An inquiry into alleged regulatory breaches by two former Quinn Insurance Limited (QIL) directors heard on Tuesday that subsidiaries of the company provided guarantees against €1.2 billion of loans taken out by its parent, Quinn Group, more than a decade ago without the knowledge of the insurer's full board.
While there are minutes of meetings purportedly giving rise to the guarantees, Eoin McCullough, senior counsel, of the legal practitioner team assisting the inquiry, said that evidence will show that no such meetings took place.
Assets
The two men subject to the inquiry are Liam McCaffrey, former chief executive of Quinn Group and one-time director of QIL, and Kevin Lunney, who was also a director of both companies at the time of the alleged contraventions between 2005 and 2008.
The assets of eight subsidiaries providing the guarantees were either direct or indirect units of QIL and were used by the insurer to bolster its technical reserves, according to Mr McCullough. The units included Quinn Property Holdings Limited and Quinn Hotels Limited.
The guarantees were used by businessman Sean Quinn's then cement-to-property conglomerate Quinn Group to access funding through UK banking group Barclays between October, 2005 and April, 2007. This weakened the quality of the reserves of QIL, as the assets might not have been available to the insurer if it ran into trouble, he said.
“What is certainly not in dispute is the following: the persons concerned never told the other members of the QIL board or the investment committee of the proposal to enter into the guarantees - or the fact that the guarantees were entered into,” Mr McCullough said.
He said that the rest of the board did not become aware of the guarantees until March 2010, “when matters became difficult”.
While the Central Bank decided in 2015 to proceed with an inquiry into actions of the two individuals, it only began public hearings on Tuesday. The inquiry is made up of a three-person panel, led by chairman Mr Justice Iarfhlaith O'Neill, a retired High Court judge.
QIL, set up in 1996 by businessman Sean Quinn, fell into administration in early 2010 and was subsequently bought a year later by US insurer giant Liberty Insurance for a nominal price of €1. It was renamed Liberty Insurance DAC.
Loans
Mr McCaffrey told the inquiry that Quinn Group relied on law firm A&L Goodbody to complete documents in relation to group loans between 2005 and 2007 and that it was made clear that the financing could not affect QIL. “Unfortunately, the wording only carried ‘Quinn Insurance’. It should have had ‘Quinn Insurance and its subsidiaries’,” he said, adding that it was “an omission that did not come to light until 2010”.
A&L Goodbody partner Adrian Burke, who worked on the Quinn Group borrowings, said that his firm was not engaged at the time to advise QIL. He added that Quinn Group itself chose what subsidiaries were to be used to guarantee the group loans.
Mr Lunney said that he was “as shocked and surprised as everybody” to learn in 2010 that QIL subsidiaries had guaranteed the group loans. While he accepted that his signature was at the bottom of enabling documents, he said he believes that these were signed as part of a volume of paperwork that passed through his desk.
Mr McCullough said that it is not being alleged as part of the inquiry that the two former QIL directors caused the collapse of the insurer. In addition, while the two men “may feel that there may be others who should be here” and subject to investigation, “that’s not a matter for the inquiry”, he said.
The public hearings are expected to run until the end of next week.
