value on foot of the directors’ own valuation at cost, from £28 million to £60 million. Naturally the more money they pumped into it the more valuable they said it was. Auditors began qualifying the accounts in 2008, querying the lack of an independent valuation on the property. They noted that the directors said the cost of an independent valuation would outweigh the benefit.

  At the end of 2005, the year it came on the market at £70 million, the company had £5 in the bank and the property on its books was valued at £45 million. As the value of the property kept going up on the balance sheet, so too did the amount of money owed to Irish Nationwide, which reached a peak of £61 million in 2009. Meanwhile Allen and his partners must have been working very hard to finish the project before 2005 and then find a buyer. Between 2003 and 2006 directors’ remuneration totalled £1.2 million. Not all of it was received.

  Another company owned by Allen, Rhymer Investments, borrowed a total of £1.4 million from Updown Court, of which nearly £800,000 was written off as unrecoverable in 2008. Rhymer also received management fees totalling £382,000. Anton, Allen and Allen’s wife also received consultancy fees from Updown totalling £294,000, while two other Allen companies owed Updown £61,000, which was written off. Rhymer went into administration in 2009.

  NAMA took over the Updown Court loans of approximately €70 million. The agency appointed a receiver, who eventually found a Middle Eastern buyer in 2011 for €40 million. The loss to the Irish taxpayer was approximately €30 million.

  Chapter 8

  TOO LATE FOR HALLELUYAH: FROM FAILED SALE TO STATE BAIL-OUT (JANUARY–NOVEMBER 2008)

  Michael Fingleton mingled merrily with 150 members of Ireland’s business and social elite. It was November 2007 and he was at a $2,300-a-plate fund-raising dinner for Hillary Clinton, who was then an American presidential hopeful.

  The party was in the Ballsbridge mansion of the American lawyer Brian Farren and his wife, Linda O’Shea-Farren. Among the guests who paid for the pleasure of the company of Hillary Clinton and her husband, Bill, the former two-term President of the United States, were many of Fingleton’s old pals and clients. They included Niall Mellon, builder turned philanthropist, one of his biggest clients; Arthur French, auctioneer and borrower; and Terence O’Rourke, managing partner of Irish Nationwide’s auditors KPMG. Also there were the Glen Dimplex boss Martin Naughton, the broadcaster Gerry Ryan, the actor Vivienne Connolly and her then husband Mark Dunne (son of the tycoon Ben Dunne), and the glamorous Lisa Fitzpatrick and her hotelier husband, Paul.

  Fingleton happily pressed the flesh with the Clintons, with whom he was acquainted from their visits to Ireland. In June 2005 records show that Fingleton handed over a cheque for €20,000 to the Clinton Foundation. The multi-millionaire boss then charged this to the building society as an expense.

  Fingleton’s attendance at the dinner demonstrates how he filled his days with distractions in 2007, one of the most important years in the history of the society. Only the previous month he had finally appointed Goldman Sachs, the giant global investment bank, to sell his beloved society. It should have been put on the market sooner, but the society was in such a mess that getting the necessary documents in order had taken longer than expected.

  All that summer Irish Nationwide had entertained informal approaches from about a dozen potential bidders. These included Hypo Real Estate, an aggressive German lender; General Electric Money; the financier Derek Quinlan, in combination with Halifax Bank of Scotland; and Landsbanki, the Icelandic bank that was in the middle of a crazed buying spree. Bank of Ireland and Ulster Bank also took an initial look.

  The problem was not that none of these bidders could be convinced to nibble: on the basis of the society’s initial undetailed sales documents they were interested; but once it got to the stage of making a bid they had all pulled back. The global environment was rapidly changing, and the few potential bidders who began to look under the hood were scared off by what they saw.

  Fingleton, Purcell and the board’s years of ignoring the basics of banking were now acting against them. Nobody was prepared to buy the society for anything like the valuation of between €1½ and €2 billion that Fingleton placed on his toxic creation. He had fatally delayed in not putting the society up for sale sooner. By not doing this immediately the legislation was passed, in the summer of 2006, he had missed the boat.

  ‘We might still have been able to sell Irish Nationwide for something,’ a source close to the sale process said, ‘but Fingleton wasn’t prepared to even countenance a fire sale.’ Despite no buyer emerging, he continued to act as if the society was on the brink of being sold.

  ——

  During much of 2007 Fingleton spent his weekends relaxing at the K Club as well as enjoying trips abroad. His eyes were often off the ball. In November, Irish Nationwide spent €40,000 on sponsoring and launching the autobiography of the Kerry football legend Mick O’Dwyer, Blessed and Obsessed. O’Dwyer, then manager of the Wicklow team, told the Sunday Independent that Fingleton would be his choice as Minister for Finance, because he has ‘done wonders for his members.’ O’Dwyer launched his autobiography in the Burlington Hotel, where six hundred guests partied from 5 p.m. to midnight. The Irish Independent described the bash as being ‘sponsored by Micko’s VBF [very best friend], Michael Fingleton of Irish Nationwide.’

  Fingleton’s client and friend Arthur French, the estate agent, was in attendance, as was Seán FitzPatrick, then chairman of Anglo Irish Bank, and a former president of the GAA, Peter Quinn (brother of Seán Quinn, the billionaire tycoon). ‘Michael Fingleton’s speech was another tour de force,’ the Independent reported, ‘tracing the Waterville man’s career, which everyone agrees makes him one of the greatest footballer managers the country has ever seen.’

  In December, Fingleton again got out the society’s chequebook, despite the worsening of the economic climate and there still being no sign of any potential buyer for the society. This time he decided to sponsor the production of an album in tribute to the Dubliners’ singer Ronnie Drew,
who was suffering from the throat cancer that would eventually kill him. This was another chance for Fingleton to associate himself with a good deed—using his members’ money. The idea of making the record came from the editor of the Sunday Independent, Aengus Fanning, himself a talented musician. He had interviewed Drew about his illness and asked Fingleton to finance a new record to cheer him up. The society spent €25,000 on the record, called The Last Session: A Fond Farewell, which featured the jazz musician Hugh Buckley and Aengus Fanning on the clarinet together with Ronnie Drew. It was a kind deed, but even still Fingleton saw no need to pay for it himself but instead got his building society to do it.

  As 2008 began, Goldman Sachs realised there was still no hope of selling the society as the world’s economy teetered, and told Fingleton as much. Fingleton, however, remained hopeful that things would turn around once sense prevailed again in the international markets.

  ——

  On 26 January 2008 Michael Fingleton stepped down from the board of his beloved building society. It was his seventieth birthday, and the society’s rules decreed that nobody could stay on the board beyond that age.

  Fingleton made no objection. He was staying on as chief executive, so the change was largely cosmetic. James Morrissey, Irish Nationwide’s spokesperson, was quick to assure the Sunday Tribune that week that Fingleton would remain ‘very involved,’ despite his advancing age.

  The society’s board had now shrunk to a mere four people. Nothing was done to seek a new member to replace Fingleton, even though the society badly needed more banking expertise and someone capable of challenging the ageing boss. The chairman, Michael Walsh, let the opportunity slide. This meant that, as the society faced into the toughest year in its history, there was nobody on the board who had not been compromised by all the bad decisions made over many years.