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| Seán Quinn founded his business in 1973 and it became Ireland's biggest private company with a payroll of over 5,000. The insurance business had been the cash cow of the operation. Business and personal debts amount to €4.0bn with €2.9bn owed by the Quinn family to the bankrupt State-controlled Anglo Irish Bank, following a disastrous reckless bet, which brought the family crashing to earth. |
The Quinn family is suing the State-owned bank
Anglo Irish Bank claiming that loans totalling €2.34bn, which were advanced in
2007 and 2008 are “unenforceable” as they were made for the purpose of
“an illegal objective” of manipulating the stock market to support the
bank’s share price.
The wife and five children of Seán Quinn say Anglo’s lending was “tainted
with illegality” and “intended to support an illegal purpose” in
breach of EU market abuse rules.
The family is seeking hundreds of millions of euro in damages and on Monday Mr
Justice Peter Kelly the head of the Commercial Court, a division of the High
Court, agreed with Anglo's consent to the case being fast-tracked.
The Quinn family has a debt to Anglo about €2.9bn
and the €2.34bn relates to loans that were advanced to cover Seán Quinn's
exposure on the option he took to build up a stake of 28% in the bank (see
below).
The bank unwound Quinn’s stake in 2008 as the businessman incurred huge losses
on his option gamble, by lending to his family and 10 customers, and dividing
the shares to avoid a collapse of the share price through a sudden sale.
In October 2008, the Financial Regulator said in
a statement: "The Financial
Regulator has reasonable cause to suspect that breaches of regulatory
requirements occurred in relation to QIL (Quinn Insurance Limited).
These breaches related to contraventions by
QIL of obligations under the Insurance Acts and Regulations, including failure
to notify the Financial Regulator prior to providing loans to related companies.
The Financial Regulator required QIL to pay a
monetary penalty of €3,250,000. The Financial Regulator also required Mr Quinn
to pay a monetary penalty of €200,000."
Quinn was forced to resign from the QIL board.
In March 2010, the Financial Regulator applied to
the High Court to have administrators appointed to QIL.
Again it was suspected that there were breaches
of Insurance Acts and Regulations through cross-guarantees from the insurance
unit for borrowings by other group firms.
In jurisdictions such as the United States,
breaches of insurance and investment regulation risk imprisonment.
Seán Quinn,
Ireland's once richest man, built up a conglomerate originally from quarrying
and later he moved into cement and glass production. In the hospitality area he
operated hotels and golf courses but his biggest cash cow was Quinn Insurance
that beat rivals on price and convenience using phone sales in the pre-internet
age.
He was felled
by a disastrous gambling bet that shares in the famed 'builders' bank Anglo
would keep on rising and as the recession began to bite with personal losses
mounting, the group became increasing reliant on the cash cow.
On March 30,
2010, provisional administrators were appointed to take control of Quinn
Insurance, which had 1.3m customers, including those who transferred from the
health insurance business of the Irish unit of UK company BUPA in late 2007.
Quinn
Insurance had posted a loss of €788.4m in unaudited accounts for 2009, which had
been provided to the Financial Regulator by the court appointed administrators.
The loss comprised a trading loss of €127.5m on its underwriting activities and
exceptional costs of €677.6m resulting from the writedown of certain non-core
assets held by subsidiaries, understood to be a wind farm in Derrylin, Co.
Fermanagh and a number of hotel properties. The losses on underwriting
activities was made up of €41m related to its business in the Republic and €86m
to the UK.
The Quinn Group made a €900m loss in
2009, reflecting losses at Quinn Insurance and write-downs on its manufacturing
and property interests.
A Reckless
Gamble
Seán
Quinn had built up a stake in Anglo Irish Bank through a financial betting
product called Contracts for Difference (CFD). The CFD's allowed him to acquire
a right to buy shares by providing 10% of the value and the tax regime was also
favourable compared with an outright purchase.
He was expecting the price of Anglo's shares to continue rising.
By 2008
Quinn had used CFDs to build a potential stake of 28% in Anglo but the Anglo
price was sliding and in July 2008 to cut his potential future losses, he
converted the CFDs into an ordinary 15% shareholding. It cost him around €2.5bn
and some of the shares were bought with borrowings from Anglo. Besides, the
remainder of his position was bought out by 10 major customers of Anglo and the
bank lent them the money for the deal.
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|
Anglo Irish Bank closed at 22 euro cent on the Irish Stock Exchange, on
its last day of trading, Jan 16, 2009, before becoming a State-owned
bank.
On February 21, 2007, the ISEQ index rose to an-all time high of 10,041
and the Financial sub-index rose to 18,098. Bank of Ireland closed at
€18.65; Anglo Irish closed at €16.64 and AIB closed unchanged at €23.95.
A year later, on February 21, 2008, AIB closed at €13.80, Anglo Irish
Bank finished at €8.84, while Irish Life & Permanent closed at €10.20
and Bank of Ireland traded at €9.50. |
