“He was both charismatic and successful. He was a guy who was well respected around town. There were so many people who invested with him, from sports figures to professionals. He had a very, very successful business.”
The speaker, who does not wish to be identified, is talking about Harry Cassidy (68), the onetime chief executive officer of Custom House Capital (CHC) who pleaded guilty to conspiracy to defraud in 2023 and was sentenced to six years and 10 months in jail as part of a criminal legal process the final curtain on which came down just last week.
It was a long way down for Cassidy. In the late 2000s he was on an annual salary of €430,000 and ran a company with 1,500 high-net-worth clients who trusted him to look after investments of more than €1.1 billion. When things started to go wrong, Cassidy made some ill-advised – and criminal – decisions, and things went downhill from there.
Most of CHC’s clients were in their 50s and 60s and had placed money with CHC to provide for their retirement. The money was put into personal retirement savings accounts, unit trusts, qualifying investor funds, stocks and special-purpose vehicles that facilitated more than 70 large commercial property investments across Europe.
The property schemes were particularly fruitful for CHC. A project would be devised to purchase, for instance, an office block in Germany. The investors’ money would be put in a fund and used, along with bank borrowings, to make the purchase, with the investors hoping to profit from their involvement after five years or more.
CHC charged its clients a placement fee of 5 per cent of the value of the property, a management fee that was typically 5 per cent of the gross rental income from the property, and client account fees on top of that.
As well as fraudulently dipping into its clients’ money to fill the gaps created by the growing property crisis, CHC also took steps to make sure no one found out what it was doing
The projects seemed attractive, but it was these schemes that led to the eventual collapse of CHC, personal disaster for Cassidy and a few his CHC colleagues and, most of all, the disruption or ruination of the pension plans of hundreds of people who had placed their trust in the Dublin firm.
CHC got contractually involved in property projects where it paid over deposits before it had secured the envisaged equity investments. The property deals typically involved a bank supplying a percentage of the funding, on the understanding that the rest would come from the CHC investors.
“When the property crisis emerged in 2007, [CHC] found that expected investment from [prospective] investors was not forthcoming,” according to a report by inspectors appointed to CHC in late 2011.
“As the flow of fresh investment into property projects ceased, in fear of loss of the initial deposit and damage to its reputation [CHC] sought to cover the investment shortfalls through the creation of products such as the mezzanine bond [of which more later] and eventually through the misuse of client holdings”.
As well as fraudulently dipping into its clients’ money to fill the gaps created by the growing property crisis, CHC also took steps to make sure no one found out what it was doing. “Client money held in a particular pooled client account [was] improperly transferred from that account without the relevant clients’ consent,” the inspectors said.
The deceit was maintained by placing signals on the records of those client accounts from which money had been taken. Any member of the staff wanting to issue a statement to a client whose account bore a “flag” had to first contact Cassidy or the CHC financial controller, Paul Lavery, before doing so. (Lavery (49) was given a sentence of three years in 2023 having pleaded guilty to conspiracy to defraud.)
A false statement concealing the misuse of the client’s money would be issued to the client, while at the same time CHC’s in-house records showed the true position.
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In one instance, later cited in a court judgment, a client was told that the value of their funds within a pooled account on May 31st, 2011 was €25,002, whereas the actual amount was €2. In another case, a client was told on March 24th, 2011 that their share of the pooled account was €89,929, whereas the correct figure was €59,929.
In another instance, where 51 clients had invested €5.9 million in commodity bonds, the bonds were redeemed for €7.3 million without the clients being informed. CHC then used some of the money to pay other clients €1.1 million they were owed.
Another €700,000 was diverted to European property funds. More of the money was placed on deposit with a German bank, to back loans that were being used to shore up property deals.
John Whyte (54) – who was jailed for four years in 2023 having also pleaded guilty to conspiracy to defraud – was an executive director with CHC in the years prior to its collapse and on an annual salary of €133,000.
In a judgment in December 2016 the High Court said it was “clear that Mr Whyte was aware that, from 2007, shortfalls in the funds that the company required for its property business transactions were being met by diverting money out of client accounts”.
Whyte, the court said, claimed he tried to challenge Cassidy “on repeated occasions” to return money improperly diverted from a client investment cash fund, but also admitted that he complied “albeit reluctantly” when Cassidy instructed him to divert funds to support struggling property ventures.
Whyte said in his defence that Cassidy had a “domineering personality”. He also claimed, according to the judgment, that he was concerned that “if he exposed Mr Cassidy, a panic might ensue, leading to a run on the company and a greater loss of client deposits.
“He does not appear to have contemplated the countervailing possibility – the one that came to pass – that his complicity and inaction might permit the misappropriation from client funds of ever larger sums.”
Within the confines of the Central Bank, they were struggling with the same dilemma. A routine inspection of CHC in 2007 had discovered breaches of the client money regulations, according to a later report produced and published by the regulator.
In 2009 a “major professional services firm” was brought in to investigate some of the CHC property schemes and identified “a number of serious issues”.
As a result there was an “intense focus” on CHC cash flows. Auditors who had failed to note earlier problems were removed.
“The main elements of the Central Bank’s strategy during 2009 and 2010 were to understand better the firm’s exposure to its property investments, force the firm to restore those money due to the clients as and when they could be realised in an orderly way, ie avoiding forced sales of property, and to improve the very weak solvency position of the firm until such time as its business could be sold and management thereby replaced,” according to the Central Bank report.
“While it was appreciated that CHC management presented a significant risk, the Central Bank’s greater fear was that the removal of its authorisation and consequent abrupt cessation of business would cause even greater potential loss to the underlying customers. The other option, liquidation, would also have had the same potential outcome.”
By early 2011 the Central Bank was finding it harder to get coherent answers from the investment firm and in July of that year it approached the courts seeking the appointment of inspectors. When the inspectors reported in October 2011 that client funds had been misappropriated, Kieran Wallace, then of KPMG now with Interpath, was appointed liquidator.
To have the firm you had trusted with your pension investment placed in liquidation was undoubtedly a stress-inducing development for its investors. But what subsequently emerged was such a legal and financial mess than most had to wait years to get their funds back. Some died before their investments were released. Others are still waiting.
One former client of the CHC, retired solicitor Tressan Scott, went to court in 2011 and argued successfully that money she had lost should be returned to her from CHC’s assets
A key reason for the delay was that client money had been put into pooled accounts and some of that pooled money then improperly diverted to other investment schemes where it was mixed with funds belonging to identified investors who had knowingly put their money in the funds. Since 2009 the Central Bank had been alerted to the fact that client money were being diverted into the above-mentioned mezzanine bond fund.
By the time the inspectors reported to the High Court in late 2011, they estimated that more than €56 million in client funds had been improperly diverted from some accounts, and a further €10.4 million was owed to the mezzanine fund.
Because of the intermingling that had happened, it was extremely difficult to separate out who owned what money, and whose rights came first in the case of any apparent dispute. To make sense of the mess would require a lot of detailed work, and that would cost money.
[ Investors tell of devastation caused by Custom House Capital collapseOpens in new window ]
This in turn led to a second major complication. Wallace had been appointed to a company that looked after client assets of more than €1.1 billion, but he was liquidator to the company, not the client assets. The assets of the company were, as Ms Justice Mary Finlay Geoghegan put it in a court ruling, “in relative terms, small”.
Before he could return their investments to many of the clients, Wallace needed to conduct a complex reconciliation. In order to get paid for this work he proposed a fee scheme to the clients, some of whom agreed and went on to have their money released. Others disagreed with Wallace’s proposal, further slowing down a process that was already moving slowly.
Ms Justice Finlay Geoghegan, when the issue was brought before her, formed the view that the reconciliation work was properly required for the orderly winding up of CHC, and that Wallace was entitled to deduct “reasonable expenses” from client money.
This, understandably, was not something many of the clients felt inclined to agree with, and disputes over the issue added to the distress of those who had once placed their trust in Cassidy and his team.
One former client of the CHC, retired solicitor Tressan Scott, went to court in 2011 and argued successfully that money she had lost should be returned to her from CHC’s assets.
Her accountant had recommended CHC to her and in 2009 Scott met Whyte in her Wexford home and discussed her requirements. Eventually Scott transferred most of her personal savings and pension funds – €744,238 – to CHC.
The transfer included €145,000 that was to be given as a loan to CHC. The investment, she was told, was “low risk” but in fact was a subordinated loan to a company that was already experiencing serious difficulties.
In 2010 media reports emerged that the Central Bank had ordered CHC to cease writing new business. Whyte visited Scott in her home and, she later told the court, reassured her that her €145,000 was safe.
He showed her a letter which the Central Bank had directed to be shown to CHC clients who had made subordinated loans to the firm. It pointed out that the €145,000 given by Scott to CHC was being used to buttress the capital of CHC following a direction from the Central Bank.
The letter offered Scott the opportunity to withdraw her money, but Whyte, she said, insisted her money was safe, and she believed him. When CHC collapsed, Scott’s €145,000 appeared to go with it.
In a decision in December 2013, Ms Justice Finlay Geoghegan found that CHC/Whyte had “fraudulently procured” from Scott her decision to leave the money with CHC rather than be repaid with interest. The consequence of this, the judge said, was that from that date on the money was no longer a subordinated loan to CHC but rather money that CHC held in trust for the retired solicitor.
The latest filed statement from Wallace’s ongoing liquidation of CHC shows total realisations as of November 2024 of €7.7 million and total disbursements of €6.6 million. Among those who have received money from the CHC realisations was Scott, who was paid €185,411.
Despite the commission payments, the overall picture that emerged after CHC collapsed was not of an effort to steal client money for personal benefit, but rather a doomed effort to use client money to keep the CHC show on the road
Cassidy, Whyte and former non-executive director John Mulholland (74) – who was given a one-year sentence in 2023 having pleaded guilty to neglectful discharge of a director’s duties – were all disqualified from acting as directors in December 2016 by Mr Justice David Keane. Cassidy was disqualified for 14 years, the longest such disqualification by the High Court to date. Mulholland was disqualified for 12 years and Whyte for 10.
In his ruling Mr Justice Keane said Mulholland, like Cassidy, benefited from commission payments that were due to the men but that were made using client rather than company funds.
Among the matters discovered by the inspectors, the judge noted, was the existence of a bank account in the name of Cassidy and Mulholland in Luxembourg into which commissions totalling €2.3 million were paid, with most of the money coming from client funds rather than CHC.
“Although Mr Mulholland has expressed embarrassment and distress at the position the company’s clients now find themselves in, as with Mr Cassidy, there is no suggestion that he has made any attempt to address the deficit in client funds,” the judge said. Mulholland co-operated with Wallace and the liquidation process. Cassidy did not.
Despite the commission payments, the overall picture that emerged after CHC collapsed was not of an effort to steal client money for personal benefit, but rather a doomed effort to use client money to keep the CHC show on the road. Although the clients had to wait years for it to happen, the bulk of the client money that CHC had under management has now been returned.
Last week the courts were told the Director of Public Prosecutions had decided not to try, for a third time, former CHC financial services manager Ciara Kelleher (53) for alleged conspiracy to defraud. After the nolle prosequi was entered, her family said Kelleher was “devastated” by having been the subject of suspicion for more than a decade. Juries in two trials had failed to reach a decision in her case. Meanwhile, the investors continue to rue the day they ever handed over money to Harry Cassidy and CHC.
