Oireachtas Joint and Select Committees

Tuesday, 18 October 2016

Public Accounts Committee

Special Report No. 94 of the Comptroller and Auditor General: National Asset Management Agency Sale of Project Eagle (Resumed)

Mr. Seamus McCarthy (An tArd Reachtaire Cuntas agus Ciste), Mr. Willie Soffe (NAMA Board Member), Mr. Oliver Ellingham (NAMA Board Member)and Mr. Brian McEnery (NAMA Board Member)called and examined.

10:00 am

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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Apologies have been received from Deputies Peter Burke, Alan Farrell and Josepha Madigan.

Today the committee will continue its examination of the Comptroller and Attorney General's special report No. 94 on the National Asset Management Agency, or NAMA as it is better known, and its sale of Project Eagle, the code name given to the sale of its Northern Ireland loan portfolio. To date, we have met the Comptroller and Attorney General to discuss his report; representatives of NAMA; the Minister for Finance, Deputy Michael Noonan; and Mr. Brian Rowntree, a former member of NAMA's Northern Ireland Advisory Committee, NIAC. Today we have an opportunity to meet three of the board members of NAMA.

They are current board members who were also on the board at the time of the sale of Project Eagle. We will meet three former members of the board on 17 November 2016. The reason for doing so is that there was a suggestion, before the Comptroller and Auditor General's report was made, that members of the board of NAMA had requested to meet the Comptroller and Auditor General. That meeting did not happen, which we saw in the report, so we said we would facilitate the meeting. That is no criticism of the Comptroller and Auditor General as it is just our prerogative to do so.

I welcome Mr. Brian McEnery who was also and remains chair of NAMA's audit committee and a member of the Northern Ireland advisory committee, NIAC, at that time. We are joined by Mr. Oliver Ellingham who was also and is chair of NAMA's risk management committee and a member of the audit committee. Also in attendance is Mr. Willie Soffe who was chair of the planning advisory committee and also a member of the NIAC at that time.

Please note that we are joined from the Office of the Comptroller and Auditor General by Mr. Andy Harkness, secretary and director of audit, and Mr. John Riordan, deputy director.

I want to acknowledge that since our meeting with Mr. Rowntree we have received correspondence from NAMA, dated 14 October, from NAMA's head of public affairs. He enclosed a copy of the Ulster University's spatial analysis of the residential development landbanks in Northern Ireland that was compiled for NAMA. He also enclosed another document called Opportunities for Open Discussion by Ulster University and a copy of a parliamentary question from and reply to Deputy Pearse Doherty on the matters we spoke about with Mr. Rowntree. The letter from NAMA categorically refutes what Mr. Rowntree said in a number of aspects. We will publish that correspondence this morning. We will not have a debate on it but I wish to acknowledge that we have received the correspondence and I have put it out there publicly, as urgently as possible.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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To follow up on the matter, it would be valuable to write back to NAMA to say a number of presentations were given prior to the 2014 presentation that it cites that NAMA failed to mention in its letter. It is in the documentation. In 2012 and 2013, detailed presentations were given about the Ulster University's study.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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Yes.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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We should ask NAMA for a full list of whatever presentations were given, not just the 2014 one but any presentations that were given, either to the NIAC or the board of NAMA.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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Fine. We will do that and it has been noted by the secretariat. Standard procedure from now on will be that after every meeting, we will send NAMA a letter regarding any documentation we need to obtain from it because I am sure something will come up today that will require clarification. It will be routine that at the conclusion of each meeting, the secretariat will send a letter, on the behalf of us, seeking the matters referred to.

I remind members, witnesses and those in the Public Gallery that all mobile phones must be switched off.

I advise the witnesses that by virtue of section 17(2)(l) of the Defamation Act 2009, they are protected by absolute privilege in respect of their evidence to this committee. If, however, they are directed by it to cease giving evidence on a particular matter and continue to do so, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person or an entity, either by name or in such a way as to make him or her identifiable.

Members are reminded of the provisions of Standing Order 186 that the committee shall refrain from inquiring into the merits of a policy or policies of the Government or a Minister of the Government or the merits of the objectives of such policy or policies. Finally, members are reminded of the long-standing ruling of the Chair to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official, either by name or in such a way as to make him or her identifiable.

Mr Soffe will make an opening statement on behalf of the three directors in attendance today. Then we will have questions from members of the committee, who will be free to direct their questions to whomsoever of the witnesses they consider most appropriate. We will work that out as the meeting goes along. I call on Mr. Soffe to commence.

Mr. Willie Soffe:

For completeness, I wish to say that I am the chairman of NAMA's credit committee as well.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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I thank Mr. Soffe.

Mr. Willie Soffe:

And I was at the time of the sale.

I welcome the opportunity on my own behalf and on behalf of my board colleagues, Brian McEnery and Oliver Ellingham, to respond to the Comptroller and Auditor General's special report into the sale of Project Eagle. The committee has asked us to focus on four main aspects of the sale: the financial outcome; the basis for the decision to sell the loans and to set the minimum price; the competitiveness of the loan sales process; and the management of conflicts of interest associated with the disposal and with the Northern Ireland advisory committee.

The committee will appreciate that it is difficult to address the questions its members have put to us without repeating points made by NAMA's chairman and chief executive officer, CEO, when they appeared before the committee on 29 September. That is because my colleagues here today and I concur fully with the Chairman and CEO's views. While I am conscious of the time constraints facing the committee, I feel it is essential that we put on the record our perspective on the issues the committee has asked us to focus on.

In terms of the financial outcome and the basis for the decision to sell the loans and set the minimum price, I am acutely conscious that some people are of the view that NAMA should not have sold Project Eagle in 2014. Let me explain, as a board member, the reasons why we did so. When we became aware of a potential opportunity to sell Project Eagle in one lot, it was one of four possible courses of action open to us, namely, to sell in one lot, sell in more than one lot, defer a sale in favour of selling at some point in the future or retain all of the loans and work them out over a five to seven-year period. We chose to sell in one lot in 2014. The NAMA board formed the view that this was the best strategy and that is still our view. We have seen no credible analysis that would prove that another strategy would have delivered a better outcome. Selling in more than one lot would, in our view, have delivered an inferior commercial outcome. The portfolio had a lot of secondary assets. We simply could not have achieved an acceptable price if those assets had not been bundled with better quality assets. Deferring a sale would have delivered an inferior outcome. Northern Ireland commercial property prices have failed to improve since we sold Project Eagle. All the signs are that the Northern Ireland market may struggle for the foreseeable future until the full implications of Brexit have been absorbed. Retaining the loans for five to seven years would also have delivered an inferior outcome. No credible observer would suggest that working out these loans in a post-Brexit world would generate more money than we got.

We were acutely conscious then, as we are now, of our obligation under section 10 of the NAMA Act - an obligation placed on us by the Oireachtas - to do our business commercially and expeditiously. That means taking advantage of opportunities to sell loans and assets when and where it makes commercial sense to do so. We have never had the luxury with any loans or assets of awaiting some indefinable optimum price level at some indeterminate point in the future.

We were also acutely conscious throughout this period from our engagement with the troika, the capital markets and international credit rating agencies, that major progress by NAMA in terms of debt redemption was seen as an important element in Ireland's path to recovery. NAMA has never acted in a vacuum.

For all of these reasons, I have no doubt that if we had turned down the opportunity to sell Project Eagle for £1.322 billion in 2014, the Committee of Public Accounts would now be asking us a different set of questions. In making the decision to sell, we took account of the potential risks associated with other courses of action and concluded that they were not worth it. I cannot see how anyone, even operating with the benefit of hindsight, could now take the view that these risks were in fact worth taking. If NAMA had turned down the newly-presented opportunity to sell the Eagle portfolio in 2014 for £1.322 billion, I believe that it would have been acting in contravention of section 10 of the NAMA Act. I believe that because the £1.322 billion achieved in 2014 was the best price available in the market at that time and because we did not expect that working out the assets over a longer timeframe would yield a better result.

The board's decision in setting a minimum price of £1.3 billion for the Eagle portfolio was based on the portfolio's carrying value and the market reality that an non-performing loan discount of at least 10% would apply if the loan sale were to proceed.

If the reserve price had been too low, as the Comptroller and Auditor General has implied, it was likely that several bidders would have matched the reserve price with a view to acquiring the portfolio and realising the surplus value that was allegedly mispriced by NAMA. Nobody has offered a credible explanation as to why some very sharp investors somehow failed to identify this alleged mispricing opportunity.

In contrast, an e-mail from Fortress Investment Group, the underbidder, to the NAMA CEO in April 2014 showed that while Fortress Investment Group was “eager” to acquire the portfolio, it was "unwilling to pay NAMA's minimum price". In the e-mail, Fortress Investment Group added: “If you don’t hit your reserve we’d like to continue discussions with you either for the whole thing or some subset of it”. I have circulated a copy of that e-mail to the committee. As it happened, this offer was moot as the bid from Cerberus exceeded the minimum price set by the NAMA board. It strikes me that no recognition is given in the Comptroller and Auditor General's report to the commercial reality of an upfront discount associated with a bulk sale of loans versus working out loans individually over an extended timeframe.

The Comptroller and Auditor General acknowledged at the end of the Committee of Public Accounts meeting on 29 September 2016 that the 5.5% discount rate was not a market discount rate. In other words, no buyer would value the portfolio at a 5.5% discount rate. A similar view was expressed by Department of Finance officials at the Committee of Public Accounts meeting on 6 October. However, the key finding in the Comptroller and Auditor General's report, that NAMA made a "probable loss" on this sale, is derived from the mistaken assumption that a 5.5% discount rate, not the market discount of at least 10%, should have applied. This is like comparing apples and oranges and is not a fair or reasonable comparison. It is certainly a very fragile and hollow basis on which to ground one of the major findings of the report. It should be borne in mind that NAMA had in-house board and senior management expertise that would have guided the board as regards market discounts for portfolios of this type.

I share the concern of the NAMA chairman that the Comptroller and Auditor General ignored the independent market expert advice received by NAMA on this point, while failing to put forward any independent market advice which would support his own position. This is the key point. The Comptroller and Auditor General's statement that NAMA made a "probable" loss of £190 million on the Project Eagle sale is based on an assumption and a comparison that is simply wrong. The word "probable", which carries very specific connotations, was an amendment to the finding of a “potential” loss which appeared in the final draft submitted to the Minister for Finance and to NAMA. NAMA was not provided an opportunity to respond to this amended wording. We find the reference entirely incongruous with the Comptroller and Auditor General's evidence before this committee that "it is incorrect for my report to be characterised as stating that the discount rate of 5.5% was to be used in arriving at a likely market value ... This is not what the report says”. The "probable loss" only arises if one considers that a discount rate of 5.5% was appropriate for the Project Eagle portfolio. If one takes the market view of the appropriate discount rate, there is no loss, probable, potential or otherwise. Moreover, the Comptroller and Auditor General has said he has not received sufficient assurance that a different course of action would not have delivered a better outcome, yet no one – not the Comptroller and Auditor General or any market participant – has offered any convincing evidence that a better outcome was available, either then or later.

I will turn to the competitiveness of the loan sale process. Questions have also been raised about the extent to which the sales process was competitive. The fact is that nine of the largest loan purchasers in the world were approached on Project Eagle, five of whom proceeded with due diligence and two of whom ultimately submitted bids based on their view as to what the portfolio was worth. The fact that there were two final bidders is a common outcome for many loan sales and to describe the process as uncompetitive is simply wrong. As any loan sales specialist will attest, a competition that is time bound and focused on the most credible bidders is not unusual in the loan sales market. As was explained by the chairman on 29 September last, there were very good reasons for opting for a time bound and focused competition in the case of Project Eagle.

Let me be clear - the NAMA board would not have continued with this sale if the sales process was not competitive. Lazard was categorical in advising the board that the sales process was competitive throughout and ultimately delivered the best outcome. To believe otherwise is to believe that my colleagues and I deliberately and consciously chose a course of action that would harm the interests of the State. Nothing could be further from the truth. We have always taken our obligations very seriously and it not credible to suggest that, on this one occasion, the board was collectively derelict in its duty to taxpayers. Section 18(3) of the NAMA Act requires the board to "act in utmost good faith with care, skill and diligence" in making its decisions. I can assure the committee that we fully discharged this statutory duty.

I and other board members were satisfied, based on Lazard’s unequivocal expert advice to the board, that all major credible investors with the capacity to submit bids for a portfolio of this scale and granularity were approached during the process and that all investors that had a serious interest in acquiring the portfolio had adequate time and information to enable them to prepare and submit firm bids. There was no qualified recommendation from Lazard as has been suggested. On that basis, I and my colleagues were satisfied that the best price achievable for the portfolio was achieved. The board rejects the Comptroller and Auditor General's unsubstantiated suggestion that serious credible bidders were excluded from the process.

On the sales process itself, we believe that the Comptroller and Auditor also failed to take account of the wider political, economic and financial implications in Northern Ireland of NAMA’s decision to sell the Project Eagle portfolio and the obligations on NAMA as a State agency in Dublin to be cognisant of the concerns of the Northern Ireland Executive and of the Irish Government. Northern Ireland could never have been viewed by NAMA in the same way as it would have viewed other jurisdictions to which it also had significant exposure. NAMA’s exposure in those jurisdictions was minuscule by reference to the size of their property markets. This was not the case in Northern Ireland. I believe that NAMA’s perspective on this would be widely shared in the Oireachtas - given the recent history of this island, it would have been unthinkable for NAMA to have ignored the impact of its actions on the Northern Ireland economy and on North-South relations.

Turning to the management of conflicts of interest associated with the disposal and with the Northern Ireland advisory committee, I will conclude by dealing with concerns over Mr. Cushnahan’s alleged conflict of interest. We take strong exception to the suggestion that the process was corrupted by Mr. Cushnahan’s alleged activities. As the NAMA chairman pointed out to this committee on 29 September last, Mr. Cushnahan may have sought to represent himself as a key pivot between debtors, investors and politicians but he had no influence with NAMA and his alleged activities had no impact on the price ultimately achieved.

Following my appointment to the committee in mid-2011, I attended every meeting of the Northern Ireland advisory committee, NIAC. I can attest at first hand that there was no discussion of individual debtors or individual debtor assets at those meetings. Nothing said at those meetings would have been of any benefit to any NAMA Northern Ireland debtor or to anybody seeking to buy assets from a NAMA Northern Ireland debtor. The Comptroller and Auditor General's view on the management of conflict of interests reflects a subjective opinion exercised with hindsight by the Comptroller and Auditor General. The board by contrast had to rely on its judgment and knowledge in March 2014, and prior to that, and within the legal parameters applicable. What was, in fact, regularly discussed at the NIAC was the state of the Northern Ireland property market and of the wider Northern Ireland economy. We heard from various Northern Ireland economists and property market experts and the message was far from positive or confident about the future.

In 2012, we were given a presentation by a leading Northern Ireland economist. The title of that presentation says a lot, An Overview of the Regional Economy at a time of Balance Sheet Recession and Austerity. At another meeting in 2013, we received a follow-up presentation from that economist and another, the title of which was Recession, Recovery or Stagnation? Short and Medium Term Prospects.

There were very few cheerleaders for the Northern Ireland property market and economy during the period from 2010 to 2014. Indeed, I recall that Mr. Brian Rowntree, another external member of the NIAC, gave a very down-beat assessment of the Northern Ireland economy to the NAMA board and executive in February 2014. The NAMA board took note of the perspective of the two external members of the NIAC as it provided a useful local insight into Northern Ireland dynamics. However, strategy towards Northern Ireland debtors and assets was entirely a matter for the board and there was never any doubt about this. This was confirmed by Mr. Rowntree in his evidence to this committee last week. During that evidence, Mr. Rowntree also referred to a University of Ulster report on residential land in Northern Ireland. That report relates solely to residential development land which comprised less than 8% of NAMA’s Project Eagle portfolio. It contains no valuations or NAMA debtor or asset-specific information. It is, in fact, a high-level overview of residential land holdings held as security by NAMA and by other financial institutions in Northern Ireland. I understand that a total of five financial institutions contributed data to the research. NAMA referred to this report in its 2013 annual report, on page 68, and in its 2014 annual report, on page 61. The report was available to the Comptroller and Auditor General's office as part of its review of Project Eagle, or indeed at any time before that review. Subsequent to Mr. Rowntree’s evidence, we made a copy of this report available to this committee and have published it on our website.

Mr. Rowntree suggested that the information in this report could potentially have been of commercial value if combined with Northern Ireland Housing Executive data on housing requirements. This aggregated analysis was not available to NAMA during 2012 and 2013 and only became available to NAMA when two Ulster University at Jordanstown, UUJ, staff members made a presentation to the NIAC on 8 September 2014. This was three months after the sale of Project Eagle concluded in June 2014. The committee might note that this UUJ information from September 2014 was not provided to Mr. Cushnahan as he had resigned from the NIAC in November 2013, some ten months before.

There has been some comment on the fact that Brown Rudnick and Tughans were employed as strategic advisers by Cerberus after the withdrawal of PIMCO but they were not legal advisors. It is our understanding that it is not unusual for advisors of all types to transfer to other bidders in these circumstances. This was confirmed to us by Lazard which stated that, in its experience, it is not uncommon for advisors acting for an investor who withdraws from a process to work subsequently for a different investor who remains in the process. I gather that this point was also affirmed by the Department of Finance at this committee's meeting on 6 October.

I will conclude by making a number of points. First, to anyone who doubts whether the financial outcome of this sale was in fact the best achievable, I would respond that no one, including the Comptroller and Auditor General, has demonstrated any other course of action that would have resulted in a better price for the taxpayer. Second, to anyone who doubts that we were right to sell the loans for more than our minimum price, I would respond that we would get far less if we tried to work them out over time or if we tried to sell them today. Third, to anyone who doubts that the sales process was competitive, I would respond that it is clear to any objective observer that the underbidder, Fortress, was very disappointed not to acquire Project Eagle. Notwithstanding its serious interest, it was simply not in a position to match the board’s minimum price. The existence of a highly credible but disappointed underbidder is the single defining characteristic of a competitive sale process. Finally, to anyone who believes that Mr. Cushnahan’s conflict of interest in some way harmed the Irish taxpayer, I would respond that his alleged actions had no bearing whatsoever on the price paid by the winning bidder or on NAMA's decision to sell.

Commercial decision-making involves deciding on the merits of one course of action over another. The board accepted that a non-performing loan discount of at least 10% would arise in the sale of the project Eagle portfolio but it was also very much aware of a number of balancing considerations. The board was satisfied then and now that the minimum reserve price of £1.3 billion was appropriate. The proceeds realised from Project Eagle made a significant contribution to the major senior debt redemption of €9.1 billion achieved by NAMA in 2014. This was a significant statement about Ireland in its first year after exiting the troika programme.

We have also saved on costs arising from the management of the Northern Ireland debtor loan portfolio and crucially, we reduced the exposure of Irish taxpayers to the impact of Brexit on property values in Northern Ireland, the north of England and Scotland. We fully stand over the decision to sell the Project Eagle portfolio for the £1.322 billion price achieved in April 2014 and nothing has occurred in the interim to undermine the sound, strategic and commercial rationale for that sale decision.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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I thank Mr Soffe. I now invite Deputy Catherine Murphy to commence the questioning of our witnesses. She will be followed by Deputies Cullinane, Connolly, Kelly and McDonald.

Photo of Catherine MurphyCatherine Murphy (Kildare North, Social Democrats)
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The witnesses are very welcome. Mr. Soffe said in his statement that there was an obligation placed on NAMA by the Oireachtas to do its business commercially and expeditiously. NAMA also had a policy of openly marketing loan sales but it deviated from that with the Project Eagle sale. It was only very late in the day that other bidders were invited into the process and the timeline seems to have been incredibly tight in terms of assimilating the kind of information that would have been in the data room for other bidders to properly consider any bid they would make. I ask Mr. Soffe to respond to that.

The sales process was a singular sales process, as opposed to a two-phased process where one opens it up to a wider group. Obviously, people have to make a declaration not to disclose commercial information and then it is narrowed down to a shortlist of preferred bidders. Would that be the way NAMA would normally have approached other sales processes? If so, why did this one deviate from the norm?

Mr. Willie Soffe:

We would normally appoint a company to manage the sale and the process would be much more open. In this particular case, as was pointed out by our chairman, Mr. Frank Daly, on 29 September, there were special circumstances. It was the view of the Northern Ireland Executive and the Irish Government that we should not be seen to be selling off assets or disrupting the economy of Northern Ireland and that this should be a confidential, as far as possible, and discreet sale. It is not unusual in the marketplace - my colleagues would have more experience than me of this - to have this sort of limited sales process. Lazars advised that it was not unusual. This had to be a time-bound and focused sale. It would have been unthinkable in the circumstances pertaining in Northern Ireland to spend up to 12 months trying to complete a sale. Therefore, we had this focused process which is not unusual.

At the end of the day, nine very substantial bidders, representing approximately 90% of the capacity in purchasing this type of sizeable loan throughout Europe and the UK, had an opportunity to bid. They had expertise of being able to get and analyse the information that would be available in a data room. Mr. McEnery has something to add.

Mr. Brian McEnery:

As is outlined on page 111 of the Comptroller and Auditor General's report, we proposed an approach that "involved the appointment of a Corporate Finance Advisor, who would (i) advise NAMA on the appropriate marketing approach which would balance the open marketing requirement with the need for confidentiality, (ii) undertake appropriate marketing..."

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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Sorry, where is that?

Mr. Brian McEnery:

It is on page 111, Deputy.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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Yes. I have it in front of me.

Mr. Brian McEnery:

It is the fourth paragraph down.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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Thanks.

Mr. Brian McEnery:

We went on to say that the adviser should "undertake appropriate marketing to suitable targeted bidders with the financial wherewithal and appetite to purchase such a portfolio and capacity to perform in a timely manner, with a timeline as recommended by the advisor". That was the decision of the board. It was different and it was bespoke. I think that has been recognised and stated by the chairman and chief executive. It is also important to say that a request for a closed process was refused. That request was made on a number of occasions, but it was refused by the board. The advisers were appointed. Then there was a list of nine parties who would have been deemed to be credible as counter-parties.

Photo of Catherine MurphyCatherine Murphy (Kildare North, Social Democrats)
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Was Lazard not brought in after PIMCO withdrew? If that is the case, it did not advise NAMA of it in advance. I think it would be fair to say it advised NAMA in hindsight. It has been suggested that Northern Ireland was a different category, but 50% of the assets associated with the loans were not based in Northern Ireland. Why were they not separated out? They would not have raised the same conflicts or problems that existed, according to what we have been told. On that point, why did NAMA engage the University of Ulster to do a piece of work to prepare in advance of the sale, if it considered that a more strategic approach needed to be taken and that this information was needed? That does not make any sense to me. It seems to have been dispensed with very quickly.

Mr. Willie Soffe:

In the early years, the policy was to work out loans where there was no opportunity for bulk sales. The main opportunities we had to sell were in the London area. We had some opportunities here in Ireland. That is why if one looks at redemption figures, one will see that in the three years to the end of 2013, we paid down €7.5 billion of the debt. We had difficulty doing so.

Photo of Catherine MurphyCatherine Murphy (Kildare North, Social Democrats)
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I ask Mr. Soffe to address the questions I have asked.

Mr. Willie Soffe:

Opportunities for loan sales were arising in late 2013 and 2014. We decided that was a road to take. We undertook a top-level project on residential land zoning with the University of Ulster in 2012, when opportunities for loan sales were not arising in Northern Ireland.

Mr. Brian McEnery:

I will answer the Deputy's question about why we did not look at separating the assets outside Northern Ireland. We actually did look at it. We discussed it. I will explain why we did not do so. Let us take the example of a debtor who has some borrowings and some assets in Northern Ireland and some in the United Kingdom. If we decided to separate out the Northern Ireland ones in such a case, we would have to remit recourse in respect of the assets we would be trying to sell in the United Kingdom. We were trying to ensure we did not separate the portfolio in cases where there was a personal guarantee, for example, because we believed such a move would have damaged the value of part of the borrowing covered by the borrower's personal guarantee. We believed that if we did separate them out, we could impair the value of the overall portfolio. That is the reason we did not separate them. What was common about this was that the borrowers were out of the Northern Ireland jurisdiction. Not all of their borrowings were in the Northern Ireland jurisdiction. We felt it was important for us not to give the rights associated with the personal guarantees covering their borrowings by separating out parts of their portfolios.

Photo of Catherine MurphyCatherine Murphy (Kildare North, Social Democrats)
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Yes, I can see that that could be the case. It seems to have been the case in almost all of the Northern Ireland loan portfolio and not just parts of it. Is that how Mr. McEnery sees it?

Mr. Brian McEnery:

There would have been personal recourse in a lot of borrowings. There may not have been personal recourse in other borrowings. It is also important to mention another reason. As part of our strategy around selling loans in bulk, as opposed to the individual assets underneath, we generally try to blend the mix of what goes into a loan sale. We try to include some good loans, some medium loans and some pretty poor loans that are not generating any income at all. We felt that if we were going to do a loan sale on a bulk, it was important to mix in poor, medium and high-quality loans. When we were looking at those assets, we found that some loans in the poor part of the portfolio were not generating income at all. There was no income coming off of them. In fact, there would have been a cost associated with holding those assets if we had sold off the other ones. I will explain why. There would have been a need for public indemnity insurance in respect of them. Some of the assets would have been deteriorating. Security costs and other costs are associated with poor properties and half-built housing units. Truthfully, the loan process is about trying to get a mix to take to market in order to get rid of the bad ones with the good ones.

Photo of Catherine MurphyCatherine Murphy (Kildare North, Social Democrats)
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The common denominator is that the loans were owned by people rather than based in Northern Ireland. How many loans that were owned by Northern Ireland-based people were actually sold separate to Project Eagle?

Mr. Brian McEnery:

Up to when we sold Project Eagle, I believe it was approximately €100 million that was sold. That would have been in advance of the sale in 2014. They would have been individual assets.

Photo of Catherine MurphyCatherine Murphy (Kildare North, Social Democrats)
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Very little, really, in comparison-----

Mr. Brian McEnery:

Yes.

Photo of Catherine MurphyCatherine Murphy (Kildare North, Social Democrats)
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Right.

Mr. Brian McEnery:

That would have been reflective of the fact that we would have felt the market was-----

Photo of Catherine MurphyCatherine Murphy (Kildare North, Social Democrats)
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Would Mr. McEnery accept that Lazard was brought in after the event? NAMA relies on it to say it advised, but that advice was provided in retrospect rather than in advance.

Mr. Brian McEnery:

PIMCO approached NAMA through the Department of Finance. It was a reverse approach, in effect. We did not go out seeking a sale of the Northern Ireland portfolio en masse. It approached NAMA. We did not appoint Lazard in advance because we did not intend to go out on a bulk loan sale.

Photo of Catherine MurphyCatherine Murphy (Kildare North, Social Democrats)
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Mr. McEnery referred to Fortress as regretting that it did not make the reserve price. It was brought in very late in the day. Would that not have indicated to NAMA that there may well have been some value in dividing the loans at that stage to achieve a better outcome? Would that not have suggested to NAMA that the amount of time made available for Fortress and other bidders to consider what was on sale may have been inadequate? By comparison, PIMCO had a large length of time to consider and to engage with NAMA.

Mr. Oliver Ellingham:

It is not uncommon for bidders like this to know that they are having to bid on a short timeframe and they will say they are either willing to do it or they are not willing to do it. In this case, there were nine parties who were willing to operate in the timescales that were made available for them. Fortress was not saying that it might have paid more had we broken the assets up. It was saying it simply could not reach a value of €1.3 billion. It did not think these assets were worth €1.3 million. We found somebody who was willing to pay that price and from all the work we had covered before, our view was that if we broke it up into smaller parts, we would definitely have got less money.

Photo of Catherine MurphyCatherine Murphy (Kildare North, Social Democrats)
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Brian Rowntree told the committee he was one of the people who suggested the University of Ulster report be done. The report was done in conjunction with banks when other assets were involved. What was the thinking of the board with regard to undertaking this process? How did it anticipate it would work through these loans in the context of the University of Ulster report?

Mr. Willie Soffe:

I remember that this was a project that was limited to residential land zonings. About 8% of the Project Eagle portfolio was residential. If one looks at the totality of the figures from the institutions that took part in this project, we were about one fifth. It was confined to residential.

Why was it done? It was done because there seemed to be a dearth of information about residential zonings throughout Northern Ireland and incomplete information about them. The approach that was made to us by the University of Ulster was one where it said, "Look, you and other financial institutions probably have loans in many of these residential properties. Can we have a project that identifies the totality of residential land on which there are loans throughout the province?" It is possible to go into any local authority or planning authority and find out what is happening in that particular local authority area. What was lacking was a total picture. We wanted to find out more about our own residential zonings up there because we were coming from a different jurisdiction and it was important to know the quality.

One of the things that emerged in the exercise was that there were a lot of residential zonings that created excess zoning. One could argue in quite a number of cases that maybe a structure would be returned to agricultural zoning. The whole purpose was to get a total picture in regard to Northern Ireland. NAMA funded a similar project here in the Republic but it was much larger. It was geographical information systems, GIS, project that the Department of the Environment, Community and Local Government wanted. It gave information on all types of zoning, whether it was residential, industrial, agricultural or amenity - the whole lot- as well as a lot of information about flood plains, infrastructure deficits and all of that. That project has been completed and it is available for policy decision. The Department has it now and it gives information down through tremendous detail on every planning application and development plan.

This was a project to see if we could get a picture of residential zonings throughout the province or throughout Northern Ireland. It was high level and, as I said, there were no details of valuations or individual borrowers.

Photo of Catherine MurphyCatherine Murphy (Kildare North, Social Democrats)
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Several interim reports were presented.

Mr. Willie Soffe:

There was a perfection of the process. At the beginning, some of the financial institutions did not want to get involved and there was an exercise in persuading them to become part of it. They were most anxious to ensure that if they took part that, while the total information was made available at the end of the day, that part of the information that applied to them would not be identified separately.

Photo of Catherine MurphyCatherine Murphy (Kildare North, Social Democrats)
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Once the project was under way, interim reports were given to the Northern Ireland advisory committee and the NAMA board. Therefore, it is not true to say that the only sight that, for example, the likes of Frank Cushnahan would have had of the process would have been at the end of it. Mr. Cushnahan would not have had sight of it because he had left the advisory board but interim reports were produced once the project was embarked on. That is fair to say.

Mr. Willie Soffe:

The end of September meeting was the last meeting of the Northern Ireland advisory committee. At that meeting, there was a presentation made on where the University of Ulster was on the project at that stage. It also included Northern Ireland Housing Executive information, but still at a high level. At that stage, as the Deputy knows, Project Eagle had been completed since June. Our contribution was, we felt, significant to putting all this information together. The real beneficiaries of this had to be the Northern Ireland Executive which could get a picture of residential zoning in the whole province so that, for instance, if it was trying to attract industries to west of the Bann, it would know whether there was a possibility of people living in that area, as well as having sites for industrial development.

Photo of Catherine MurphyCatherine Murphy (Kildare North, Social Democrats)
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While I am sure that is of value to the Northern Ireland Executive and I accept it will have benefitted from the report, I would have thought the primary purpose of the report was to benefit NAMA rather than the Northern Ireland Executive.

We heard from Brian Rowntree last week that he would not bid blind for something as big as Project Eagle and he thought it was unusual for a blind bid to be made. In the Comptroller and Auditor General's report, we are told that there was no due diligence engaged directly and that there was a reverse engineering of NAMA's balance sheet. Did it strike the witnesses as surprising that the PIMCO bid or offer came in advance? Did NAMA have any doubts about from where PIMCO would have put together the information?

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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I ask the Deputy to conclude.

Mr. Oliver Ellingham:

It is not uncommon for buyers to approach owners of businesses to try to tease out a sale. They will go on whatever information they have got, whether it is accurate or not, and they may have been hopelessly out in their expectations. In the end, we agreed a basis that we would provide data on - I think it was the leading 55 loan accounts - once we had an approach of interest from PIMCO. So, it is not at all uncommon in the world for people to try to tease interest to sell from owners.

Mr. Brian McEnery:

There are two other aspects. There was a significant amount of information which would have been available through our financial statements, which gave a composition of the loans. That is publicly available as part of the annual report. Second, it is useful, as a follow on from what my colleague has said, to note that when PIMCO approached NAMA, it did so with a range of between €1.1 billion and €1.3 billion. In essence, what it was really saying was this: "We have an interest potentially in this portfolio and these are broadly the parameters; the high end is €1.3 billion and the low end is €1.1 billion and we will not know until we get in and get some detail around it". In effect, it had given itself a 16%, 17% or 18% margin of movement between the €1.1 billion and the €1.3 billion.

That is why we went off and looked at what we determined was the value pertaining to that portfolio.

Mr. Willie Soffe:

We made it clear early on that they could not have exclusivity.

Photo of Catherine MurphyCatherine Murphy (Kildare North, Social Democrats)
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They could not.

Mr. Willie Soffe:

They could not have the exclusivity they wanted.

Photo of Catherine MurphyCatherine Murphy (Kildare North, Social Democrats)
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Okay. By virtue of the fact that it was engaged almost privately, they did really have exclusivity and would have had, had they not run into the difficulty with-----

Mr. Willie Soffe:

No. We said that it would be a time bound, focused process and used Lazard, which was asked to bring in other interested parties.

Photo of Catherine MurphyCatherine Murphy (Kildare North, Social Democrats)
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Okay.

Mr. Willie Soffe:

It was made clear, initially, that PIMCO was one of those interested parties, but not the only one.

Photo of Catherine MurphyCatherine Murphy (Kildare North, Social Democrats)
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Can I just ask-----

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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The Deputy will have to conclude so we can go to the next speaker.

Photo of Catherine MurphyCatherine Murphy (Kildare North, Social Democrats)
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I have just one other question.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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Yes.

Photo of Catherine MurphyCatherine Murphy (Kildare North, Social Democrats)
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I will now to turn to the terms of reference, how there are always conflicts of interest and how they are resolved in situations like this. With regard to the terms of reference for the NAMA board and for the consultative committee in Northern Ireland, given that there had been a declaration that Mr. Cushnahan had engagement with a number of large developers with loans, would that not have been something that concerned the board with regard to the board's terms of reference? Northern Ireland is a very small place and it was suggested last week that there was a problem with the terms of reference.

Mr. Willie Soffe:

I do not see what problem there could have been. The terms of reference were quite clear that it was not a decision making committee. Its purpose was to provide advice on strategy in Northern Ireland. Details about borrowers or their assets were never discussed. On the issue of conflict of interest, we all make declarations annually about any conflict of interest, but at each meeting - I chair the credit committee quite regularly - and at the board meeting, the first item on the agenda is whether there are any disclosures of interest to be made. From time to time disclosures are made and when the item to which the disclosure applies arises, the individual involved has to leave the meeting and come back when the item is finished. It happens for various reasons. People may have a conflict of interest because in their other job they are doing work with various companies. An example would be a member of staff of NAMA who was, in a previous job, an adviser to a buyer. That person would have filled in a form and declared that interest. The chairman of the meeting will then ask the individual to leave.

Mr. Oliver Ellingham:

I think the best way of summarising those committees is that it was a one-way street. Those people were there to provide colour on an economy and they were very local to it. Clearly, as this committee has said, there is a difference between the North and the South. Their job was to provide views of what was happening in Northern Ireland but they were never provided with confidential information on debtors.

Photo of Catherine MurphyCatherine Murphy (Kildare North, Social Democrats)
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Was it not very local by virtue of the fact that Mr. Cushnahan had engagement, or had an association, with a number of the large debtors? Is that not little bit too close for comfort?

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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That is the Deputy's last question. Mr. Soffe will respond to that and then I will invite Deputy Cullinane to contribute.

Mr. Willie Soffe:

I will finish. As long as it did not affect any of the business before us. We were not talking at meetings of the Northern Ireland advisory committee about individual debtors. In any case, where discussion about individual debtors crops up - and it would mainly arise at board meetings and credit meetings - a person with a conflict of interest would have to leave the meeting for that particular item.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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I welcome our witnesses and a welcome back to Mr. McEnery. I believe he was here a few weeks ago also. I found the opening statement by Mr. Soffe to be quite defensive. The board of NAMA has a right to defend itself but I found the statement itself to be quite defensive and emotional in some ways. Emotional statements were made rather than statements of fact, but we will return to that shortly. It is only my opinion and the witness is entitled to defend himself.

I will now turn to the issue of conflict of interest. Mr Rowntree was before the committee last week and he spoke about the process around conflict of interest. Mr. Soffe has spoken about the way that conflict of interest was dealt with; if a member of the board of NAMA or the NIAC believed there was a conflict of interest in any present or past experiences they would have had with companies, these would have to be declared, there is an annual declaration and then at every meeting people had to fill in a form. Is the process the same for the NAMA board itself?

Mr. Willie Soffe:

Yes, quite. Not too often but regularly enough, NAMA board members would declare conflicts of interest and excuse themselves from a particular item.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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This is different to what was done in the NIAC. It is my understanding, from what Mr Rowntree said, that members would have to fill in a written declaration. The information was not shared with anybody else, or other members. He then said that he hoped the same process runs through "the spinal cord" of the NAMA board. If somebody declared a conflict of interest before the meeting was that then shared with other members of the board? Was it kept private?

Mr. Willie Soffe:

What happens is that a conflict of interest is declared through the chairperson-----

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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In writing or orally?

Mr. Willie Soffe:

In both usually.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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Both.

Mr. Willie Soffe:

A form is provided to everybody-----

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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But that is not the case with the NIAC. It was not done orally for the NIAC and according to Mr Rowntree it was all in writing.

Mr. Willie Soffe:

I attended, as I said, all of the committees since 2011 and the chairman, Mr. Daly, inquired at the start of every meeting if there were any conflicts of interest. People were expected to have filled in a form beforehand to declare their conflicts of interest. Those of us who are chairpersons also ask at the meetings-----

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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I have what the witness is saying, but Mr. Daly also chaired the NIAC meetings.

Mr. Willie Soffe:

He did yes.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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When Mr Rowntree appeared before the committee last week he spoke about how conflicts of interest were dealt with. He said there was a form that had to be filled in, in writing.

Mr. Willie Soffe:

Yes.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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That information was not shared with any other member of the NIAC.

Mr. Willie Soffe:

No.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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At no point did the chair make reference to it or allude to it. It was just handed to the person who had responsibility for it, the information was not shared with anybody else. Mr. Soffe is saying that at the NAMA board meetings a different process was followed, where the chairperson would ask if there were any conflicts of interest, and if there were, someone would remove themselves. This seems to be a difference between the two.

Mr. Brian McEnery:

If I can respond to that. At the start of every meeting, and I believe this is for any of the Northern Ireland advisory committee meetings that I have attended and I do it in the very same way at every audit committee meeting, we ask if there are any section 30 disclosures of interest. We ask verbally but in addition there is a form to be filled in. What would happen in regard to the Northern Ireland advisory committee, as it would for every other board member, or advisory committee member is that at the start of the year they would be asked by the head of compliance in the National Treasury Management Agency-----

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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I know all of that, sorry Mr. McEnery, but I am talking about others knowing of the declaration. I will quote what Mr. Rowntree said to the committee when he was pressed on whether they should have been made aware of other people's declarations of conflicts of interest: "It is not best practice from my perspective as an experienced chairperson at senior level. It is not what I would see as open book provision".

Mr. Brian McEnery:

I will tell the Deputy why. The agenda for business of the meeting that related to Northern Ireland would go out. If anyone had a conflict of interest they were supposed to submit a form. In addition, at the start of every meeting if there was a conflict of interest around the business of that meeting it would be asked, "Is there a section 30 disclosure?". Mr. Rowntree is right in what he said, because every NIAC board member was supposed to complete their annual declaration and that was given to the chairman.

At any given meeting if there was a conflict of interest that should have been declared.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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Is Mr. McEnery saying that Mr. Rowntree was right when he said it is not best practice from his perspective and it was not-----

Mr. Brian McEnery:

No because I will tell the Deputy why-----

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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He was wrong there.

Mr. Brian McEnery:

It did not arise because there was never debtor information discussed at the Northern Ireland advisory committee meeting. As a consequence, for instance, if I had known somebody in Northern-----

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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There does not need to be debtor information for there to be a perceived conflict of interest. We now know that. It is a bit of a red herring. There are many different ways in which there could potentially be conflicts of interest. We have Mr. McEnery's view on that and Mr. Rowntree's.

Mr. Brian McEnery:

The important point as I understand it-----

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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I have Mr. McEnery's point.

Mr. Brian McEnery:

At every meeting there would be a request for a disclosure of any section 30 declaration.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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Have the three witnesses personally declared conflicts of interest?

Mr. Brian McEnery:

I have.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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You all have. Prior to appointment to the NAMA board did Mr. McEnery work for any companies that had any association with NAMA?

Mr. Brian McEnery:

My practice may indeed have had associations.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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The practice? Can he outline what the nature of that involvement would have been?

Mr. Brian McEnery:

We may have represented parties for tax advice or other advice. We may have been auditors to parties who became debtors of NAMA.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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Is this HBC?

Mr. Brian McEnery:

It was originally Horwath Bastow Charleton, HBC, and then I moved to BDO and I have never received any work from NAMA or been involved in decision making of any clients of HBC or BDO.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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In respect of conflict of interest did any of the witnesses here have any involvement in political campaigns?

Mr. Brian McEnery:

I have been involved in dealings with------

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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Can he tell us what that was?

Mr. Brian McEnery:

I was formerly a director of elections for Fine Gael.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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For who specifically?

Mr. Brian McEnery:

For Deputy Michael Finucane and the Limerick West constituency.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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Would that include Michael Noonan?

Mr. Brian McEnery:

No. I was never director of elections for-----

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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Mr. McEnery was a director of elections for Fine Gael. Would that have been something he should have told us when he was here previously?

Mr. Brian McEnery:

I was not asked and I freely tell it now.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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It is interesting to know that.

Mr. Willie Soffe:

Since 1959 I have been a public servant, all my life. I interfaced with a lot of politicians but I was not a politician.

Mr. Oliver Ellingham:

To complete the round I have never declared a conflict of interest perhaps because of my original location.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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To move to the discount rate. I think NAMA has put out a lot of misinformation on this because it seems to peddle the line that the Comptroller and Auditor General in his report was making a claim that the 5.5% discount rate should have been applied and not the 10.5% which was what it calls the market rate. That is not accurate. The Comptroller and Auditor General's report says that the information that the board had at the time, I think it was November or December 2013, was that the work-out rate based on the sale of the assets would have realised €1.49 billion. There are staff of the Comptroller and Auditor General's office here. He says then there was a shift in the sales strategy. it moved from an asset sale to a debtor sale. Of course when that decision was made NAMA would look at the market value. Where is the evidence presented to the board to suggest that a loan sale was the way to go? What documentation was presented to the board at that time?

I understand from what the Comptroller and Auditor General said that the only information available was the standard 5.5% and that was based on working out the assets at the time. That would realise a return of €1.49 billion. That is real time, not hindsight or foresight. When a decision was made to change sales strategy what documentation, evidence or expert opinion was given to suggest that a 10% discount should be applied?

Mr. Brian McEnery:

To go back to where we were, until the approach came to NAMA the basis of recording the investment in the Northern Ireland assets was effectively the carrying value. On an annual basis we would put impairments, we would look at the cash flows out over the next few years and say this is what we think we will get on the basis of the cash flows. For an accounting purpose we would use a discount factor of 5.5%. That is for accounting, it is the effective interest rate, EIR. That is what we discounted our cash flows at from an accounting perspective. I think I gave the clerk to the committee this morning an important single page out of our 2013 accounts.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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What is the page number?

Mr. Brian McEnery:

It was page 154 of our financial statements.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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Can Mr. McEnery be precise because I have read that? The point is that there was no reference made to papers presented to the board to say why a higher rate than NAMA's 5.5% discount rate would have been applied.

Mr. Brian McEnery:

I will come back to that.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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That is what I am trying to get at, what evidence was presented to the board.

Mr. Brian McEnery:

This is important because what was said here on 29 September was that it was only in June, most recently, that there was ever a reference to 10% and that is not true. The Comptroller and Auditor General signed off on the financial statements which allude to "Loans and receivables are shown net of charges for impairment". That is true. "The fair value of loans and receivables has been estimated using the expected future cash flows in the portfolio". True, €1.679 billion. It is further stated:

Expected future cash flows for individually significant debtors were reviewed as part of the impairment cash flow assessment at the reporting date. Cash flows between 2014 and 2016 were discounted at a rate of 5.5% and cash flows between 2017 and 2020 were discounted at a higher rate of 10% due to greater uncertainty in predicting cash flows beyond 2016. This estimation is subject to judgement by management in relation to the discount rate used and the timing and amount of future cash flows.

In effect we said in the 2013 financial statements - and it could not be clearer, this is not last June - that we were using a range of discount factors to reflect the portfolio of assets we were looking at. We said some were being discounted at 5.5% because of their profile and some had a discount factor of 10%. That is the first reference to a 10% discount. When it is said that NAMA retrospectively came up with 10% to justify the number that is not true. It is here in the financial statements of 2013.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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NAMA needs to present that to us in more detail. All of this was done on the basis of painstaking work by the Comptroller and Auditor General's office. This was a serious bone of contention between NAMA and the Comptroller and Auditor General. There would have been a lot of toing and froing and the Comptroller and Auditor General's office would have looked for all the supporting documentation. It seems that it did not get supporting documentation from NAMA that would give any legitimacy to applying a higher discount rate. It is saying that of course if NAMA moves to a market sale and a loan sale it might apply a higher discount rate but the information the board had in real time was that disposing of the assets rather than having a debtor's sale or a loan sale, in the way that was planned at the time, would have yielded €1.49 billion.

Mr. Brian McEnery:

What the Deputy is saying is fair but let me outline this: in our minutes-----

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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If that is fair then that------

Mr. Brian McEnery:

I am going to outline that in 2013 we impaired the Northern Ireland assets by €164 million. What is also alluded to in our minutes is that we expected a continuing deterioration in the values in 2014. That was our view as a board, that we would have a further impairment in 2014. I will draw the Deputy's attention to page 146 of the Comptroller and Auditor General's report where we again alluded to a 10% discount in-----

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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Can NAMA provide evidence that the board believed that should be applied to Project Eagle?

Mr. Brian McEnery:

It was discussed at length at that meeting. In fact - this is the intriguing thing - it is actually in the paper.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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Which paper?

Mr. Brian McEnery:

The paper that was circulated to the board on 12 December 2013 and which is referenced on page 146 of the Comptroller and Auditor General's report. Not only that, it is also in our financial statements that we were using a range of discount factors between 5.5% and 10%. It was not last June that this was first said; it was in the financial statements audited by the Comptroller and Auditor General.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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We will hear from the Comptroller and Auditor General in due course.

Mr. Willie Soffe:

At the meeting of 12 December our asset recovery section stated that, in its experience, a discount rate of at least 10% was appropriate.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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We seem to have a paper trail for the asset-based discount but not for the debtor-based discount.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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The paragraph to which Mr. McEnery referred, on page 146, and which mentions the rate of 10% begins as follows: "In NAMA AR [asset recovery] experience, a party buying a non-performing loan portfolio ... is likely to discount the value of the underlying security by at least 10%...". In other words, the 10% rate is relevant to the buyer, not the seller. That sentence which is the only reference in the report to a 10% rate relates to a buyer's discount. NAMA management has been at pains to state there were two halves to the transaction, namely, the buyer and the seller. We sometimes think there is only one transaction, but NAMA has maintained that there are two. The witnesses cannot come in here and use a buyer's non-performing loan discount to put the word out that the 10% rate is the seller's discount.

Mr. McEnery also referred to NAMA's 2013 financial statements. What page did he mention?

Mr. Brian McEnery:

Page 154.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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Yes. Mr McEnery also talked about loans and receivables. I remind him that those financial statements were signed off on by the directors on 9 May 2014. In other words, they were written after the agreement on the sale price. Mr. McEnery referred to the 2013 accounts to show this was the policy in 2013. Maybe it was; maybe it was not. What we can say is the financial statement was only written and signed off on on 10 May 2014, after the completion of the sale and with the benefit of hindsight. Does Mr. McEnery accept those dates?

Mr. Brian McEnery:

We do because we signed the financial statements.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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However, Mr. McEnery did not say that.

Mr. Brian McEnery:

At the meeting of this committee on 29 September the Comptroller and Auditor General said: "The question of whether the discount rate should be 5.5% or 10% for the purposes of evaluating the work-out only emerged in the board's response in June." What I am saying is this is not accurate because it was in our financial statements back in 2013.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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The statements were written in May 2014.

Mr. Brian McEnery:

That is true, but May 2014 is not June 2016. The Comptroller and Auditor General is saying it only emerged in the board's response in June 2016. That is not true.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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Mr. McEnery's answers raise more questions. Perhaps we might seek written clarification from the witnesses on this point.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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Exactly.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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It is very difficult to tease out all of this.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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To help the Deputy, the day Mr. Daly was here we concentrated on the question of what evidence there was at the time the sale was being considered of the use of the 10% discount rate by NAMA. Two weeks later the witnesses have produced not a screed of evidence to back up the use of that rate. If they do, it will make our lives very easy.

Mr. Brian McEnery:

It is in our financial statements that we were using a range of discounts.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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Those statements were written after the deed had been done.

Mr. Brian McEnery:

We can show the committee iterations of those financial statements. I am willing to bet the Chairman that this particular wording will not just be in the iteration that was eventually signed off on but also in the ones that preceded it.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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How about showing us iterations of the board meetings before the sale was done instead of after it?

Mr. Brian McEnery:

As I said, I am confident the iterations of the financial statements will show the same thing.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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We asked about this three weeks ago but still do not have any evidence.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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Are there other documents or evidence which would suggest this applied to Project Eagle? Mr. McEnery referred to the financial statements. Will he clarify the date and whether the rate was generic or specific to Project Eagle?

Mr. Brian McEnery:

Cashflows would be looked at on an individual basis.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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Was it specific to Project Eagle or generic?

Mr. Brian McEnery:

All of the cashflows, right across the Irish portfolio, the Northern Ireland portfolio and the UK portfolio, were looked at on an individual basis.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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Follow-up information is needed.

Moving on, Mr. Soffe noted in his opening remarks that questions had been raised about the extent to which the sales process was competitive. He challenged the Comptroller and Auditor General's assertion that it might not have been competitive. When Mr. Daly was here some weeks ago, he said: "There was a concern that a fully open sales process, which would by its nature take longer to conduct, would freeze activity in the Northern Ireland market for a period of nine to 12 months." He went on to say NAMA "did not believe that a fully open sales process would yield any additional benefit in terms of identifying other credible bidders or of getting a higher price." Mr. Daly certainly seemed to be suggesting the process was not fully open. The Comptroller and Auditor General's report is also quite critical of restrictions that were imposed on bidders, a criticism also made by the bidders. Will the witnesses comment on this?

Mr. Oliver Ellingham:

The reality is that for a portfolio of £1.3 billion, there will be a limited number of buyers with that amount of money available to pay for a set of assets. In Lazard's view, we went to all of the buyers who were capable of writing a cheque for £1.3 billion for a set of assets. Did we advertise the sale in The Irish Times? No, we did not. Did we send an intermediary into the marketplace with the expertise to identify who was available to buy the assets at that price and in the timeframe we had in mind? Yes, we did.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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Is it credible to say the process was competitive and open when the chairman of NAMA has stated to this committee that, in fact, a "fully open sales process" would not yield any additional benefit? What the witnesses are failing to acknowledge is that some of the bidders are not happy with how the process was conducted. That is clearly set out in the Comptroller and Auditor General's findings. Restrictions were imposed on marketing and access to information. Again, that is all included in the Comptroller and Auditor General's report. I do not see how all of this sits with the witnesses' assertion that it was a competitive process.

Mr. Oliver Ellingham:

By way of background, I spent 23 years of my life working in a bank buying and selling assets for corporations. It is normal in a process that is open to advertise it in The Irish Times. Anybody who wants to turn up to sign the bit of paper will, as long as they qualify, be given the book. We are talking about a select process where there were requests for us to be careful not to disrupt life in Northern Ireland by touting the assets around, while also ensuring we had a competitive process. A competitive process can be run very easily with just three buyers because, at the end of the day, if they are all fired up and motivated to buy the assets, they will bid against each other, provided the intermediary chosen makes sure to select three of the good buyers.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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How does Mr. Ellingham respond to the Comptroller and Auditor General's observations on the restrictions imposed on the process? How does he respond to claims from some of the bidders who were involved in the process at various points that they felt it was not as open and competitive as it should have been?

Mr. Oliver Ellingham:

Parties who do not win often have a moan. At no point did we receive notification from Lazard, our adviser, that there was a problem in getting sufficient bids in the process such that it would be uncompetitive. There was competition by dint of the fact that we had more than two or three buyers prepared to put bids on the table.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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With respect, I think it is a bit more than unsuccessful bidders having a moan, as the witness put it. There were very clear concerns expressed in the report around restrictions that were put in the process. The witness has dealt with that.

I want to move on to the last point. There was quite an incredible statement in the opening remarks of Mr. Soffe when he said, "We take strong exception to the suggestion that the process was corrupted by Mr. Cushnahan’s alleged activities." When the Minister for Finance, Deputy Noonan, was here a couple of weeks ago he said, "On the allegation of a corrupted process, we can agree that there was a corrupted process."

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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A mobile phone is ringing and it is interfering with the recording of the meeting.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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I put to Mr. Soffe what the Minister said. He said, "On the allegation of a corrupted process, we can agree that there was a corrupted process." There was also a briefing document that was done for the Minister by his officials in the Department. It described the success fees or fixer's fees, call them what you like, as shocking. We also know from an exchange with Mr. Daly when he was before the committee that there are differences of opinion as to whether PIMCO left voluntarily or whether it withdrew. He strongly argued that the board took a decision that PIMCO had to go because of the emergence of the success fees or fixer's fees. It is quite incredible that the board took a decision, as is being said, that PIMCO had to go on the basis of the emergence of success fees, even though that is disputed in the Comptroller and Auditor General's report and the Minister for Finance has agreed that the process was corrupted. Given what we now know, I find it incredible that the board members can come in and say that they do not believe that the process was corrupted. Will Mr. Soffe explain what he means by that?

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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Before the witness replies to that question, I will say that this committee is not empowered nor is it within its remit to deal with matters of corruption. References to corruption may have been made but we are not having a discussion on corruption. That is a matter for other authorities. I know that the words were mentioned at a previous meeting. However, we are not in a position to tease out corruption at this meeting. Does the Deputy understand where I am going?

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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No, I do not, because we are not straying into that area. This is-----

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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I want to let the Deputy explain his point, but I cannot let this committee stray into trying to find, or adjudicating on, matters of corruption. It is not within our-----

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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First of all, it was Mr. Soffe's opening remarks that made reference to there being no corruption in the process. We are talking about process, conflicts of interest and what we know. It has been accepted by the Minister that there was a corrupted process. We know from Mr. Daly's evidence given before the committee that such was the shock within the board of NAMA when they found out about the success fees, that PIMCO had to get out of town very quickly. That is disputed in the Comptroller and Auditor General's report. That is what I am trying to get at. How does all of that sit with the statement that this was not a corrupted process? I am not attributing any wrongdoing to any individual. I am saying that it is accepted now that the process was corrupted.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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Before we proceed any further-----

Mr. Willie Soffe:

It is not accepted by us.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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Just bear with me for a minute. Under no circumstances will our committee, when it is concluding its work, be dealing with the issue or findings of corruption. We will not be going there. We are the legislators. Corruption is decided on down in the Four Courts or somewhere else, but not in this building. I have to be very careful because we will undermine our work if we start talking about allegations of corruption. The words were said. The Deputy may put the question, but I advise the witnesses that they do not have to respond. We are not here to find out about corruption-----

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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Cathaoirleach, I might try to be of some assistance here.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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I want to be helpful.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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Deputy Cullinane is not inviting any witness to make a remark or to suggest a finding of corruption against any individual. I think he has made that clear.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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Fine.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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We are talking here, in connection with this report, about issues of process-----

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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Correct.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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-----and conflicts of interest that are not matters of speculation but matters of established fact. Those facts are reflected in the Comptroller and Auditor General's report. All the facts can only lead to the obvious conclusion that the process had been compromised and corrupted.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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No, compromised.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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Corrupted. What I hear the Deputy asking in challenging Mr. Soffe, who referred to this point in his opening statement, is how on earth he is so against the grain of what is in the report, of what is a matter of established fact and of what is the view of the Minister and others.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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All I am saying is that we will not be going into anything that suggests criminal corruption. Criminal corruption is not within anybody's remit inside the gates of Leinster House. It is okay but I am just being careful. People associate-----

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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A corrupted process.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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A corrupted process.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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A corrupted process does not necessarily mean that there was any criminal wrongdoing.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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Fine.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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A corrupted process means it is to do with governance.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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A corrupted process.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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Yes.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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That is the key point. The difference here is that we cannot, as the Chair quite rightly pointed out, drift into that area of corruption. However, there is a difference between a process that has been corrupted and-----

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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A corrupted process. It is in that context.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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I make the point again that it was the Minister who accepted that the process had become corrupted. These are not my words, yet representatives of the board here still seem to have a different view.

Mr. Willie Soffe:

Let me explain our position. First of all, when we became aware that PIMCO were paying a success fee and that it involved Mr. Cushnahan, our position was clear. I was at the board meeting. We found it unacceptable and we would not tolerate a situation in which a success fee was going to be paid to somebody who had been with NAMA, either on a board, a committee or on the staff.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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Did the witness find it further than unacceptable?

Mr. Willie Soffe:

We found it unacceptable or even unethical, as far as we were concerned. Some people may argue that it may not be illegal, but it was unacceptable to us. So-----

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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If it was unacceptable and unethical-----

Mr. Willie Soffe:

Let me finish.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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-----does that then make it a corrupted process?

Mr. Willie Soffe:

No, it does not. Let me finish.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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Why not?

Mr. Willie Soffe:

Just listen to me. We took the view that PIMCO had to go. It was offered the opportunity to leave the process, but it was clear at the board meeting I was present at that every member of the board took the view that PIMCO had to go. If it refused, it would have to be forced out. That was the position. It could not stay in the process. We were in a position in which we had solid bids from others. Mr. Cushnahan had not been with NAMA since the previous September, PIMCO was gone, Cerberus had made the best bid over our minimum price, and we established with absolute certainty from it in writing that it had no arrangement to pay a success fee to anybody associated with NAMA, past or present. Cerberus gave that assurance in writing.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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Can we get appendix E of the Comptroller and Auditor General's report on the screen? Did Mr. Soffe read appendix E?

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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Appendix E is on the last page of the report, page 157.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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It is page 158.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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The last two pages.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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This is my last line of questioning. I am nearly finished. Mr. Soffe said a few minutes ago that the board took a very strong view that PIMCO had to go. When the Comptroller and Auditor General first attended the committee on this subject, I put that to him. He had looked at all the documentation that was available in terms of the conference calls, notes that were taken by the legal team from NAMA and others, and he came to the view that PIMCO voluntarily withdrew from the process. Let us look at what is said in the report. We have it up on the screen. It is under the heading of "Conference calls". It states, "The Head of Asset Recovery enquired about ‘other options’". This was when there was a discussion after PIMCO made NAMA aware of the success fee. The head of asset recovery at the time was Mr. Ronnie Hanna. He was asking about other options. He then asked if the deal could be "shaped differently for the arrangement fee to come out". There was a bit of toing and froing between the boards.

What is in the documentation that was presented to the Comptroller and Auditor General seems to be in stark contrast to Mr. Daly's assertion when he was before the committee that PIMCO had to go and to what Mr. Soffe has said today. When Mr. Daly was pressed on this, he came back and said that NAMA had to nuance its strategy and be tactical. What did that mean? Did something get lost in translation between Mr. Hanna leaving the board meeting at which there was an understanding that PIMCO had to go, if that is what happened, and seeing whether NAMA could shape it differently for the arrangement fee to come out to keep PIMCO in the game? It does not seem to stack up, does it not?

Mr. Brian McEnery:

The reference the Deputy makes is on page 158 of the Comptroller and Auditor General's report. I draw the committee's attention to page 118, which occurred immediately after that.

The calls referred to on page 158 were on 11 March and 12 March. The minute on page 118 states: "Following the recent disclosure by PIMCO Legal and Compliance units of the existence of a success fee sharing arrangement in relation to Project Eagle negotiated by PIMCO's commercial team (first disclosed to HoAR and..., NAMA legal via conference call on 10th March 2014) PIMCO had sought NAMA's acquiescence to this which NAMA had not acceded to."

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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That is a very serious thing to say because we know that the American authorities are interested in this and we know from the documentation at which the Comptroller and Auditor General looked that PIMCO was very concerned about its legal responsibilities. I would be very concerned if I was an executive member of the PIMCO board, or associated with PIMCO, that NAMA is saying this and essentially trying to dodge its responsibilities in order to stay in the game.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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It is breaking the law.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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It is breaking the law. Would Mr. McEnery be concerned if he was a member?

Mr. Brian McEnery:

The summation of that minute is that NAMA would not accede to the payments and, as a consequence, it had to go. That was the view of NAMA. The fact that it withdrew was useful to us, and the chairman has already said that it would have been put out. The reason it was useful for us was that, if we had put it out, we would have been concerned that we would have had potentially-----

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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That is not what Mr. McEnery said happened. The report said PIMCO had sought NAMA's acquiescence of this.

Mr. Brian McEnery:

NAMA would not accede to the payments. PIMCO said it had these arrangements and asked if NAMA would acquiesce but NAMA said "no".

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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Is it not astonishing that PIMCO would essentially break the law?

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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This is its assertion.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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If it were to acquiesce it would potentially be signing up to break the law. That does not stack up with the notes and documentation given to the Comptroller and Auditor General.

Mr. Brian McEnery:

The decision of NAMA was not to allow this sale to occur in the circumstances of which we had become aware. In a later minute it mentions that a question was put to the board as to whether Cerberus was a proxy and the reply was that there was no evidence of this. This was a concern of mine.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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Why did Mr. Hanna say that things could be shaped differently for the arrangement fee to come out, if the board's decision was so robust?

Mr. Brian McEnery:

That discussion took place on 11 March and 12 March but this is the board minute of 13 March. The board's position was that there would be no acquiescence.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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PIMCO had signalled at that point that it was gone. This was closing the stable door after the horse had bolted.

Mr. Willie Soffe:

The position was clear. The board's position was that PIMCO had the opportunity to withdraw. This is not an unusual practice and, having been in the personnel business for many years, I have seen many occasions where people were offered the opportunity to leave. We gave it the opportunity to leave on the clear understanding that there was no way it could continue in the process.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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We, as a committee, will consider this when we are drafting our report.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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I am actually married to a Brian McEnery.

Mr. Brian McEnery:

I saw that.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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He was never a director of elections for any Fine Gael candidate, however. I think I am still married to him.

A lot of press releases and documents have been made available to us but we have not yet got to page 158 of the report of the Comptroller and Auditor General. It is an extraordinary situation because the Comptroller and Auditor General has made no allegations and I agree with Deputy Cullinane that Mr. Soffe's opening statement was extraordinary. The language is pejorative, it is defensive and does not deal with the issues. It talks about apples and oranges and mentions "any reasonable observer" but the Comptroller and Auditor General is doing his job, with his team, as best he can. He made a number of observations and on the last occasion we met I asked if Mr. Soffe had read the document. I ask him again, did he read the 158 pages of the document?

Mr. Willie Soffe:

Yes.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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Great.

Mr. Willie Soffe:

What comes across in the report is that, in 2014, we made a foolish commercial decision.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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Unusually for the Committee of Public Accounts, we have invited in not only the chairperson and chief executive officer but also each member to give them a chance to speak. The board made the decisions and it speaks with one voice so we are giving the witnesses additional time. They have given us a ten-page reply and used those ten pages to be pejorative, to be overly defensive and not to deal with the issues. My first question deals with the conflict of interest.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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I concur with the Deputy and support her in what she has said. We raised the issue of the tone of NAMA's response with the chairman when he was here. The essential argument is that he changed the word "potential" to "probable" and the witnesses are a little bit miffed that they did not have a veto over his final draft but it is his report, not theirs. I was shocked by Mr. Soffe's statement here today. He made ten specific attacks on the Comptroller and Auditor General, including accusing him of no recognition of the commercial reality. He stated that he made mistaken assumptions and that he ignored market advice. He said the Comptroller and Auditor General was simply wrong and that the word "probable" was incongruous. He stated that the Comptroller and Auditor General made unsubstantiated suggestions and that he had failed to take account of certain items and that he expressed a subjective opinion. If the NAMA story is such a good story, why has Mr. Soffe come in here to make ten specific attacks on the person who wrote the report? How about playing your own game instead of attacking the person who wrote the report? I have never seen ten attacks by any public body against the Comptroller and Auditor General. Mr. Soffe should have stated his point of view; he did not need to make those attacks. It has made our job more difficult. He is here today because the level of attacks on the Comptroller and Auditor General has been unprecedented. We are not saying he is right or wrong. Does NAMA normally launch such attacks on people who criticise them?

Mr. Willie Soffe:

It is right that we defend our position and that is what we are doing. Why should we meekly accept what is very strong criticism of us? We feel we are perfectly justified in defending our position. At a previous session there was a reference to a disagreement between the Office of Public Works and the Comptroller and Auditor General and the Chairman, as a member of the committee, said he liked people to stand their ground if they felt they were right.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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I do. I would prefer, however, a State body to play the ball and not the man. Maybe Mr. Soffe thinks playing the man is the best way of winning the game but if I was a referee every NAMA person who has appeared before us would have received a red card. I am Chairman, however, and want to hear the end of the process.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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The Chair gave me extra time. I thank him very much.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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I was supporting Deputy Connolly's opening comments.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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Let us deal with the issues relating to the conflict of interest. It was said that the allegations regarding Mr. Cushnahan's involvement in an arrangement to share fees with Brown Rudnick and Tughans warranted more action by NAMA when the matter came to light. That is a statement from the Comptroller and Auditor General. He went on to say that the matter warranted more action, such as seeking advice from the unit within the National Treasury Management Agency that was responsible or writing to Mr. Cushnahan to seek confirmation or an explanation. Could any of the three witnesses deal with that aspect please?

Mr. Willie Soffe:

That statement is based on information available in 2016. We were dealing with what we knew in March 2014. At that stage, Mr. Cushnahan had left us. PIMCO was gone and we felt at that stage there was little point in writing to Mr. Cushnahan about something that was on a buyer side with a company that was no longer involved in the process.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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I accept that. Mr. Soffe is giving the exact same answer as Mr. Daly, and he is standing by that again today. The Comptroller and Auditor General said - in my opinion, gently - that NAMA should have done more and Mr. Soffe has again said "No" today. I will not waste any more time on the issue. Mr. Soffe has said "No". In my opinion, that is wrong. At the very least NAMA should have followed up on it. In hindsight, at this point and in view of all that is known, it is extraordinary that no one in NAMA is, at the very least, saying "Hmm". That is the first point.

My second point relates to the bidding process. I do not come from that background but I have read a lot at this point and I am tiring of listening to talk of nine bidders. There were not nine bidders. Let us put that to one side. I tried to do that on the previous day. The witnesses are using up valuable time coming in here and talking about nine bidders. There were three bidders. Is that correct?

Mr. Willie Soffe:

Yes.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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Good. That is great. There were three bidders and only one was interested. Is that correct?

Mr. Willie Soffe:

For complete clarity, five signed declarations of confidentiality and entered the data room. Three made bids.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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I have no difficulty with any of that. We are talking about a process and the Comptroller and Auditor General has identified issues or concerns in respect of it. That is the position. There is nothing else. It would have been great if NAMA came back and dealt with those issues rather than going to the newspapers or preparing a ten-page opening statement containing pejorative comments. It was repeated today that there were nine bidders, but there were not. The process started with three bidders. Only one bidder was interested but NAMA was forced to look at three more. I have outlined all of that. Does Mr. Soffe accept that was the process? There were never nine bids.

Mr. Willie Soffe:

I think it is fair to say there were nine bidders. We said that nine companies were invited to bid.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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Nine companies were never invited to bid. Initially, there were three bidders.

Mr. Willie Soffe:

No, it was a phased-----

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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When the witnesses come to the Committee of Public Accounts and talk about nine bidders, if they are standing over the process about which the Comptroller and Auditor General has concerns, there is a duty on them to come back and say this is the process. They did not. Mr. Ellingham came in today and referred to nine bidders once again, as did the other NAMA witnesses.

Mr. Willie Soffe:

Nine companies were invited to bid but they did not bid.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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Mr. Soffe can keep repeating that. I am highlighting what I have read. The Comptroller and Auditor and General had concerns about the process. The witnesses have not reassured me about those concerns.

Let me deal with one or two other little matters. On disclosure, I understand from Mr. Rowntree last week that Mr. Cushnahan never left the room in any of the meetings that he attended. Is that correct?

Mr. Willie Soffe:

I cannot recollect them all but that could be true because he was not conflicted in respect of any of the items on the agenda.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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Okay, so that is Mr. Soffe's explanation. I understand that. He represented seven of the major debtors, six plus in partnership with someone else regarding the seventh. That represented 50% of the property or the loan portfolio. Is that not correct?

Mr. Willie Soffe:

Yes, but none of their business was discussed at NIAC meetings.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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Yes, Mr. Soffe said that. Mr. Rowntree has a slightly different view. Actually, to be precise, he backs Mr. Soffe up on that but not in respect of another matter in Ulster to which I will return. Mr. Cushnahan was representing 50% of the loan debtors. Is that correct?

Mr. Willie Soffe:

Yes.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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Is it the case that a conflict of interest was never declared?

Mr. Willie Soffe:

As I have said, and as the chairman and chief executive have said so many times, none of the business of any of those people was discussed at the NIAC meetings. No individual debtor's business was ever allowed to be discussed.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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Mr. Soffe has made that point clearly and he has stuck to that. With regard to the University of Ulster research, Mr. Rowntree was very clear that it was a high-level piece of research - that has been confirmed by the witnesses today - and there were many presentations. He said that was potentially confidential information that somebody could make use of. I am summarising what he said. The witnesses probably listened carefully to his evidence so they know better than I do. Does Mr. Soffe disagree with him on that?

Mr. Willie Soffe:

Let me explain. The information on planning zoning is available in planning offices throughout the country.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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I understand that. I have been involved with local authorities for 17 years.

Mr. Willie Soffe:

I was in that business.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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I heard Mr. Soffe say that. I am asking him a question.

Mr. Willie Soffe:

But what this was doing was-----

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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No, my question is whether Mr. Soffe disagrees with Mr. Rowntree.

Mr. Willie Soffe:

I am.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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Good, that is okay.

Mr. Willie Soffe:

I do not say there was anything particularly confidential about it that was of benefit. The same information could be found by anyone who wanted to inquire whether development was possible at particular locations.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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Regarding Lazard, which was appointed in January 2014 and which was given a verbal briefing on the sales process, is it correct that there was no written document?

Mr. Willie Soffe:

Yes. It was to come back with its proposal.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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NAMA did not give Lazard a written document. It was a verbal briefing. Okay. The Comptroller and Auditor General has raised concerns in terms of NAMA's reliance on the assurance from Lazard. Today, NAMA has relied on that again. Mr. Soffe in particular has come back and said that Lazard reassured NAMA that the process was-----

Mr. Willie Soffe:

There was competitive tension to the very end.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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Okay. NAMA never told Lazard that PIMCO had withdrawn in the circumstances in which it had withdrawn.

Mr. Willie Soffe:

It was not relevant for Lazard as it was gone out of the process. There was no reason to discuss it with them. PIMCO wanted to go away quietly and it was allowed to do that.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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Well PIMCO certainly did not go away quietly because we are talking about it now in 2016. Let us deal with this issue for a moment. NAMA was relying on Lazard's assurance. The Comptroller and Auditor General said that the latter was a limited assurance in light of the information available to Lazard. Does Mr. Soffe have a difficulty with that?

Mr. Willie Soffe:

I am sorry for repeating myself but Lazard gave us an absolute assurance that there was a competitive tension right to the very end and that we were achieving more than our minimum price.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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Mr. Soffe is not listening to my question. The Comptroller and Auditor General has raised an issue regarding the nature of the assurance given by Lazard and he said that Lazard had only limited information. Does Mr. Soffe accept that concern?

Mr. Oliver Ellingham:

I think if we were to rephrase that, we were happy that the assurance we had from Lazard for a commercial transaction was adequate. As a board we were faced with selling some assets and I am sure any party would be able to find reasons why an adviser needed to be given lots more information to give us an opinion. All we were asking for was an opinion from Lazard as to whether we were selling in a competitive process and getting a fair price.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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How could one possibly rely on an assurance where one has given limited information and where one knows PIMCO has withdrawn? NAMA has come back and told us even today that it was reassured by that assurance. Are the witnesses-----

Mr. Oliver Ellingham:

All we were trying to do was to sell some assets for a particular sum of money in order to pay down debt.

We had an assurance that provided we got over €1.3 million, that was the right price in the marketplace and the buyer was capable of buying it. For us, it was a commercial transaction and in terms of Lazard opining on the mathematics of the situation, we did not think it was relevant for it to be told why PIMCO had withdrawn.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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I am no expert but to me, and I am sure to the ordinary person watching or listening, I am not reassured. Mr. Ellingham gives limited information to get precisely the answer he wants, which is reassurance that the competition is competitive when there is only one remaining bidder.

Mr. Willie Soffe:

There were two to the end and, as we have said, that is not uncommon. If we look at projects like Project Eagle, there were two at the very end. It is quite normal to get down to two.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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It could well be, but this is not a normal situation. NAMA is now aware that there were success fees and it still does not pass that information on to Lazard.

Mr. Willie Soffe:

That was dealt with and was out of the way. It had nothing to do with the remaining process.

Mr. Brian McEnery:

I hope this is useful to the Deputy, but what was critically important was that NAMA did not allow somebody to come in and determine the price. Before we had engagement around taking this sales process further, we set, based on the analysis of all the cashflows we would have out and looking at the impairment for 2013, looking at the valuation of those and discounting them back, what we determined was the price we believed we needed to achieve, and that was €1.3 billion. That is the starting point from NAMA's perspective, not whether somebody was willing to pay €1.1 million or €1.-----

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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Mr. McEnery has said that, and the clock is against me. I will conclude on two matters. PIMCO had already set the price in a range of €1.1 million to €1.3 million and, magically, NAMA's price is very similar. The Comptroller and Auditor General said it had no valuation. None of the witnesses has dealt with that.

Mr. Brian McEnery:

Can I address-----

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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Let me finish. They did not deal with it in their ten page submission. They did not deal with the fact that there was a strategic change of plan, and all the Comptroller and Auditor General is saying is that he did not see the justification for that change in plan laid out in the documents he examined. Indeed, the witnesses have attempted to conflate and confuse. I will read what the Comptroller and Auditor stated:

NAMA has outlined the strategic and commercial rationale underpinning the decision to sell the [Northern Ireland] loan portfolio. The report draws no conclusion about the merits of that decision.

That is on page 11. He does not comment on that whatsoever. He comments on the process, and his concerns about the process. The strategic change of plan-----

Mr. Brian McEnery:

Can I address the strategic-----

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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Great.

Mr. Brian McEnery:

First, as a board, we were planning to continue to work out the assets on a piecemeal basis. However, it is important to set that in context. In the section 227 report, up to 2012, it was stated:

The availability of this capital, the low rate environment and the positive investor disposition towards Ireland creates a [significant] opportunity for NAMA to capitalise on this interest.

In addition, the IBRC process provided successful acquirers with the critical mass to establish and invest in local servicing platforms, increasing their capacity and appetite for further acquisitions.

That section 227 report goes on to state: "As long as these market conditions do persist, there is an opportunity for NAMA to sell [large] portfolios into this demand more quickly than would have been predicted as recently as mid-2013." Clearly, what the Department's own section 227 report is saying, which quite frankly was on foot of some of the work being done around IBRC, is that a market was emerging for larger portfolio purchases rather than working out the assets asset by asset, folio by folio. That is true, and that is what the section 227 report states.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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I have asked Mr. McEnery to deal with what the Comptroller and Auditor General raised. He has not dealt with a single question. Our time is limited, and he is quoting from a section 227 report. The Comptroller and Auditor General simply said there was a strategic change of plan, and there is no evidence in the contemporaneous papers that he examined to justify that change of plan. That is all he said. Five drafts went back and forth. NAMA has had months, and it has had press releases, and Mr. McEnery is quoting from a section 227 report and not dealing with the simple issues of process-----

Mr. Brian McEnery:

I want to try to explain to the Deputy. In 2012, there was nobody interested in this portfolio. In 2013, it emerged that there was somebody interested, and I believe it would have been wrong of us not to engage when there was interest in the bulk acquisition of the portfolio.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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Mr. McEnery is still not dealing with the question.

Mr. Willie Soffe:

We were changing strategy anyway-----

Mr. Brian McEnery:

We were beginning to start to look at loan sales.

Mr. Willie Soffe:

-----because we had to pay down the debt more quickly.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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That is right. That is why NAMA sold it off.

Mr. Willie Soffe:

The opportunity was there.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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It confirmed that in a letter to the Minister where it stated that the Government was under pressure regarding the senior bond date, and this had to be sold.

Mr. Willie Soffe:

We had to pay down the debt more quickly, and we had the opportunity. If the Deputy looks at the figures I quoted earlier, up to the end of 2013, we had paid down €0.75 billion of the debt and in one year, 2014, we paid down €9.1 billion. Since then, we have paid down a further-----

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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That was the driving force.

Mr. Willie Soffe:

It is important to make the point that at this stage we have paid down €26.6 billion of the debt, and there is €3.6 billion left. That is a very healthy position to be in when we see what the markets are like now, and with Brexit looming.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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We can understand that. I call Deputy Kelly. I suggest that when Deputy Kelly concludes in a few minutes-----

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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A few minutes or half an hour.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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-----or perhaps 15 or 20 minutes, we might take a quick break for 15 minutes to allow people have a cup of tea if they wish. There are a number of people offering, and we cannot keep going. People will need a short break at the end of Deputy Kelly's contribution.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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He always does this after me, for some reason. I have six questions and will make two observations. The first observation is to concur with my colleagues. I know the witnesses have a job to do, and I thank them for coming in, but can I say that, for the three of them, this has been a public relations disaster. To sign off collectively on a statement like this, with the inferences it contains, is a PR disaster for them. The public relations management in NAMA has not always been the best, and this is another example of it. Some of the inferences in the statement are unacceptable by virtue of the fact that the Comptroller and Auditor General and his colleagues are just doing their job. They are not declaring any wrongdoing in regard to anyone. They are just doing a report, which is their role, and to make comments like that was unacceptable. I believe the witnesses should reflect on them.

Interruptions.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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Sorry, I said this was a statement, not a question. This is the Committee of Public Accounts. We ask the questions. That is my first statement, and I will make another one at the end of my contribution.

My first question relates to page 2 of the witnesses' soliloquy, or whatever we will call it. They state:

Selling in more than one lot would, in our view, have delivered an inferior commercial outcome. The portfolio had a lot of secondary assets and we simply could not have achieved an acceptable price if those assets had not been bundled with better quality assets.

How did they know that? Lazard did not do any analysis regarding the value of the assets beforehand. That is a big statement.

Mr. Oliver Ellingham:

Within the portfolio there were assets which, based on the views we were getting from asset recovery and the team that were what we would call a very long tail of small, very impaired, very difficult assets. That was internal information which was provided to the board by the executive team within NAMA.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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Did Mr. Soffe not think, when NAMA brought in a company to do the work, that an underlying analysis of the assets would have been the right thing to do?

Mr. Willie Soffe:

We had a lot of in-house experience in asset valuation, AV, and they were seeing prices of assets every day of the week. They were in a good position to judge value. Fifty five of the main assets constituted the bulk of the portfolio, and then one had this tail, as Mr. Ellingham has said. It made sense to bulk because it was likely to have the effect of getting the best price possible.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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Therefore, Mr. Soffe did not think it would have been right to get the organisation NAMA had brought in to do an assessment of the assets.

Mr. Willie Soffe:

As I said, we had the competence in-house to do the work.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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NAMA had the competence in-house. Mr. Soffe did not need a second opinion.

Mr. Brian McEnery:

There are a few things around that. First, approximately 50% by value had been recently valued in the context of the year end position for December 2013 where it was not NAMA which was putting a valuation on them. Half of the portfolio by value had had recent valuations. Second, in respect of Deputy Kelly's point around the bundling, 19% of the portfolio was non-income generating. In fact, there was a cost associated with the holding of the assets. For instance, land or development, or partially developed housing estates, were non-income generating. One of the key considerations for the board was that we would not be left with that 19% as a rump, and that is why we looked at the bundling. That would be a common practice when one would be taking a loan sale.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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I have no issue with the second part of Mr. McEnery's analysis. Let me just say this, from my perspective and that of most of us here, the fact that this was not done was a weakness and it should have been done. On relying solely on in-house analysis, one always needs a second opinion. I will get back to that because I have limited time.

I laugh because I said this to the Chairman. There are a number of references to Brexit in Mr. Soffe's statement. The Chairman should remind me when Cheltenham comes around next to bring the board of NAMA with me because it seems to have a capacity to predict future outcomes. Obviously, Brexit was an issue in the sense that the previous British Prime Minister had referenced that it was coming, but the idea that Brexit formed part of the equation of analysis in relation pricing-----

Mr. Willie Soffe:

Let me answer that. It was there in the background, right from the time that Mr. Cameron announced that there would be a vote. It was a distinct possibility and something that we should bear in mind. This referendum was a lot different from Harold Wilson's referendum in 1975 because-----

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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I was only born then.

Mr. Willie Soffe:

-----no significant media outlet was recommending leave at that stage, but if one looks at what was happening this time and forget about what the financiers-----

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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I understand what Mr. Soffe is saying. Can I just reference this so? If that is the case, and that is Mr. Soffe's argument, what weighting was put on that in relation to this analysis?

Mr. Willie Soffe:

The weighting was that-----

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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Was part of the equation to sit and-----

Mr. Willie Soffe:

The weighting, with other things, was that what was happening in London, what was happening in parts of England and what was happening generally was that there had to be a downturn some time. I was in the public service for 45 years and in every decade, there have been peaks and valleys - in every one of them.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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Will Mr. Soffe just answer my question?

Mr. Willie Soffe:

What we were saying was-----

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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I have limited time. Can Mr. Soffe answer my question, please?

Mr. Willie Soffe:

What we were saying was that the clouds were gathering and-----

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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Okay. What weighting?

Mr. Willie Soffe:

-----as part of our general policy, we should take any opportunity that we had to pay down the debt.

Mr. Brian McEnery:

It is fair to say it was on a risk register. I personally put very little weight on that, being truthful.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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What about Mr. McEnery's two colleagues?

Mr. Willie Soffe:

I placed a fair amount of weight on it because I thought that there was an overoptimistic view being taken of a vote to remain.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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Mr. Ellingham?

Mr. Oliver Ellingham:

I would say it was a neutral factor. It was there. It was not the overriding factor in wanting to take the decision to exit the assets.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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Okay.

Mr. Oliver Ellingham:

What was much more important-----

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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We have Mr. McEnery saying it was negative, we have Mr. Soffe saying that it was significant or it was more of an issue, and we have Mr. Ellingham saying that it was neutral. Effectively, that is a plus, a minus and a neutral which makes it a neutral, which means that it had no impact.

Mr. Brian McEnery:

It was on the risk register. It was put on the risk-----

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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But the weighting put in subsequently, in their few words here and, by the way, as referenced by NAMA's chair, is much higher.

Mr. Willie Soffe:

What we are saying essentially-----

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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I think I have proved my point. I will move on. I have a limited amount of time.

Lazard is constantly being referred to here. Let me just say this, I, personally, would never hire the company from what I have seen here. For me, this is a box-ticking exercise. Its role was bizarre, and I have referenced this previously. Mr. Soffe, in his opening statement, stated, "I and other Board members were satisfied, based on Lazard's unequivocal expert advice ...", but it is easy to get the expert advice if one defines the role in such a limited way that it has to give the answers that one wants. Does the idea that it was not required to do the value of the loan book earlier on, that the marketing exercise was fairly limited, as has been outlined by my colleague and which I will not go into now because I do not have time, and that, in relation to their post-analysis of the sales process, they were not informed of the fact that there were payments being made show that its role in this was merely a box-ticking one?

Mr. Willie Soffe:

No, and we said that from the start. It was asked to carry out a sales process, which it did in a professional manner. It is an internationally renowned company.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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I know it is. Trust me, I know who it is. I knew who it was before this. Anyway, we will agree to disagree.

Mr. Brian McEnery:

Lazard was retained on the basis that the board of NAMA had analysed the portfolio and said that its minimum was €1.3 billion. In fact, the way the engagement with Lazard was structured was that the pricing mechanism around how it got paid would be higher if it went to a party other than PIMCO.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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Okay.

Mr. Brian McEnery:

That is an important thing. It fees arrangement was less if PIMCO was the acquiring party.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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Okay, fine. I need to move on. Is there anything in the process that the board believes it should have improved on or would have done differently or better?

Mr. Willie Soffe:

I do not think so. I think that this was a good sound process.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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The chair of their board said that he would have done one thing differently, that is, the documentation. Does these gentlemen agree with that?

Mr. Brian McEnery:

I would like to make a few comments around that. The chairman, in his statement on 29 September, when I was here, stated that the important thing around documentation and minutes was that they recorded the decisions and not the discussions. The well-known publication, Company Secretaries, states record of decisions and resolutions passed, not discussions, and that is referenced by the Director of Corporate Enforcement. That is the basis on which NAMA has kept its records since.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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I do not have any issue with Mr. McEnery's last statement, but it is fair to say that records and documentation could have been kept better. NAMA's own chair said that.

Mr. Brian McEnery:

In truth, I believe that the Comptroller and Auditor General, in this report, stated that he had an issue around the record-keeping and minute-keeping, but I genuinely believe that one will have some who will say they should be descriptive. They are descriptive in this committee for sure, but not in others.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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Let us get down into the nitty-gritty of what I am getting at here. It is not just about minutes. Throughout this process, when we have looked for documentation in relation to the analysis as regards the discount, we have been told on a couple of occasions that we will get that. We still have not got it. We asked again here today. If there is such good documentation, let us set a time limit on it. We have been looking for it for some time now. Let us say-----

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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Three weeks.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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We have been looking for it for some time, however. Today is Tuesday. Can we have it by Thursday? If there is no problem with the documentation, we should have it by now, not in minutes. Mr. McEnery said repeatedly that he is "sure" there were various iterations that would have made references to confirm his hypothesis. If so, he should produce the information immediately.

Mr. Brian McEnery:

It is incumbent on us to look back and say when the iterations went out. When accounts are published-----

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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Three weeks, for sure.

Mr. Brian McEnery:

When accounts are published, it is not on that day that they will have been prepared. There will have been prepared for quite a period of time. I will go back to NAMA and ask that the information be given.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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This week would be good.

Mr. Oliver Ellingham:

On the provision of information in regard to Lazard, that is, correspondence with the committee about that, and confidentiality issues that seem to be resolved-----

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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We will find out about the other documentation this week.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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I did not hear that. What was said about confidential information?

Mr. Willie Soffe:

We have sought permission to release certain documentation.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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Good.

Mr. Willie Soffe:

We, on behalf of the organisation, have been in touch with the committee to ascertain whether the confidential documentation can be provided in a limited way.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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We will wait to hear from NAMA.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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We actually do not really know what Mr. Soffe is talking about. We will find out soon, I hope.

Let me refer to the payment of success fees. When the delegates became aware of this, PIMCO had pulled out or was forced out. We still not have got to the bottom of what happened there. An assurance was received from Cerberus afterwards that no payments would be made to anyone associated with NAMA. Is that not correct?

Mr. Willie Soffe:

Past or present.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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Past or present. Sorry. I have raised this issue before. What about the step-down process whereby a payment could be made to somebody involved with NAMA through someone getting a payment from Cerberus? In other words, did NAMA ensure categorically that those it was doing business with could not make success payments to anyone associated with NAMA?

Mr. Willie Soffe:

The assurance it gave us was that-----

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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I need not ask about the assurance it gave. I asked whether NAMA ensured that third parties receiving success payments could not make further payments to anyone associated with NAMA. I seek a "Yes" or "No" answer.

Mr. Willie Soffe:

Our contract was with Cerberus. It ensured us that people it was engaging would not be making payments to people associated with NAMA.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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That is fine. May I make an observation based on Mr. Soffe's answer? The answer is obviously "No" because the process would not have been engaged in had the answer been "Yes". If NAMA had asked Cerberus for a guarantee that it would not be making any success payments to any third parties that, in turn, would make payments to anyone associated with NAMA, the process could not have been gone through. I take it that NAMA did not ask. The assurance was not obtained.

Mr. Willie Soffe:

As I said, it assured us that it was not making payments to anybody associated with NAMA and that anybody it was engaging to work for it was not making payments to anybody associated with NAMA.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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Now it looks like that is not true. We do not know. We will find out in the wash.

Page 6 of Mr. Soffe's submission, which is all honest and fairly reflective, states, "On the sales process itself, we believe that the C&AG also failed to take account of the wider political and economic and financial implications in Northern Ireland of NAMA’s decision to sell the Eagle portfolio and the obligations on NAMA as a State agency in Dublin to be cognisant of the concerns of the Northern Ireland Executive and of the Irish Government". In fairness, this tallies with point 10 of the Comptroller and Auditor General which states, "NAMA has stated that the factors that influenced its decision to change its Northern Ireland strategy were the emergence of the loan sale option, the political and crossjurisdictional context in which it held the Northern Ireland debtor assets, and its assessment that its relationship with the Northern Ireland debtors was deteriorating". There is also a reference to the widespread lack of co-operation.

Section 10 of the National Asset Management Agency Act must be observed on one side while, on the other side, one must be cognisant of other factors, the first being political pressure. Let us be frank about that. One should remember that politicians in Northern Ireland were not under the same limitations as all of us here in the South in regard to interacting with NAMA. Diplomacy issues are high up the list. There was a lack of debtor engagement.

The fourth factor is business risk. One could probably legitimately add Brexit to that but there were other business risks. These factors are on one side and section 10 of the National Asset Management Agency Act is the other. Therefore, there was weighting taking place.

One should remember there was avolte face, going from a firesale to what was literally one bulk sale. Once this option became available, combined with the four factors I have mentioned, was it not the case that NAMA basically could not look a gift horse in the mouth and that the idea of selling in one bulk sale for the amount in question was just worthwhile, even in light of the competition associated with section 10 of the National Asset Management Agency Act with regard to getting best value? When the factors were weighed up, was this not the best option? Is this not fair to say?

Mr. Brian McEnery:

Obviously, we had to weigh up the options. The paramount focus of the board is section 10 but-----

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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Paramount, but not exclusive.

Mr. Brian McEnery:

Paramount. In truth, the other thing we were going through when the PIMCO expression of interest was manifest was that we were just doing our year-end impairment in respect of the portfolio in Northern Ireland. In 2013, we put through an impairment on the portfolio. The minutes from the latter end of 2013 indicate we expected a further deterioration in 2014 regarding that portfolio. Clearly, we believed we would have a further impairment on the value of the Northern Ireland portfolio beyond the year end, 31 December. That was central to our decision-making.

Mr. Willie Soffe:

Let me deal with the political element, on which the Deputy wants an answer.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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By all means, do. We are all politicians in here.

Mr. Willie Soffe:

Nobody put political pressure on us to sell. What we did have regard to was what was said to us, that is, that there should be a discreet and confidential process. That is why there was a short-focus process.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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A clean break was obviously discussed at board level. It had to be.

Mr. Willie Soffe:

Yes.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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I thank Mr. Soffe for confirming that. Did NAMA have any concerns over the meeting that took place in early 2013 between First Minister Peter Robinson, Mr. Coulter and Mr. Frank Cushnahan at Stormont?

Mr. Willie Soffe:

In what way?

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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In any way. I am asking the question.

Mr. Willie Soffe:

The Minister for Finance, Deputy Michael Noonan, has confirmed-----

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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Think about this: there has been a volte facein the decision-making at board level, moving from a firesale to a sale all in one go. A meeting took place in Stormont. There was a person on the Northern Ireland Advisory Committee at it. There is a letter from Brown Rudnick to Finance Minister Wilson that is effectively a letter of intent. If one looks at it in any other way, one notes it is basically saying a purchaser will almost be nicer to debtors, particularly in regard to personal guarantees. Did these factors, including the meeting in Stormont, not create some concern at board level in NAMA?

Mr. Willie Soffe:

The main motivation for us in selling was that we saw the opportunity as a result of PIMCO coming on the scene. There seemed then to be an opportunity to have a loan sale.

We were moving into that territory anyway because it would speed up the paying down of the debt.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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It is fair to say, however, that NAMA would not have sold were it not for the approach coming in and the way in which it came in.

Mr. Willie Soffe:

Well, that brought it forward at that stage.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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Then, there was the letter to Mr. Wilson and the meetings which took place in Stormont. Obviously, the letter of intent gave certain guarantees or referenced certain guarantees. Whether they materialised is another question. The next thing that happened was this approach.

Mr. Willie Soffe:

Once the approach came, we asked if there was a commercial opportunity in that for us and whether there was an opportunity to sell.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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I have just outlined four factors and I have also outlined the letter of intent, the meetings that were taking place and the role of Mr. Cushnahan. Did the board not consider all of these activities, the change of thinking as regards a fire sale and the four pressures that NAMA was under? Mr. McEnery has said that section 10 was paramount but not exclusive, which is a very important and interesting statement and one to which we will have to return. Did it not concern the board that there was a possibility - I refer to Mr. McEnery's use of a particular word in a different context - that something amounting almost to a "proxy" sale was going on here? Was there a sense that it was set up to address the four factors I keep referencing; business risk, lack of debtor engagement, diplomacy and political pressure, in particular the last?

Mr. Willie Soffe:

Our main consideration was whether there was an opportunity to get a fair market-related price.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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My final reference is as follows. At the board meeting of 12 December, reference was made to the idea that the portfolio sale would release NAMA from what it described as "a disproportionate burden of effort in light of the relative size of the portfolio".

Mr. Willie Soffe:

It was taking up a lot of time, yes.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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What does "burden of effort" mean?

Mr. Willie Soffe:

It refers to dealing with the debtors. There was a resistance to assign rents to us. There was a resistance to selling. People-----

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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Is it the four things to which I referred? Is it lack of debtor engagement-----

Mr. Willie Soffe:

Yes.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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-----business risk-----

Mr. Willie Soffe:

Yes.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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-----diplomacy and political pressure?

Mr. Oliver Ellingham:

I think it is the first one in the sense that the asset recovery team was managing assets in Northern Ireland, Ireland, the UK and some other places in Europe. The problems they had with debtor engagement in Northern Ireland were at the highest levels by far in any part of the portfolio.

Mr. Willie Soffe:

I emphasise that no political pressure from Government here or anywhere else influenced our decision.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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I assure the Chair that I am concluding now and not asking another question. The crux of this in relation to the €170 million is dependant on what I spoke about earlier, which is the four factors versus section 10 of the NAMA Act and whether the process was going to be worthwhile. Was it paramount or exclusive as referred to by Mr. McEnery? That is the crux of this issue. It is whether or not the €170 million to which the Comptroller and Auditor General has referred and which we are discussing here was worthwhile given the four issues to which I have made reference. That is not a question, it is statement. I give way to my colleagues.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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At this stage, I suggest-----

Mr. Brian McEnery:

I have a quick comment. I have been chair of the audit committee for a number of years and I want to note in the first instance that we have had much valuable interaction with the Comptroller and Auditor General. It should be remembered that we were established in 2010 and we had to build a system from nothing. We got huge assistance and advice from the Comptroller and Auditor General around that. I would like that to be acknowledged and noted. However, in the context of the reference to a probable loss of £190 million, it is something where we are rightly accountable before this committee to give our view. On 29 September, Deputy Alan Kelly asked what was the margin around that figure and the Comptroller and Auditor General replied that it was impossible to estimate it.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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Absolutely. I believe that is right. It could be higher. It could be lower.

Mr. Brian McEnery:

So, when someone says "probable" of an amount, that is the issue we have. I want to acknowledge, however, the significant and real value the Comptroller and Auditor General has given to NAMA during the process.

Photo of Alan KellyAlan Kelly (Tipperary, Labour)
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Mr. McEnery might re-edit his statement there.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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That is an issue with which the committee will have to deal. We will take a 15 minute break as we have been here since 10 a.m. If the three witnesses wish, they may take a minute or two at the commencement of the next session because questions were being fired at them which they might not have had an opportunity to address. If they are happy to proceed, we will do that, but if there are any points they did not get to cover, they will have the opportunity when we come back. It is in case there were issues to which the witnesses did not have time to respond.

Sitting suspended at 12.35 p.m. until 12.55 p.m.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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I ask Deputy Mary Lou McDonald to proceed.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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Fáilte uilig anseo inniu. I want to start with the assertions the gentlemen who are welcome have made against others in the course of the proceedings this morning, some of which I want to explore with them. At different points of his opening statement Mr. Soffe questioned the credibility of the Comptroller and Auditor General. It echoed what Mr. Frank Daly had to say when he appeared before us. Mr. Soffe has been a public servant for his entire career and is aware that the Office of the Comptroller and Auditor General is a constitutional one. He is also aware that the Comptroller and Attorney General and his staff carry out their work without fear or favour and that at all times exercise due diligence. Will he confirm that he accepts this to be the case?

Mr. Willie Soffe:

I do not agree that we have questioned, as the Deputy put it, the credibility of the Office of the Comptroller and Auditor General. We have had a professional disagreement on certain things. In my lengthy public service career I have dealt with the Local Government Audit Service and have not had particularly difficult relations with it. I very much respect the two services which perform-----

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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I will stop Mr. Soffe there. This is not the first occasion on which the defence of NAMA has been premised not on substantiated facts from NAMA but on what I regard as an outright assault on the Office of the Comptroller and Auditor General. I can give Mr. Soffe an example. In his statement, on page 7, he makes the following assertion: "The C&AG’s view on the management of conflicts of interest reflects a subjective opinion exercised with hindsight by the C&AG." That is an extraordinary remark to make. It questions not just the competence but also, in fact, the diligence and even the integrity of the Office of the Comptroller and Auditor General. Mr. Soffe has no basis for making that assertion.

Mr. Willie Soffe:

I do not accept that.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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Then what is meant by that statement?

Mr. Willie Soffe:

What we are really saying is that we are being judged on what is known about the gentleman concerned in 2016 against what we knew when we were dealing with a problem in 2014.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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I do not accept that, but we will come back to that issue. At another point of his statement, on page 6, Mr. Soffe states: "The Board rejects the C&AG’s unsubstantiated suggestion that serious credible bidders were excluded from the process." He is asserting not simply that people were excluded but also that there was an "unsubstantiated suggestion," as he puts it.

In so stating, he questions the due diligence and integrity of the Office of the Comptroller and Auditor General. That is my interpretation of that statement.

Mr. Willie Soffe:

It is not mine.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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We have had some witnesses appear before us and we will hear from more. One thing marks out the Comptroller and Auditor General and the report in that every assertion made, regardless of whether the witnesses accept it or not, is fully substantiated and, unlike NAMA, is actually backed up by what was an extensive trawl, consideration and examination of the material available to the office from NAMA.

Mr. Brian McEnery:

I would not agree with the Deputy's comment that everything was substantiated by the Comptroller and Auditor General. The fundamental point that I believe is at issue here is the discount factor that was applied and I do not believe that has been substantiated.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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I did not make reference to the discount factor-----

Mr. Brian McEnery:

It is a key factor.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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There has been quite a substantial discussion on that. I referenced in particular the issue of conflicts of interest and the issue of exclusion of credible bidders.

Mr. Willie Soffe:

Our view is that all credible bidders who could write a cheque for £1.3 billion had the opportunity to bid.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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I am sure Mr. Soffe also accepts that within the report of the Comptroller and Auditor General, views from other bidders who found the process to be unsatisfactory, to say the least, are given. They raised a series of concerns that were simply recorded by the Comptroller and Auditor General in terms of valuations and the very obvious fact that PIMCO had a head start on all other comers. I am sure Mr. Soffe has read those criticisms in the report. Surely he is not suggesting that the Comptroller and Auditor General invented these concerns and he accepts at a minimum that these concerns were expressed by other bidders or potential bidders.

Mr. Willie Soffe:

Bidders give different reasons they should not continue. If they were serious contenders determined to buy the portfolio, they would stay in the race.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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What I am trying to get to is Mr. Soffe's acceptance of the facts as reflected by the Comptroller and Auditor General that a number of bidders and potential bidders were less than happy with the process NAMA ran. Can Mr. Soffe accept that?

Mr. Willie Soffe:

I fully accept that he gives the accurate account of why people withdrew. Several reasons are given throughout the-----

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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-----throughout the text. Therefore, his assertions and observations are substantiated.

Mr. Willie Soffe:

The point we are making is that apart from the nine, there did not seem to be other people out there.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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That is not the question I put to Mr. Soffe. I put it to him that he has made a very serious charge against a constitutional office of this State that a report produced by that office was based on unsubstantiated suggestions and any reading of the report does not support that description.

Mr. Willie Soffe:

I, and my colleagues on the board, including the chairman and the chief executive, who appeared here previously, have consistently said and believe that all credible bidders had the opportunity to bid.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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That is not the question. I am affording Mr. Soffe and his colleagues an opportunity to withdraw what I think is very intemperate language and an assertion over which they could not possibly stand. Regardless of their difference around conclusions, to suggest that matters are unsubstantiated in this report is just wrong. I suggest that Mr. Soffe avails of the opportunity to withdraw that particular set of remarks in his opening statement.

Mr. Willie Soffe:

What we said simply means that there were no other people there who were interested in bidding. Who else was there other than the nine?

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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The report contains criticisms of the sales process. Mr. Soffe has accepted that, has he not?

Mr. Willie Soffe:

No, I have not.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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It is there - black on white. I am sure we will hear in the course of our hearings from some of these bidders and they may reiterate their concerns with the process.

Mr. Willie Soffe:

Bidders are bidders.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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I am not asking Mr. Soffe to-----

Mr. Willie Soffe:

Lazard told us that this was a properly run process and that is what we accept.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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I am sure the witnesses take my point. I hope they take it, particularly Mr. Soffe. He has made reference to his record in public service. He does not lightly appear before an Oireachtas committee and attempt to question or trash the Office of the Comptroller and Auditor General, a constitutional office. Does he take that point?

Mr. Willie Soffe:

I am not trashing the Office of the Comptroller and Auditor General. I would not do that to the Comptroller and Auditor General. We are defending our position.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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In so doing, they are attacking rather unjustly and in an unfounded way. The witnesses made another assertion in the course of this morning which relates to PIMCO and the manner of its withdrawal from the sales process. Deputy Cullinane raised this issue with the witnesses earlier. They have suggested that having discovered these unethical and inappropriate success or finder fees, PIMCO attempted to get the acquiescence of NAMA in that. That is the witnesses' position.

Mr. Willie Soffe:

It would have liked to stay in the process.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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The minutes reflect that according to the witnesses' narrative, PIMCO sought the acquiescence of NAMA. Is that still the witnesses' position?

Mr. Willie Soffe:

Yes.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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Does Mr. Soffe understand the seriousness of making that assertion?

Mr. Willie Soffe:

It is what one would have expected it to do - to ask whether it could stay. Let us be clear about it. Success fees are quite common. Our problem was that it was suggested that they would be paid to people who were associated with us.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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The very reason PIMCO approached NAMA and not vice versawas because it had unearthed this fact and in terms of not just what is ethical but what is legal and in compliance with the regulatory framework it is bound to, this caused a massive problem for it. PIMCO approached NAMA, not vice versa. We can agree on that.

Mr. Willie Soffe:

Yes. For the sake of clarity, the people who were carrying out the negotiations obviously proposed success fees but their legal and compliance unit alerted us to it.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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I will come to that in a moment. We have established that the legal and compliance unit approached NAMA. The witnesses' contention is that having approached in that way, the legal and compliance division of PIMCO then sought to sidestep its regulatory and legal duties in an effort to stay within the process with NAMA's acquiescence. That is what the witnesses have told us today.

Mr. Willie Soffe:

I do not think it quite accepted that it was illegal.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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Why did it approach NAMA then?

Mr. Willie Soffe:

I suppose it saw us as a public authority that was very tight on this sort of thing. Our rules are very strict. For example, there is another rule that we cannot sell a debtor's property back to that debtor. The unit alerted us, asked us whether it was okay and we said "no".

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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That is not what is reflected in the notes from the conference calls and, quite frankly, that really does not tally with common sense given that PIMCO made the approach to NAMA. I suppose PIMCO was the whistleblower in this scenario. The contemporaneous notes of the phone calls and exchanges relating to the legal and compliance unit in PIMCO and NAMA reflect its concern, its insistence that it would not be party to a process in which these fees were involved, its initial willingness and subsequent insistence that it withdraw.

This is what I would expect a legal compliance unit to do. However, the NAMA board members are suggesting, and the minutes intimate, this is not what happened. The board members are suggesting that PIMCO came to them and asked how to side step it and hang in. It is a very serious charge to level against PIMCO. Does Mr. Soffe understand the seriousness of it?

Mr. Oliver Ellingham:

We must be clear. There were discussions with the legal and compliance department of PIMCO and between the buying team of PIMCO. As a board, our position was very clear, and the position of the legal and compliance department of PIMCO was very clear, that it was a problem. They came to us and said they had a problem with it.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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Is it the board's position that the legal and compliance unit of PIMCO sought to hang in in the process?

Mr. Oliver Ellingham:

If there was any way they could have carried on by eliminating all causes of the problem, they would have considered it.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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The notes from the conference calls completely refute that assertion. In the conference call dated 12 March 2014, PIMCO further stated that it could not see how any change would allow the organisation to continue with the transaction. This suggests the move to try to change things or side step things did not emanate from PIMCO but from NAMA.

Mr. Oliver Ellingham:

I do not believe that is the case. At no point do I believe the board ever considered the possibility of letting PIMCO carry on with anytaintthat we thought was a problem.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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In the conference call on 11 March 2014, the head of asset recovery, Mr. Ronnie Hanna inquired about other options. PIMCO asked what he meant by it, and Mr. Hanna asked if the deal could be shaped differently for the arrangement fee to come out. This is fairly explicit that NAMA was seeking to reorder or reshape things to keep PIMCO in it. It does not support the board members’ assertion.

Mr. Willie Soffe:

It was not the case. All three of us were at the board and there was never any attempt to keep them in.

Mr. Oliver Ellingham:

There may have been a situation in which we, as the board, in making the ultimate decision whether to proceed or not, would not have condoned this. We were not aware of the conversation taking place.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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Is it the board members' contention that Mr. Hanna acted alone in that regard?

Mr. Willie Soffe:

If he was conveying the impression that the board was seeking a way of allowing PIMCO to continue, it was wrong.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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The notes I have quoted from are summaries of the communications, mainly conference calls, between PIMCO and NAMA in March 2014 regarding PIMCO's withdrawal from the Project Eagle loan sales process and are based on meetings with NAMA officials and the examination team reviewing a minute of a conference call prepared by NAMA's senior divisional manager, legal and reviewed by NAMA's head of asset recovery, based on contemporaneous notes taken by the senior divisional manager, legal, on 11, 12 and 13 March, and copies of e-mailed correspondence between NAMA legal and PIMCO. They are substantiated. This is not an unsubstantiated scenario. They reflect that NAMA was attempting to hold PIMCO inside the process.

Mr. Willie Soffe:

I want to be absolutely clear that at no stage was it an option the board of NAMA was considering.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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I can only surmise that Mr. Ronnie Hanna, head of asset recovery, and NAMA's senior divisional manager, legal, were on a solo run in this regard. Is that the suggestion?

Mr. Willie Soffe:

I am making the board’s position very clear.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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Mr. Hanna has been invited to the committee. We need to hear from NAMA's senior divisional manager, legal, about the matter. Could we make a note on it?

Mr. Brian McEnery:

Could I mention one other matter?

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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Briefly.

Mr. Brian McEnery:

In a subsequent discussion when Cerberus emerged, because we did not want what I referred to earlier as a proxy, I specifically sought assurance that PIMCO was not in the background, just in case. I am trying to find it in the minutes. For all the reasons the Deputy outlined, we did not want to end up with PIMCO coming in through the back door and, thankfully, it has not been the case.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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I draw the delegates’ attention to the board minutes of 3 April. This was the meeting at which the board finally signed off on the deal with Cerberus. At this point, the board asked for confirmation-----

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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What page is it? We will display it on the screen.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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It is on page 121. Mindful of the scenario that had gone before around fixers' fees, the board approached Cerberus to get certain comfort in respect of fixers' fees and was advised that it had agreed a success fee with Brown Rudnick. The board would have known Brown Rudnick’s role in the previous PIMCO scenario. Following further clarification, the board discovered Brown Rudnick had contracted to Tughans solicitors - I am sure this name rang a bell – and that the success fee was to be split 50:50 between Brown Rudnick and Tughans. This is how it happened, right? I will put this to the board members very directly. They strike me as sensible people and they have made great play on their personal experience in the commercial world and how these things run. For me, it is astonishing that having heard the names Brown Rudnick and Tughans, no alarm bell went off and there was no worry in the board members' heads. Mr. Soffe knew, for example, that a number of the Northern Rock committee meetings had happened in Tughans. He was aware of the close relationship with Frank Cushnahan, who had an office in Tughans, and so on. When it came to the moment that the board members had to make the decision, it strikes me as almost extraordinary that nobody sat back and said they needed to wait and delve deeper. Was the question put to Cerberus in respect of Mr. Cushnahan?

Mr. Oliver Ellingham:

As it says here, we specifically asked for confirmation from Cerberus that no further fee sharing of the fee was agreed. The head of legal confirmed that Cerberus had confirmed that the potential fee was payable to Tughans. As far as we were concerned, we had written confirmation from Cerberus that it was not going down the line to anybody else.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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Did the board specifically ask about Mr. Frank Cushnahan? Is there a piece of paper, was there a phone call, is it recorded anywhere that questions were asked about Mr. Cushnahan specifically?

Mr. Oliver Ellingham:

I do not know the answer to that. Having been there at the meeting, our clear intention was to sweep up anything that was caught before, such as Mr. Cushnahan. Whether there is a piece of paper that confirms it, I do not know. We used the words "no former or current member or employee of NAMA".

Mr. Willie Soffe:

It covered anybody who was a member or former member of the board or any committee and anybody who was on the staff or who had been on the staff.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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It strikes me as remarkably coy.

Mr. Willie Soffe:

It was comprehensive.

In addition to the comprehensive sweep, why not ask specifically about Frank Cushnahan? That is what I would have done if I had been on the NAMA board. As a member of the board, I would have wanted to know specifically if there was any trace or track of him in the midst of this transaction. It seems there is a deficit of common sense, if the witnesses do not mind me saying so.

Mr. Willie Soffe:

I would regard the assurance we were given as covering him automatically.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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Does Mr. Soffe still accept that that assurance holds water?

Mr. Willie Soffe:

I have no reason to believe it does not.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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Mr. Soffe knows that there are several investigations under way-----

Mr. Willie Soffe:

That may be-----

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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-----not least in this jurisdiction, where one is soon to be established, as well as in the Northern jurisdiction and America. That was not a good day's work by NAMA, was it?

Mr. Brian McEnery:

I found the paragraph. It is the second last paragraph on page 122. It reads: "In response to a question from the Board, it was noted that, while the preferred bidder could in theory sell the Portfolio on to PIMCO, there was no suggestion that Cerberus was acting as a 'surrogate' purchaser for PIMCO". I was in the heat of it and asked a question about it as a "just in case". Remember-----

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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If Mr. McEnery does not mind me saying so, that makes it all the more extraordinary that the direct question was not put at any stage in relation to Mr. Cushnahan.

Mr. Brian McEnery:

We received a comprehensive assurance, not just in relation to one person but also in relation to any person, that there were no payments to anybody, to a current or a former member. I believe we were given that assurance twice.

Mr. Willie Soffe:

Let me come back to the question about office location. I do not know what point the Deputy is making. The practice was to try to rotate the meetings between Northern Ireland and here; therefore, we had meetings in NAMA and then in Tughans, the Housing Executive and hotels in Northern Ireland. We had no connections or any-----

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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Does Mr. Soffe think I am making a big deal out of nothing? Is that the case? In that regard, I direct him to the board's minutes of 11 March which are recorded on page 116 and 117 of the report. It is at this stage that the head of asset recovery, Ronnie Hanna, tells the board about the conversation with PIMCO. It is fascinating to note the following statement on page 117:

Following discussion the board agreed that there was no specific issue in relation to PIMCO's success fee payments to Brown Rudnick Solicitors (London). The Board noted that, in light of the co-location of offices between Frank Cushnahan and Tughans Solicitors (Belfast), there were some reservations in respect to a success fee payment to the latter.

This is not the work of my genius mind because, in fact, it had occurred to the board that there was a problem and it recognised the relationship or proximity, let us say, between Mr. Cushnahan and Tughans. Those are NAMA's minutes, are they not? In that case, what point was Mr. Soffe making to me?

The minutes go on to state: "In light of Frank Cushnahan's involvement in the PIMCO bid, the Board discussed whether PIMCO's bid, at this stage, was fatally flawed [which is fair enough] given the potential perception that PIMCO might have benefitted from insider information as a result of Frank Cushnahan's involvement". The board was recognising that there was a relationship with Tughans and, more than this, that there was an issue about information that Frank Cushnahan might have had and its effect on the bid.

Mr. Willie Soffe:

It is not information but a perception that it may have been available.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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How does one tell the dancer from the dance or what is real and perceived?

Mr. Oliver Ellingham:

We knew that Mr. Cushnahan did not have information because information on individual debtors would come to the board, not to the Northern Ireland Advisory Committee.

Mr. Willie Soffe:

He would have obtained no information from us on individual debtors.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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He probably did not need it as he was advising seven debtors who represented 50% of the portfolio. I suggest he did not necessarily have to come to the board's meeting to have extensive debtor information.

The meeting then heard that the payment to Mr. Cushnahan was a significant issue, of which Mr. Soffe made great play. However, at no stage in any of the documentation is it reflected that the board resolved to tell PIMCO that all bets were off and say "cheerio". As we heard in an earlier exchange, the papers tell a very different story.

Mr. Brian McEnery:

Going back to page 117, the Deputy referred to the fact that we had described the PIMCO bid as fatally flawed.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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It may have been fatally flawed, yes.

Mr. Brian McEnery:

On page 118, we went on to say NAMA would not accede to the arrangement which PIMCO had disclosed to us.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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The witnesses argue that PIMCO tried to manoeuvre to get NAMA on side with something that should not have been going on. It tried to sidestep compliance and regulation. Is that not their contention? It is a very serious thing to suggest.

Mr. Oliver Ellingham:

I do not think it is something we, as a board, were aware was taking place.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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It is in the board's minutes that PIMCO tried to secure the board's acquiescence to this dodgy manoeuvre.

Mr. Oliver Ellingham:

It is something we would not have considered.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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We are trying to unravel what happened and can only go on what is in front of us. The minutes tell us that the board discussed the issue and it was stated - this is faithfully recorded - that PIMCO was trying to pull a quick one.

Mr. Brian McEnery:

What we are saying is that this was not acceptable to NAMA when it found out a success fee would be payable to Frank Cushnahan who was a former member of the Northern Ireland Advisory Committee. We are not saying it was fatally flawed because of the success payment to Tughans or Brown Rudnick because success payments are very often part of that sector. What was unacceptable to us was that Frank Cushnahan - we did not know this prior to that disclosure - potentially was to be in receipt of a success fee. That was unacceptable. That is what made it fatally flawed and what NAMA would not accede to.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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The conversations we have just gone through in Appendix E comprehensively refute that assertion because, according to this material, that is not the conversation that was had with PIMCO.

Mr. Brian McEnery:

We are, I believe, three of the seven directors and absolutely recount that we were there when that discussion occurred, that we would not accept the payments and that we would not, as a consequence, accept that PIMCO could continue in this process.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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In other words, Ronnie Hanna and the other person, NAMA's senior divisional manager - legal - I do not know if the witnesses wish to tell us who it is or was - were essentially on a solo run. That is the witnesses' position on the issue.

Mr. Willie Soffe:

Absolutely, the Deputy knows what our position is as a board.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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I have no doubt that we will return to it at future hearings.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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I encourage the Deputy to conclude.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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I assume I will be able to contribute again.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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The Deputy will have a second opportunity to contribute.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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The witnesses have been very aggressive and dogmatic in making many of their assertions. The difficulty arises when one reads the board minutes. In that regard, I am zeroing in on the issue of PIMCO because I believe it is at the core of how the board did its business and the witnesses' stewardship of the board. The assertion that the board was insistent as regards PIMCO is not reflected in the minutes. There is no record of a decision by the board to declare the PIMCO bid finished. On the contrary, we have other material which contradicts and casts doubt on this.

Mr. Soffe has stated the obligations that apply under the NAMA Act and I have no reason to doubt his sincerity or that of any of the witnesses in that regard. However, my reading of the material is that, at stages, the witnesses were either half asleep or quite willing to let things go by the by in their haste to get rid of the portfolio.

Mr. Willie Soffe:

I do not accept that at all. I repeat what I said. As a board, the clear message back to PIMCO was that they had the option of exiting themselves but there was no way they could continue and they did exit.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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We know they exited. Did the head of the legal division report to any regulatory authority at that time or subsequently that PIMCO had attempted to sidestep its regulatory and legal duties in the way Mr. Soffe contends happened, by seeking his acquiescence and so on? Was that reported anywhere?

Mr. Willie Soffe:

I am not aware that we did.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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I assume NAMA is in contact with various authorities now in respect of other investigations. Have Mr. Soffe and Mr. McEnery made this information known in respect of PIMCO? Did they make a complaint or share that information with any of the investigating authorities?

Mr. Brian McEnery:

I believe we have made declarations to the Standards in Public Office Commission around Mr. Cushnahan.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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I am asking about the witnesses' assertions around PIMCO.

Mr. Willie Soffe:

No, I am not aware-----

Mr. Brian McEnery:

But, ultimately, we have not made an assertion around PIMCO.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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I am sorry. The witnesses have, in fact.

Mr. Brian McEnery:

We have not. What we said was that we would not accept that it could make a success-based payment to somebody who was a former participant on the Northern Ireland advisory committee. As a consequence of the fact that potential payments to Mr. Cushnahan were alleged, we made a report to the relevant authorities around Mr. Cushnahan.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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We must proceed. This is the Deputy's last point.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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This is my last point, which should not be missed. The witnesses have not just said that. They said that PIMCO connived to stay within the process and that it sought their acquiescence in that regard. That is their position on it. I am a little astonished because the seriousness of asserting that seems to have gone over their heads. I would imagine the head of the legal division of PIMCO and PIMCO corporate would not be best impressed or pleased at the suggestion that an entity such as theirs attempted to sidestep regulation and the law. That is what the witnesses are asserting.

Mr. Brian McEnery:

We are asserting that they sought the agreement of NAMA to accept.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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It is the same thing.

Mr. Brian McEnery:

I am saying NAMA did not accept and would not accept. That was the-----

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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Mr. McEnery has made that point and he is not moving from that position.

Mr. Brian McEnery:

They sought the agreement to pay success-based fees to whom they had retained. We would not agree in respect of Mr. Cushnahan. That is the fact of NAMA's position.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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I am sorry, it is more serious than that. They approached board members because they knew that a success fee could not go to Mr. Cushnahan or anybody else associated with it.

Mr. Brian McEnery:

I do not know about it.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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They brought this to Mr. McEnery's attention and it is now his contention that they said, "But listen, whatever about that, how do we hang on in?". That is a most serious charge against any organisation and its compliance and legal division. I am surprised at that.

Mr. Willie Soffe:

I would put it slightly differently. If you were PIMCO and had invested a large amount in looking at the assets, doing due diligence and rest of it, it would be quite natural for you to seek a way-----

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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To try and break the law.

Mr. Willie Soffe:

I am not saying "break the law" but to see was there any way they could stay in the process.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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We are going to conclude.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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The conversations were with its legal and compliance unit, not with some office junior who thought it might be a bright idea to hang in. The witnesses are asserting, and they have asserted multiple times, that the person charged with legal compliance sought to sidestep or undermine legal compliance in that regard. That is an astonishing claim for them to make and I am sure we will have PIMCO here and we can test that.

Mr. Brian McEnery:

I am not suggesting that they sought to do an illegal act but what we are saying-----

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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They sought the acquiescence of the witnesses.

Mr. Brian McEnery:

I certainly did not even ask whether this was a legal or an illegal act and, quite frankly, it was not of concern.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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It was not of concern to Mr. McEnery.

Mr. Brian McEnery:

What was of concern to me was that I would not have anything to do with it. I would not allow my support go to PIMCO remaining in that process. That was the fact of it.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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Why does Mr. McEnery think the legal and compliance unit of PIMCO was in touch? There was a issue of legality, compliance and regulation and that is why they called him.

Mr. Brian McEnery:

From the perspective of this board, it did not get past first base that PIMCO could stay in this and that is why we said it was fatally flawed and we would not acquiesce to it. Both of those are in our minutes. It was fatally flawed.

Mr. Willie Soffe:

If somebody had been able to demonstrate to me and to us generally that paying the fee was legal, there was still no way we would have accepted it because it was unethical from our point of view that somebody who had been with us was getting paid.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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Mr. Soffe is trying to dance around my central point but his assertion is recorded on the record of the committee.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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The Deputy will have another opportunity. I call Deputy Cassells.

Photo of Shane CassellsShane Cassells (Meath West, Fianna Fail)
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I thank the witnesses for their contributions. My colleague when questioning the Minister for Finance made reference to no smoke without fire, which generated plenty of chuckles. However, during these hearings, there has been plenty of stoking of the coals. Every so often, little sparks emanate and we get nuggets of information but it is taking plenty of stoking to get them. One of the core points that is ultimately our objective to examine is the issue of a probable loss. Mr. McEnery and the NAMA chairman stressed this was a good deal. The Minister for Finance has wished us well in finding the truth. The question of motivation is central. Mr. Soffe said in his opening contribution that the process would not continue if it was not competitive and three times he said that no political pressure was brought to bear. I would like to reflect on what the Minister for Finance said during his appearance before the committee because he was at pains to present what he called "a context" for what was happening in the overall economy. I find this strange. Why would the Minister, who was at pains to say he was at a remove from NAMA's commercial decisions and is prohibited from being involved in them, detail context for us? He spoke of how the impaired loans were a drag on Ireland and its ability to re-enter the bond market and at that point, he swivelled in his chair and he pointed towards the Comptroller and Auditor, saying, "You did not have the ECB or the troika breathing down your neck". This is unbelievable stuff. It equated to an attack on Mr. McCarthy. Given those statements, did the NAMA board members have the Minister breathing down their necks? Did he influence, pressurise or even suggest that they get this done as quickly as possible and get it in the bag?

Mr. Willie Soffe:

We were brought under no pressure to sell in connection with Project Eagle. What the Minister said to the committee and what he said to us was it was important from Ireland Inc.'s point of view and its borrowings that the debt would be paid down by NAMA as quickly as possible. The Act asked us to deal with the assets expeditiously. The word "expeditiously" is used twice in section 10.

I recall the Minister saying three things when he spoke to the board. One was that where there is the opportunity, debt should be paid down as quickly as possible. Second, he told us to see what we could do to deliver housing. As a result, we developed a programme to deliver 20,000 houses by 2020, which was a huge increase for us. We had an aim up to then of 1,500 a year. Now we had to push it to 4,000 per annum on average. The third point he made was on the docklands strategic development zone, SDZ. We needed commercial development and housing there and we were to work with the agencies involved, apart from ourselves, to deliver there. He spoke-----

Photo of Shane CassellsShane Cassells (Meath West, Fianna Fail)
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In terms of the question-----

Mr. Willie Soffe:

-----in general terms about paying down the debt.

Photo of Shane CassellsShane Cassells (Meath West, Fianna Fail)
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That is interesting because he had a number of people from the Department of Finance here with him on that day as well. The second secretary was with him who is coming back in before us. They say they have regular contact. Did they convey anything to Mr. Soffe? Some might say it is not political pressure because it comes from the officials. What is interesting is that, on the day, I think it was Ann Nolan who said there was no other deal on the table. This was the Department of Finance talking. They were very good cheerleaders for the stance NAMA took because they were fully behind it on that day.

I will ask Mr. Soffe again. Were the Department of Finance senior officials saying to get this done as quickly as possible? Mr. Soffe said to me that the Act refers to dealing with assets expeditiously. How expeditiously and at what cost is the kernel of the issue.

Mr. Brian McEnery:

It was only probably once a year that we met the Minister for Finance. I do not think I, as a board member, ever met anybody. I think I met Ann Nolan once. As a consequence, I as a board member never had any interaction with the Department of Finance or the Minister in which they were telling us what to do. It was once a year with the Minister. The Minister would come to a strategy session and, as Mr. Willie Soffe has said, they were the areas he would have asked us about. Other than that, for us, quite frankly, we did not have interactions with the Minister or the Department of Finance. I think that is fair.

Mr. Willie Soffe:

I can say the same. There usually was interaction at chairman level with the Department of Finance but I had no interaction with the Department.

Photo of Shane CassellsShane Cassells (Meath West, Fianna Fail)
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I suppose that is the chairman dealing with the minuted or non-minuted accounts of meetings and so forth. In terms of personal interaction and meeting the Minister in any other kind of context, was there ever a conversation between members of the board and the Minister or any of the senior officials about expeditiously moving this on?

Mr. Brian McEnery:

No, not with me anyway.

Mr. Willie Soffe:

No, nor me.

Photo of Shane CassellsShane Cassells (Meath West, Fianna Fail)
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Mr. Soffe said to us before the break there was no political pressure but what was required was a discreet and confidential process. Who said that to Mr. Soffe?

Mr. Willie Soffe:

That was conveyed to the chairman, as I understand it, from the Minister and discussions that were had with the Minister's counterpart in Northern Ireland.

Photo of Shane CassellsShane Cassells (Meath West, Fianna Fail)
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That goes right back to the heart of what I said. There was no political pressure yet the Minister said he wanted a discreet and confidential process.

Mr. Willie Soffe:

What he said was that it was up to us to run the sales process, but in the interests of Northern Ireland and the particular problems it was always dealing with, he asked us to do it in a discreet manner.

Photo of Shane CassellsShane Cassells (Meath West, Fianna Fail)
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I understand that but it goes back to the heart of what I am saying. We had the Minister for Finance in here saying he had absolutely nothing to do with the process and that he was fully removed from it, but at the same time he was suggesting and advising that he wanted a discreet and confidential process because it was Northern Ireland. Does that not go against the grain of the whole issue of transparency which is at the heart of this discussion?

Mr. Willie Soffe:

I think what he was saying to us was it was an opportunity to have a time-bound, limited process but at no stage did he advise against a competitive process. The Minister always made it clear in any discussions he had elsewhere or in contact with us that NAMA's policy was open competition and he never advised us to change that.

Photo of Shane CassellsShane Cassells (Meath West, Fianna Fail)
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Again, he saw that as an opportunity but the Comptroller and Auditor General report refers to the fact that the probable losses were a result of the pursuance of that tactic.

Mr. Willie Soffe:

We have a problem with-----

Photo of Shane CassellsShane Cassells (Meath West, Fianna Fail)
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I know NAMA does.

Mr. Willie Soffe:

-----probable loss because we do not believe the phrase stands up at all. There is no loss, as I have said.

Photo of Shane CassellsShane Cassells (Meath West, Fianna Fail)
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In terms of the Minister for Finance's role in this, Mr. Soffe has said that the Minister sought a discreet and confidential process. Mr. Soffe said that, "given the recent history of this island, it would have been unthinkable for NAMA to have ignored the impact of its actions on the Northern Ireland economy and on North-South relations". It comes back to the issue of motivation. Did that thinking affect how expeditiously the process was proceeded with and the discount that was applied?

Mr. Oliver Ellingham:

I do not think there is any problem for any organisation in taking a decision to take account of all factors. The political factors both here and in Northern Ireland were one of the factors we bore in mind when we were looking to-----

Photo of Shane CassellsShane Cassells (Meath West, Fianna Fail)
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There is if the Minister for Finance is seeking to have this wrapped up and it results in a probable loss to the State. That is ultimately what happened here.

Mr. Oliver Ellingham:

Let us do it in parts. A whole series of factors came into the reason we looked at selling this. Somebody came forward to buy it. At the time, we thought there was no single party interested in buying the lot. That is a fact. We then had the political forces saying if we did decide to sell these assets, it would be unhelpful to have Northern Ireland hawked around by a State agency in the South. That was fine. We then said our policy was not to have closed sales so everything had to go through some kind of competitive process. We then said we needed as competitive a process as could be had for one this size while taking into account the request that these would not be hawked around on the front page of The Irish Times. That was the position. At no point were we ever asked to sell these assets at below our section 10 price. It is very important that people bear in mind that we had a view as to the number we could sell these assets for while keeping faith with our section 10 obligation. That, in our mind, was £1.3 billion.

Mr. Willie Soffe:

If we failed to reach that minimum price, no matter who was talking to us, we would not have sold.

Photo of Shane CassellsShane Cassells (Meath West, Fianna Fail)
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I find it unbelievable that the Minister of Finance - the person who advised a discreet and confidential process - was giving no end of advice to people on how to proceed and yet he is saying he had no role in this commercial deal. When he attended the committee, I asked him a straight question whether he believed there was a good deal or not and he said he would not comment. He was advising in terms of progressing this deal, yet he could not make an adjudication, as the Minister for Finance for this country, as to whether there was a probable loss.

Mr. Willie Soffe:

It was up to NAMA to decide whether it was a good deal or not.

Mr. Oliver Ellingham:

Exactly. In our view we were not being advised by the Minister for Finance. He was airing a view as to what the political will was in both parts of Ireland-----

Photo of Shane CassellsShane Cassells (Meath West, Fianna Fail)
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And Europe because he kept referring to the ECB and the troika.

Mr. Oliver Ellingham:

-----and if we found a way of selling these assets it would be fine. We did not take advice from the Minister for Finance. He could have directed us-----

Photo of Shane CassellsShane Cassells (Meath West, Fianna Fail)
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So Mr. Ellingham got no sense that the Minister was under an extreme amount of pressure from Europe and was passing it on to NAMA to do this?

Mr. Oliver Ellingham:

No.

Photo of Shane CassellsShane Cassells (Meath West, Fianna Fail)
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None whatsoever.

Mr. Oliver Ellingham:

The pressure he was under was because of financial events in Ireland as a whole to try to pay down the debt as quickly as possible to get the contingent liability off the State balance sheet so it could start refinancing and not have a second bailout. That would have been at the back of his mind but it was not of-----

Photo of Shane CassellsShane Cassells (Meath West, Fianna Fail)
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I think it was at the forefront of his mind, given his comments to the Comptroller and Auditor General the last day.

Mr. Oliver Ellingham:

As Minister for Finance, he was probably right. He was not saying to take this pot of assets and sell them.

That was down to us.

Mr. Willie Soffe:

I recall early on in the first few years, when we had a target of €7.5 billion to pay back, that it was touch and go as to whether we would reach it by the end of 2013. The chief executive officer of the National Treasury Management Agency, NTMA, who was on the board of NAMA, was saying at the time that if we did not reach that target it would be damaging to the sovereign. He was trying to borrow to fund expenditure in the country. If one looks back, part of the cost of services in the last ten budgets has been met by borrowing. It was important that the State be able to borrow at the lowest rate possible.

Photo of Shane CassellsShane Cassells (Meath West, Fianna Fail)
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No one is disputing that. We are just trying to ascertain the process that was followed which led to the ultimate price achieved. Politicians above all people do not need a history lesson on how the State was funded.

Mr. Willie Soffe:

Yes, but I was emphasising how important it was for the reputation of the country that the debt be paid down.

Photo of Shane CassellsShane Cassells (Meath West, Fianna Fail)
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Certainly, but the question that we are trying to address is: at what cost? Was there a cost? That is the whole point of the interaction between us all today.

Mr. Willie Soffe:

As far as we were concerned, we were working towards a fair, market-related price.

Photo of Shane CassellsShane Cassells (Meath West, Fianna Fail)
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That is the point Mr. Soffe was making. To go back to rationale for the application of a 10% discount, Mr. Soffe drew attention to the financial statement of 2013 which, as the Chairman clarified, was signed in May of 2014. Are the witnesses able to categorically state that there is sound documentary evidence, in real time rather than post-dated, from the board where the considerations to which they refer were thrashed out and a resolution arrived at?

Mr. Brian McEnery:

Yes, absolutely. As part of our decision making, we absolutely reflected on that. I know it probably annoys the Chairman when I say this but we set our target price based upon cash flows that we were doing for the year end and then we discounted them back. That is how we came up with the figure of £1.3 billion. We decided that if we did not get a price of £1.3 billion, we would not sell the portfolio. The important issue is how we came to that decision. We considered a number of factors. We considered the cash flows in the first instance. It is important to note that there is no disagreement between the Comptroller and Auditor General and NAMA regarding the cash flows out to 2020. The heart of the issue is that the cash flows are out to 2020 and are discounted back to today, but the Comptroller and Auditor General has calculated the €190 million based on a discount of 5.5%. We argue that one would not be able to sell these assets, many of which were non-performing, at a 5.5% discount because much better assets that were fully performing were pitched at a discount factor of 7% to 7.5%. That is our contention, namely, that we could not have sold the portfolio at that discount rate.

I go back to the point that to have a seller, one must have a purchaser-----

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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Sorry, Chairman, that is not actually what the Comptroller and Auditor General was saying. He was not saying that if we had a loan strategy, the 5.5% discount rate would be applied. What he was saying, or at least this is my understanding of it, was that it was based on the asset sales strategy and not on loan sales. Is that correct?

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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I will ask Mr. McEnery to respond to that. I will not bring in the Comptroller and Auditor General at this point.

Mr. Brian McEnery:

The £190 million identified by the Comptroller and Auditor General is the difference between the £1.49 billion figure and the £1.3 billion figure. In actual fact, we got £1.32 billion. That is how the £190 million was calculated, by virtue of the fact that the Comptroller and Auditor General has discounted the future value of the cash flows that both his office and NAMA agreed on at the end of December 2013. We both agreed on them and he signed off on the financial statement. We weread idemon that. What then happened was that we decided that 5.5% was not realistic. That was one factor.

Another factor we considered was the following. It should be noted that the 5.5% rate was in our paper. When NAMA acquired these loans from the participating institutions back in 2009, consideration was given to what was termed the long-term economic value uplift. What we deducted from that was a cost for enforcement or a carrying cost into the future for these loans. We took off a discount. There was an uplift, the long term economic value and then when we bought those loans, we applied a discount to reflect the fact that we would have enforcement costs. We also said in our paper of December 2013 that a purchaser would not buy these if there was not a discount and that explains the 10% that is referred to on the last page of that paper.

We approached it on a number of fronts to come to that £1.3 billion figure. It was not as if we came up with that willy-nilly. I know the Deputy is not suggesting that. We did not; we looked at it from a few different fronts. We looked at the cash flows and discounted them using a low, market-based figure. Remember, in the reports on the discount factors, some of which were given, there were ranges of between 11% and 19%, as the Department of Finance said back in -----

Photo of Shane CassellsShane Cassells (Meath West, Fianna Fail)
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All I asked for were the accounts of where that was thrashed out. Mr. McEnery has just simply referred to the -----

Mr. Brian McEnery:

We have-----

Photo of Shane CassellsShane Cassells (Meath West, Fianna Fail)
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-----financial statement of 2013.

Mr. Brian McEnery:

We did thrash it out. It is terribly important that we say to the Deputy that they were thrashed out.

Photo of Shane CassellsShane Cassells (Meath West, Fianna Fail)
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The Comptroller and Auditor General has said that the lack of documentary evidence on the process is not helpful, in terms of actually allowing people -----

Mr. Brian McEnery:

In truth, the Comptroller and Auditor General has said that. As chairman of the audit committee, I would love to sit down with the Comptroller and Auditor General now and discuss this. Remember, we produced minutes between 2009 and 2016 and our minutes do say that there were discussions around this. However, our minutes are mostly formed on the basis of the decision. The Comptroller and Auditor General, quite frankly, had never questioned our minutes up until the publication of his report. In 2010, 2011, 2012 and 2013, he never said that our minutes were too short. Ultimately, minutes are part of record keeping. We accept that and we record decisions. However, I will gladly take have a discussion with the Comptroller and Auditor General on minute taking into the future. We should have that discussion. He has now said it in his report but he had not said it previously.

Photo of Shane CassellsShane Cassells (Meath West, Fianna Fail)
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Given the sensitivity of what was being handled, it would have been important to make sure that there was an accurate recording, especially given that in its financial statement, NAMA pointed out that it would allow itself some wriggle room to change the discount in order to move a deal on. There should have been proper minute-taking in respect of a decision of this magnitude.

Mr. Brian McEnery:

I note the Chairman's points about us being able to show that this was something that was contemplated before the sale occurred. I fully accept that. However, it is important for us to outline that what was said here on the last occasion by the Comptroller and Auditor General is not fully correct. He said that the 10% rate only came into the equation last June but it did not. It was in our financial statement back in-----

Photo of Shane CassellsShane Cassells (Meath West, Fianna Fail)
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Deputy Alan Kelly asked earlier about a timeframe for producing some of that documentation. I am not sure that was fully answered.

Mr. Brian McEnery:

It would my objective-----

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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We will need it within the week.

Mr. Brian McEnery:

It would my objective to go back from here and to ask for that because that is a very reasonable-----

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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I will be saying to the Chairman in the next 48 hours that we need that documentation now. We need a weekly response to every request from now on. Three weeks have now elapsed, which is unbelievable. We made the point three weeks ago.

Mr. Willie Soffe:

There is a legal issue -----

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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The witnesses can take this message back to NAMA, although I am sure its other members are watching this. We had a list of 20 items. If there is an issue with one or two of them being released, NAMA can give us the rest so that we can get working on them and studying them.

Mr. Willie Soffe:

There is a legal issue, as the Chairman knows -----

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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Yes, with some of the documentation, but not all.

Photo of Bobby AylwardBobby Aylward (Carlow-Kilkenny, Fianna Fail)
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At the outset I must say that, like my colleagues, I find it unbelievable the way in which Mr. Soffe attacked the office of the Comptroller and Auditor General in his opening statement today.

I thought three members of the board - there are only seven members - would come before the committee to defend themselves and outline their reasons for the sale of the Project Eagle portfolio. Instead, they came in and attacked the Comptroller and Auditor General, which I find unbelievable. I thought that, as board members, they would defend the reason we have them before the committee, not attack another pillar of the State and rubbish what that person said.

Mr. Willie Soffe:

I do not accept that we made any sort of personal attack.

Photo of Bobby AylwardBobby Aylward (Carlow-Kilkenny, Fianna Fail)
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That is the way I read it.

Mr. Willie Soffe:

What we did - trenchantly, I accept - was defend our position and why we thought we had taken what was the right course of action. I do not think that is offensive. If one feels one is right, one should say one is right and give the reasons one is saying it. That is all we have done.

Photo of Bobby AylwardBobby Aylward (Carlow-Kilkenny, Fianna Fail)
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I accept that. However, to downgrade and rubbish the Comptroller and Auditor General is another matter.

Mr. Willie Soffe:

I do not think we have done that. We have-----

Photo of Bobby AylwardBobby Aylward (Carlow-Kilkenny, Fianna Fail)
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That is my reading of it.

Mr. Willie Soffe:

-----said that we strongly disagree with some of his conclusions. As already stated, we worked with auditors most of our lives and we have disagreements. If we have disagreements, we air them.

Photo of Bobby AylwardBobby Aylward (Carlow-Kilkenny, Fianna Fail)
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Does Mr. Soffe respect the Comptroller and Auditor General's office?

Mr. Willie Soffe:

Yes, very much.

Mr. Brian McEnery:

I think we said that we have gained a lot from the interactions with the Comptroller and Auditor General since 2009. It would be wrong of us not to say that and to fail to fully acknowledge the fact that the Comptroller and Auditor General has been part of the journey of the National Asset Management Agency in its systems development and improvement. I am an accountant, and I believe there are aspects of the report, and the methodologies around the report, which, frankly, I would have gone about differently. For example, I would have met the board members because the Comptroller and Auditor General alludes in his report - and his submission on 29 September - that he had to rely on the minutes. There were only seven of us. He could have met us and we would have to tried outline the position. Fundamentally, we have got a lot of significant and positive advice and guidance from the Comptroller and Auditor General over the years.

Photo of Bobby AylwardBobby Aylward (Carlow-Kilkenny, Fianna Fail)
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I am glad Mr. McEnery acknowledged that. That is a change of tune from the opening statement. I want to move on.

Brexit was mentioned by Deputy Kelly and, in his opening statement, Mr. Soffe made a big play about Brexit in that he knew it was coming down the line. I felt he was saying that he was going to take his cake, eat it and then run. In other words, get rid of the loan sale before the Brexit vote and have that gone from the system in the event it would have an effect later on.

Mr. Willie Soffe:

I will repeat our rationale. There were a number of reasons, as we said. The opportunity was there to look at a loan sale. We were anxious to pay down our total debt as much as possible. We are in a very comfortable position now, with the storm clouds gathering, in that we are down to €3.6 billion. This was an opportunity. I did say that when we looked at what was on the horizon, Brexit was a distinct possibility, and nobody knew what would be the effects of it. Before there was ever a vote, it had begun to create uncertainty.

Photo of Bobby AylwardBobby Aylward (Carlow-Kilkenny, Fianna Fail)
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If NAMA still had the loan sale book in 2018, is it Mr. Soffe's professional opinion that Brexit would have a major effect on valuations?

Mr. Willie Soffe:

Commentators in the market have been saying that since the start of September. There was an article by one of the senior people in Savills which stated that property values in London are down 17% and that those in the rest of the United Kingdom are down by approximately 30%. From our experience in regard to the portfolio, there is every indication that those are the sort of figures we are talking about. Yes, it has had a significant impact on prices.

Photo of Bobby AylwardBobby Aylward (Carlow-Kilkenny, Fianna Fail)
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The witnesses referred to NAMA's engagement with the troika. Will Mr. Soffe elaborate on that? What engagement would the NAMA board have had with the troika over the time these sales books were being prepared?

Mr. Brian McEnery:

None of us would have had - at least I did not-----

Photo of Bobby AylwardBobby Aylward (Carlow-Kilkenny, Fianna Fail)
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The witnesses referred in their statement to their engagements with the troika.

Mr. Willie Soffe:

The chief executive attended meetings about every quarter with people from Europe regarding where we were at in respect of paying down the debt.

Photo of Bobby AylwardBobby Aylward (Carlow-Kilkenny, Fianna Fail)
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That is what the witnesses meant when they referred to the engagement with the troika.

Mr. Brian McEnery:

Not us.

Mr. Willie Soffe:

And, of course, there was engagement with the Department of Finance and elsewhere. The message coming through was clear. They wanted that money back as quickly as possible.

Photo of Bobby AylwardBobby Aylward (Carlow-Kilkenny, Fianna Fail)
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Was the troika putting pressure on NAMA?

Mr. Willie Soffe:

The European Central Bank is part of the troika.

Photo of Bobby AylwardBobby Aylward (Carlow-Kilkenny, Fianna Fail)
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Where was it putting pressure-----

Mr. Willie Soffe:

As I said, through our chief executive officer.

Photo of Bobby AylwardBobby Aylward (Carlow-Kilkenny, Fianna Fail)
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Mr. Rowntree was before the committee last week and I found him to be open, transparent and forward in his views. He was the first witness to come before us who was transparent and willing to answer every question we asked. However, NAMA has rubbished the evidence he gave to the committee. He said he had been a member of the NIAC and that what he termed "sensitive information" was put in front of him every day. As an outside member, Mr. Cushnahan was the other one. He as good as said that that information could be construed and used afterwards, if one were to be in Mr. Cushnahan's situation where he was advising six or seven people who owned 50% of the portfolio in Northern Ireland. He said it was not hard to identify individual debtors from what they were getting at those meetings. They were not allowed to bring that information out of the meeting. It was given to them at those advisory meetings and then taken back before they left, but he said it would not be difficult for any individual to identify debtors and assets from the information they were getting. The witnesses are saying, however, that Mr. Rowntree or Mr. Cushnahan had no information whatsoever that they could bring forward for their own benefit. We hoped it would not turn out that way but that will have to be proven. Have the witnesses any comment on what Mr. Rowntree said? In his evidence, he was adamant that what they were shown at meetings could be used to identify individual debtors and assets that they were speaking about. However, the witnesses state categorically that no information was given to those two men that could have a bearing on any outcome of it. That is a contradiction.

Mr. Willie Soffe:

Let me refer to some of the things he said elsewhere. In the Irish Newson 4-----

Photo of Bobby AylwardBobby Aylward (Carlow-Kilkenny, Fianna Fail)
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I am referring to this one.

Mr. Willie Soffe:

The Deputy said he had information.

Photo of Bobby AylwardBobby Aylward (Carlow-Kilkenny, Fianna Fail)
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That is what it says here.

Mr. Willie Soffe:

In regard to the NIAC, he said there was a wall of silence, that he had felt excluded, that commercially-sensitive items were not discussed and that he was kept entirely in the dark. The interviews he gave to Northern Ireland newspapers are on record.

Photo of Bobby AylwardBobby Aylward (Carlow-Kilkenny, Fianna Fail)
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That was not his evidence to us. His evidence to us was the opposite.

Mr. Willie Soffe:

Let us come to the particular Ulster University papers and the project we had with them. As I explained earlier, the purpose of the project was to put together - on a Northern Ireland basis - a global view of land zoning in the entire area of influence of the Northern Ireland Executive and to show that on an area-by-area basis throughout the province. As the Deputy knows, in this jurisdiction that is information one can get by walking into any planning department. What this was doing was combining it in regard to residential zoning. It is useful in that form, but if somebody wants to advise a person on how he or she should spend his or her money on a particular plot of ground, that individual can go through the local planning authority records and find out the story on that particular piece of land.

This was a project that brought together land that was zoned residential and on which there were loans from NAMA and various other financial institutions that were prepared to take part in it and it was shown in a global way. We got reports on our own piece of it and a global report. Other individual institutions got reports on their piece and the global report. There was an agreement at the start that - the banks were particularly sensitive about this - the individual zonings would not be identified except to them only.

Photo of Bobby AylwardBobby Aylward (Carlow-Kilkenny, Fianna Fail)
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Was it an asset report then?

Mr. Willie Soffe:

It was a report on residential zoning. It identified a lot of things. First, it identified areas where there was inadequate zoning and others where there was serious over-zoning.

Photo of Bobby AylwardBobby Aylward (Carlow-Kilkenny, Fianna Fail)
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Was it exclusively on zoned residential land in Northern Ireland?

Mr. Willie Soffe:

Yes, it had nothing to do with industrial zoning. It was important in order that the Northern Ireland authority could see the whole picture. At one of our meetings Mr. Rowntree drew our attention to the fact that because of the failure of voluntary housing bodies to meet their targets, a sizeable sum would be returned to the UK Exchequer. There was a need to look at housing in a general sense and zoning for housing in Northern Ireland in order that plans and overall strategies could be developed. We did the same. We worked here on a GIS project with the Department of the Environment, Community and Local Government to put zoned land of all kinds, not just residential, in this country online. The Deputy can go on it and it will tell him the zoning attached to every piece of land and what is included in the local development plan and so on.

Photo of Bobby AylwardBobby Aylward (Carlow-Kilkenny, Fianna Fail)
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NAMA gave the University of Ulster €20,000 to compile this report. It must have put emphasis on it. When the report was produced, did it change the minds of board members on the loan portfolio? Did it have any bearing on the sale of the loan book afterwards-----

Mr. Willie Soffe:

By the time it was finished-----

Photo of Bobby AylwardBobby Aylward (Carlow-Kilkenny, Fianna Fail)
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-----or was it just hidden or thrown on a shelf?

Mr. Willie Soffe:

It was supplied after we had left the scene to, as I understand it, the Northern Ireland Executive and it is useful for it if one thinks about it. It needs to know the locations where housing should be supported. I will give a simple example. If it is promoting industrial development west of the Bann, it needs to know what serviced industrial sites are available that could be used and, second, whether there will be housing available for the people who will work there.

Photo of Bobby AylwardBobby Aylward (Carlow-Kilkenny, Fianna Fail)
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Mr. Rowntree made an assessment of the information put before him while Mr. Cushnahan was sitting in on the same meetings. Does Mr. Soffe accept that there could have been conflict of evidence? Mr. Rowntree and Mr. Cushnahan were both external members of the board and Mr. Rowntree has stated to the committee that it was easy to identify assets and individual debtors from the information. Was Mr. Cushnahan in the same position? He faced a conflict of interest because he was involved in six companies and promised a share of the money by PIMCO. Does Mr. Soffe not find that strange?

Mr. Willie Soffe:

It is not a "Yes" or a "No" answer. If a particular site is picked, one may be able to identify from the global zoning we were shown, but one can get the same information if one walks into the planning office. It is not confidential.

Photo of Bobby AylwardBobby Aylward (Carlow-Kilkenny, Fianna Fail)
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Mr. Rowntree did not say that. He said information had been circulated and taken back during the meetings and that he had information from those meetings that he would not normally have had which he could have carried out of the room if he had wanted to do so but that it had been taken from him. Mr. Cushnahan was in the same position. This means that a conflict of interest is highlighted by that alone. Mr. Cushnahan was advising six companies that were involved in 50% of the entire Northern Ireland portfolio. He was also with PIMCO. He had a share in a sum of €16 million with two other legal advisers. That is the fundamental question.

Mr. Willie Soffe:

I will approach it this way. Let us suppose he was able to figure out - there were no valuations or details of debtors - and identify a piece of land in Belfast or wherever else. The information he would have gleaned from the documentation and our project with the University of Ulster would have been readily available if he had been able to identify it precisely in the planning office in Belfast

Photo of Bobby AylwardBobby Aylward (Carlow-Kilkenny, Fianna Fail)
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I will leave it at that, but I take a different meaning from Mr. Rowntree's comments last week. The Comptroller and Auditor General referred to the expected cash from debtors and loan workout value and said that if NAMA had held these loans, it was estimated that it would receive a net £1.68 billion in cash from the Project Eagle debtors between 2014 and 2020. This relates to selling assets in instalments rather than in a loan book sale. Mr. Rowntree said the same. He said he was a professional and that he knew all of the companies in Northern Ireland well. He also said that if the assets had been sold over five years, more money would have been realised. Will Mr. Soffe comment on this? It is important that both witnesses answer that question.

Mr. Brian McEnery:

I do not think Mr. Rowntree was in a position to say that because, by his own admission, he said he had not been aware of the granular detail of the portfolio, whereas we went through every single asset. We modelled cash flows into the future and absolutely concur with the Comptroller and Auditor General that the opening position is------

Photo of Bobby AylwardBobby Aylward (Carlow-Kilkenny, Fianna Fail)
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But the board did not conduct an asset assessment of the entire portfolio.

Mr. Brian McEnery:

We did. We looked at the cash flows out to 2020. In other words, we looked to see, for instance, whether the assets were generating income. If income was being generated, it would have been included in the cash flows. At a point in time we would have asked when the asset was likely to be sold. We went through the cash flows for the assets in Northern Ireland and they were modelled annually to 2020. That amount, as the Deputy rightly said, was more than £1.6 billion. However, as he will fully appreciate, cash in 2019 and 2020 will not be worth the same as it would have been in 2014 or today; therefore, it is brought back to today's values. The clear view of the NAMA board was that there was a price, which was £1.3 billion. In fairness to Mr. Rowntree, he fully acknowledged he did not have granular information on the debtors. He states this in the transcript. He did not know the portfolio of assets NAMA was holding because it was never discussed at the NIAC.

Photo of Bobby AylwardBobby Aylward (Carlow-Kilkenny, Fianna Fail)
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Do the witnesses have no doubt, therefore, that this was the best deal they could have secured up to 2020?

Mr. Brian McEnery:

As I said in reply to Deputy Shane Cassells, we absolutely believe that because it was looked at on more than one basis, whether it was the figure of £1.6 billion that was discounted using a conservative discount factor or whether the 5.5% discount rate was used and then 10% was knocked off by virtue of enforcement costs, etc. It was all pointing to the fact that if we received £1.3 billion, we were going to do a good job in the realisation.

I can say, absolutely hand on heart, that I believe we did a very good job in the sale of Project Eagle and got the best price.

Mr. Willie Soffe:

If we were in possession of that portfolio today, it would be worth less than £1 billion.

Photo of Bobby AylwardBobby Aylward (Carlow-Kilkenny, Fianna Fail)
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I have another question. Mr. Soffe said in his opening statement, "... given the recent history of this island, it would have been unthinkable for NAMA to have ignored the impact of its actions on the Northern Ireland economy and on North-South relations", for political reasons and so forth. However, NAMA sold the portfolio to a private consortium, Cerberus. Once it was sold, NAMA had no control of it. Cerberus controls this loan book now and it can do whatever it wishes. Neither the State nor NAMA has control over it. Was NAMA not taking a chance, given it says that it was considering the impact on economics in Northern Ireland? Is it not the case that what happens with Cerberus is up in the wind? That consortium is out to make money; that is the reason it bought the portfolio. It did not buy it to lose money. It can do whatever it wishes with the portfolio. Did anybody think of the impact of a private consortium buying the lot and possibly damaging the economy in Northern Ireland and even in the South, via its offshoot being connected to it and the Border? Was the fact that Cerberus could do whatever it wished with it considered before the sale was completed?

Mr. Brian McEnery:

I said to Deputy Kelly earlier that, quite frankly, our paramount or supreme objective was to fulfil section 10 of the Act, which is the maximum realisation. From my perspective, and the board's perspective, that was the objective.

Photo of Bobby AylwardBobby Aylward (Carlow-Kilkenny, Fianna Fail)
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Does the witness have no worries about Cerberus holding this-----

Mr. Willie Soffe:

The Deputy should remember as well that we were a Republic of Ireland State body, under legislation passed here, operating in Northern Ireland. That was a sensitive situation from the start. There would have been quite a lot of fear of that or worry about it in Northern Ireland. It certainly seemed, as well, that the political side did not have a particular problem with a commercial or private company working out the assets. Unlike us, they had time. They could be there for the long haul.

Photo of Bobby AylwardBobby Aylward (Carlow-Kilkenny, Fianna Fail)
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I hear that in the South when NAMA was involved there was some room for companies or private individuals, but now that Cerberus is involved it is coming to them with a heavy hand and is ignoring all of their pleas. Cerberus is there to make money and get out the door. Regardless of the way it makes it, it will make it and that is it.

Mr. Oliver Ellingham:

It might be easier for me comment, not being somebody from the Republic. It is an emotional factor, but our belief, and the input we were receiving, was that the political forces in Northern Ireland would prefer to have these assets controlled by an American than by an entity from the South.

Photo of Bobby AylwardBobby Aylward (Carlow-Kilkenny, Fianna Fail)
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Some of the individuals at the end of the stick might not agree with that.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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Okay.

Photo of Bobby AylwardBobby Aylward (Carlow-Kilkenny, Fianna Fail)
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I will ask my last question. According to the Comptroller and Auditor General, there were eight or nine companies approached and in the end there were two or three. Eight other companies were refused entry. Why were they not left in the race to bid?

Mr. Oliver Ellingham:

Sorry?

Photo of Bobby AylwardBobby Aylward (Carlow-Kilkenny, Fianna Fail)
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The witnesses mentioned that there were eight or nine companies. That number dwindled down to Cerberus and Fortress Investment Group when PIMCO was gone. Eight other companies were not left in the race. Why were they excluded when they wanted to get into it? That is according to Comptroller and Auditor General's report.

Mr. Oliver Ellingham:

The process was to keep it as a contained bidding group of three at a time, which was all that Lazard and any other advisory body, if we had approached it, would be comfortable with. With three parties one could try to keep it discreet but have a competition. That is why the others were not needed, unless somebody else came forward. Some of them chose not to go forward because they either did not think the assets were worth the £1.3 billion or they were uncomfortable about the timing-----

Photo of Bobby AylwardBobby Aylward (Carlow-Kilkenny, Fianna Fail)
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The report says they were refused entry. "Refused" means they were not even allowed in to bid. I am asking why they were refused entry and excluded.

Mr. Willie Soffe:

As the chief executive explained to the committee on 29 September last, there were division one, division two and division three companies in the category. The companies that were seen to be able to write the cheque for £1.3 billion were targeted.

Photo of Bobby AylwardBobby Aylward (Carlow-Kilkenny, Fianna Fail)
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Seen by whom to be able to write the cheque?

Mr. Willie Soffe:

Seen by Lazard, our advisers.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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I wish to put a few questions before we proceed to the second round. When we get to that round we will try to be tighter with our time because it has been a long day, and I thank the witnesses for that. I have a few brief questions. Essentially, you had a minimum price of £1.3 billion. In the course of the process that was reduced to a revised minimum of £1.23 billion. Perhaps some assets had been sold. What did you get for it at the end?

Mr. Brian McEnery:

£1.322 billion.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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The final price was £1.322 billion. What was the reserve price at that stage?

Mr. Brian McEnery:

£1.3 billion.

Mr. Willie Soffe:

I think we are misunderstanding you, Chairman. You want to get the figures when the individual assets were sold off the total. Is that it?

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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You started with a minimum price of £1.3 billion-----

Mr. Brian McEnery:

We got a net------

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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-----and then £74 million came out for some reason, so there was a revised minimum value and you got your amount. I am referring to pages 99, 100 and 101 in the Comptroller and Auditor General's report. Appendix A states, and it is minuted in your board meetings, that before the cheque was handed over Cerberus tried to get a few bob off the final bid. The NAMA board responded, and it is minuted, that there were gains from the board's perspective. You personally as board directors, not other people, came to the view that there were gains on asset sales due to close of potential benefit to Cerberus of £14.1 million that had not been priced in the bid. It is on page 99. On the next page NAMA makes the point that there are potential surplus proceeds on asset disposals of a further £8 million for which Cerberus did not pay NAMA. Further down the page there is reference to cash deposits, relating to some account that was being offset against a loan, of £6.2 million which Cerberus got but which NAMA felt was its property. In addition, there is reference to assets of £5.3 million omitted from the bid list which Cerberus got and which NAMA had not included in the list. On the next page there is reference to deferred consideration of £1.75 million for another item. All of that amounts to £35.3 million which the board members of NAMA are minuted as saying they wanted back from Cerberus, as NAMA was owed it. The last sentence on page 101 is: "NAMA has stated, in March 2016, that it is seeking to recoup these amounts from Cerberus." Have you got any of the £35.3 million back yet?

Mr. Willie Soffe:

Chairman, at the next opportunity you should address that to the chief executive because I-----

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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You are not familiar with it.

Mr. Willie Soffe:

I would not be that familiar with it. I can answer your first question on what the final price was. It was £1.23 billion.

Mr. Brian McEnery:

But we had assets sold in the interim.

Mr. Willie Soffe:

The reason it was down to that is that assets were sold in the interim.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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It is £1.23 billion. NAMA believes it is due £35 million back, so that brings it down below £1.2 billion.

Mr. Brian McEnery:

I think-----

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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You feel Cerberus got away with £35 million of assets that it had not properly-----

Mr. Brian McEnery:

We-----

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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You said you were going to pursue it. It is recorded in the board minutes before you received the cheque from Cerberus that you would go after it for £35 million. My point is that it brings the net amount you received from Cerberus, when you get this £35 million back, possibly at or below your minimum price. Give us the figure, because it is very relevant. Fortress Investment Group has made it clear that if the minimum price was not achieved, it would be back in the field. We just want confirmation. I will not delay the meeting as this is something the CEO can send to us.

I want confirmation about the timing of the £35 million. I am referring to the three pages that recorded the board meeting. Does Mr. Soffe understand what I am asking for?

Mr. Willie Soffe:

Yes.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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It is extraordinary from the Irish citizen's point of view that, two years on from when the board decided, according to its minutes, to chase Cerberus for the £35 million, the board members present today do not know whether that happened.

Mr. Brian McEnery:

May I-----

Mr. Oliver Ellingham:

It is happening.

Mr. Willie Soffe:

I cannot state the figure.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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Has NAMA received any of the money back?

Mr. Oliver Ellingham:

A discussion is ongoing with Cerberus about trying to get the money back.

Mr. Willie Soffe:

Those-----

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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Okay. I have made the point.

Mr. Oliver Ellingham:

May I offer a simple clarification? When the assets were put up for sale with a reserve price of £1.3 billion, there were - let us choose a number - 100 assets. During the sale process, we sold some of those assets one by one to individuals because it was the right thing to do under section 10. That is the £74 million.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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We understand that.

Mr. Oliver Ellingham:

If one takes the £1.223 billion plus the £74 million, it is approximately £1.3 billion. It is actually £1.322 billion. The £35 million on the table is not surprising. In a transaction of this size and with this disparate group of assets, there will be items that are disputed between the lawyers as to what cash was paid and when, should I have had that or should someone else have had it, etc. There would then be a discussion with Cerberus about clawing those back. We will revert to the committee about how we are doing with getting that £35 million back. It is something that the Comptroller and Auditor General has raised with us.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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If NAMA were to receive it back, which is what the board believes should happen according to the minutes, it would reduce the net amount that NAMA would receive from Cerberus. It would possibly be below the bid price.

Mr. Brian McEnery:

It would increase it, as we were at £1.322 billion excluding that.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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The witnesses will send us a note.

Mr. Brian McEnery:

Yes.

Mr. Willie Soffe:

The Fortress bid was approximately £155 million below.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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I know, but it might have increased if the-----

Mr. Brian McEnery:

The point is that, if we get the £35 million back, it will increase the £1.322 billion to approximately £1.35 billion.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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Please try to get it.

The witnesses have often mentioned that the difficulties with Northern Ireland debtors are glanced over. From everything that we have read in the newspapers, plans were worked out with NAMA's major debtors in the South. There is a great deal of controversy about those, so we will not go into the details. Some debtors are being paid salaries to work with NAMA. Had NAMA detailed plans with its major debtors in the North?

Mr. Brian McEnery:

Had we-----

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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The same worked-out business plans with Northern Ireland debtors.

Mr. Brian McEnery:

That is a better question for the chief executive. He stated, and it is my sense as a board member, that there were business plans, but the actual performance of the debtor in delivering the business plan with the milestones that were set was constantly slipping. For instance, let us say that there was a deleveraged target in 2013.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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And the debtors did not meet it.

Mr. Brian McEnery:

They were halting and not meeting it.

Mr. Willie Soffe:

But there were some business plans.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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Was NAMA vigilant enough in those years in managing the business plans of the Northern Ireland debtors compared with other business plans?

Mr. Brian McEnery:

The essence of the-----

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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Does Mr. McEnery understand what I am saying?

Mr. Brian McEnery:

Yes.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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He is admitting that it did not work out.

Mr. Willie Soffe:

Well, it is-----

Mr. Brian McEnery:

No. The level of enforcement over Northern Ireland debtors was similar to the level in the South.

Mr. Willie Soffe:

There would have been a team assigned to handle the assets in Northern Ireland the same as down here or anywhere else.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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When PIMCO withdrew, were the other two bidders informed? Would they have known? We want to understand. I will not go into the detailed stuff. When PIMCO went off the pitch - I will not use the word "withdraw" - were the other two-----

Mr. Brian McEnery:

One of these minutes tells how we as a board indicated that Lazard should inform the other bidders that PIMCO had withdrawn from the process.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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If I as a potential bidder with only three others in the race was informed that the bidder in first place had withdrawn, I might feel that the competition was less competitive. We have been discussing a competitive process. We need to know whether the others were informed. Mr. McEnery will understand. If I were in a two-horse race and the other rider pulled out-----

Mr. Brian McEnery:

We will find out.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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Mr. McEnery understands. I am amazed that we have not been given an answer to this before now.

This was one of NAMA's first major loan sales. Is that correct? To date, it had been selling-----

Mr. Willie Soffe:

Yes.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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This was a new departure. Mr. Ellingham is chairman of the risk committee. What documents did it draft regarding the potential risk of this new venture for NAMA? Did it make a report or was the question dealt with specifically?

Mr. Oliver Ellingham:

It came up on some of the risk registers and there were discussions. As to what documents were prepared, I would need to look through the data.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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The witnesses might help us with that. If the information is accurate and sent to us within seven days, I am satisfied to accept it, but if it is not, we will be on NAMA like a tonne of bricks. Is that okay?

NAMA's chairman, Mr. Daly, used a phrase at this committee. This process was unique, but he called it a "bespoke process". This tells me that, before NAMA set out on a process that was different than normal, it had designed a way to go about it. Can the witnesses send us a copy of the bespoke plan that NAMA was working to during this process? Did the board see this bespoke strategy in advance of the sale?

Mr. Brian McEnery:

The board was aware-----

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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I am not talking about the detailed discussions. The board discussed the process every month, but Mr. Daly said that it was bespoke. He indicated that NAMA had designed a specific mechanism to deal with this process from the beginning. Did the board see it?

Mr. Oliver Ellingham:

We had a discussion.

Mr. Willie Soffe:

Not in total detail, but the important objectives of the bespoke process were outlined to us.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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Will the witnesses send us that document? We do not mind that it was not recorded at the board meeting, but presumably some paper had to come to the board that allowed it to discuss the matter. We look forward to receiving the document. My concern is that the process changed from month to month in terms of who was involved, who pulled out, three others being invited, two not showing and three more being invited. That sounds like it was anad hocprocess rather than a bespoke one from the beginning. We have not seen anything to convince us otherwise. We look forward to receiving evidence of the bespoke process.

Mr. Ellingham is chairman of the risk committee. Regarding its role, page 58 of NAMA's 2014 annual financial statement reads, "Overseeing the implementation and review of an Enterprise Risk Management framework and satisfying itself that appropriate actions are taken in the event that any significant concerns are identified". The PIMCO situation had to be a significant concern. Was a significant concern identified to Mr. Ellingham as chairman of the risk committee? We all accept that it was significant. We will not get into the legalities, but it was certainly a significant concern for the board. How did the risk committee deal with it when the details of what was happening were brought to the risk committee?

Mr. Oliver Ellingham:

We had discussions about the particular issue-----

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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Not the board. Your committee.

Mr. Oliver Ellingham:

-----at the board. I would need to check to see whether the matter was specifically covered at the risk committee because the discussion had all been at the board. The idea of the risk committee is principally to consider areas of risk that we then refer to the board for consideration. Therefore, if the PIMCO issue had been considered at the board, it would not normally be referred down, but I will check to see whether there was any specific discussion.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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We asked the question. If a significant risk is raised at board level first, it does not go to the risk committee at all. Surely Mr. Ellingham should have seen this significant risk and told the board that he would revert to it with the considered view of the risk committee, having taken advice from that committee's members as well as external advisers. Does Mr. Ellingham get me?

Mr. Oliver Ellingham:

We will-----

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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I would go so far as to say that there is no point in having these lovely pages in NAMA's fancy report about all of its committees, including the risk management committee, if something gets referred to the board first and the committees have no involvement in the matter. Mr. Ellingham gets my point.

I seek clarification of a couple of points in the opening statement. I will not repeat the entire reference, but the last line on page 3 mentioned the 10% issue. Will the witnesses send us the documentation that the board had on this matter from before the process completed?

I have dealt with the issue of the minimum price, but I am concerned about the issue of competitiveness.

The point is made on page 6, in the second paragraph - the witnesses were very insistent on this point - that: "The NAMA board would not have continued with this sale if the sales process was not competitive. Lazard was categoric in advising the board that the sales process was competitive throughout." It was very important that there be competitive tension in the process. Two years on, however, three board members are telling me that they cannot be sure whether Cerberus and Fortress were made aware that PIMCO had withdrawn. How can they, as three board members, be satisfied that there was a competitive process when they did not know what the state of knowledge of the two parties remaining in the field was?

Mr. Willie Soffe:

There were competitive tension in the process right to the end between the two parties remaining.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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Between the two parties remaining, but did they know that it was a two rather than a three horse race? In fact, PIMCO had never made a bid.

Mr. Willie Soffe:

Correct.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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Therefore, there were two bids, one of which was above the minimum price-----

Mr. Willie Soffe:

Yes and the other was below it; substantially below it, in fact.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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Let us be clear because this is the essence of the matter. There was one bid on the table which was above the minimum price. NAMA was clearly rejecting the bid made by Fortress because it did not make the minimum price.

Mr. Willie Soffe:

Fortress stated it would not pay the minimum price.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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Fine, but where was the competition? NAMA had one bid on the table which was above the minimum price. I do not see where there was competitive tension when there was only one bidder that had met NAMA's minimum price. I would accept it if there were two or three bidders, but, in reality, the bid made by Fortress had been discounted as not being a real bid because it had not reach the minimum price. There was only one bidder in the field.

Mr. Oliver Ellingham:

How the process worked was that Lazard talked to the two bidders up until the time at which they had to submit bids. Up until then, neither party knew where the other stood, nor did we. They were both trying to work out whether they were going to bid above or below the minimum price. Up until the moment the auction closes, we have as many bidders as are involved in the process. There were two.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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Two.

Mr. Oliver Ellingham:

There was competitive tension. One can have an auction with two people, perfectly happily. One party would not have known that the other was going to pull out. I suggest that if Cerberus had thought it was the only bidder, it would not have bid above the reserve price by as much as it did.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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By what percentage did it bid above the reserve price?

Mr. Oliver Ellingham:

By a very small amount, but at least -----

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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By what percentage?

Mr. Oliver Ellingham:

I cannot do the maths.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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I can tell Mr. Ellingham. It was by less than 1%.

Mr. Oliver Ellingham:

Yes, 1%.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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By less than 1%

Mr. Willie Soffe:

Yes, but it was above the reserve price.

Mr. Brian McEnery:

It was above it.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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Yes, but it was above it by less than 1%. There is no suggestion being made. Can NAMA guarantee that Cerberus had had no indication of what the reserve price was? To come in just a fraction above the minimum price, by 1%, is-----

Mr. Oliver Ellingham:

Cerberus knew exactly what the reserve price was because we had said that unless it bid at least £1.3 billion, we would not sell the assets. That was made clear from the very beginning.

Mr. Willie Soffe:

The other point to be made about Fortress is that it asked us to talk to it if the reserve price was not reached. It also stated that if we were to talk, it would need exclusivity for 30 days, in effect, an extension.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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The issue of advisers has come up on a number of occasions. I have a question for the risk committee. I am sure Lazard would have dealt with it, but would NAMA have known who the advisers to each of the bidders were? Would that have been part of the bidding process, knowing who was advising who and also the structures of the companies with which NAMA was dealing? In other words, would NAMA have known that some of the entities involved intended to use section 110 of the Finance Act, for example, not to pay tax to the Exchequer? Would NAMA have asked questions about the structure of the companies that were looking to buy the portfolio? Did it have an interest in that aspect?

Mr. Brian McEnery:

We certainly would have known who the advisors were. Their advisers, as has been stated, up until when we found out about it-----

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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How would NAMA have known?

Mr. Brian McEnery:

We found out because the advisers had to gain access to the data room. The company in question was A & L Goodbody in Dublin.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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In other words, Cerberus, PIMCO and Fortress notified NAMA who their advisers were.

Mr. Brian McEnery:

Their legal advisers were known to us. I cannot remember the name of the firm in London-----

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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It does not matter.

Mr. Brian McEnery:

In actual fact, on 29 September, the chief executive officer alluded to the fact that part of the reason we did not know about Brown Rudnick and Tughans was they were not in the data room once PIMCO had been put out. That was the reason we did not know. It was not obvious to us because A & L Goodbody was accessing the data room on behalf of Cerberus.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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We are talking about good practice and ethics. Would it not have been good practice for NAMA to know the identities of the full team of advisers for Cerberus? NAMA knew the identities of the advisers for PIMCO. Essentially, it only found out at the last minute, when it was asking Cerberus to sign an undertaking, that Tughans and Brown Rudnick were also advisers to Cerberus. Did that not raise concerns for the risk committee? Is it possible that one of these companies was also working for Fortress and we do not know about it? Perhaps it was all a cosy arrangement. Has NAMA been able to exclude the possibility that some of them were also working for Fortress which came in with a lower bid? I am asking what mechanisms the risk committee had in place to insure against this?

Mr. Oliver Ellingham:

Typically in a process one expects the financial adviser to make sure there is no conflict between the different advisers to the potential parties. If, as Mr. McEnery was saying, they were trying to use the same law firm, that clearly would have been an issue for us.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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Yes, but valuers are also advisers. There were more than law firms acting as advisers to the bidders.

Mr. Brian McEnery:

We do know that there were three main advisers to PIMCO, namely, Tughans, Brown Rudnick and Cushman and Wakefield. We know that Cushman and Wakefield went to Fortress. Obviously, Cerberus got somebody else to advise on the asset valuations. We know that only two of the three went with Cerberus and that one of the three key advisers to PIMCO went to the other party, Fortress.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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Which company went to Fortress?

Mr. Brian McEnery:

Cushman and Wakefield.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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Cushnahan.

Mr. Brian McEnery:

Cushman and Wakefield.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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It was part of-----

Mr. Brian McEnery:

Cushman and Wakefield was part of the advisory team on-----

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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In other words, PIMCO was off the field and its advisers split themselves between the two remaining horses in the field and NAMA received a bid that a fraction, 1%, above its minimum price.

Mr. Brian McEnery:

Frankly, Cushman and Wakefield is one of the biggest property advisers in the country, from which I take some element of reassurance. Also, I would have been much more worried if all three advisers had gone to Cerberus.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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My last question relates to the report from the University of Ulster which was submitted on 8 September 2014. What was the point of it, given that Project Eagle had long been sold at that stage?

Mr. Willie Soffe:

It was not of value to us, but it was important that it be completed and it was passed on. It is of value to the Northern Ireland Executive.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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I appreciate that and accept the executive summary. I refer, in particular, to the reference to "residential development land holdings". I accept that this refers to residential development lands. The witnesses have said such lands represented 8% of NAMA's loan portfolio.

Mr. Willie Soffe:

Yes.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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Did NAMA commission any report on the remaining 92%? Why did NAMA just select 8% of its loan portfolio?

Mr. Willie Soffe:

It was zoned land.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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The other lands would have been zoned industrial?

Mr. Willie Soffe:

We did not commission any report on the rest of the portfolio. It was an opportunity presented from the University of Ulster and we saw it as something of which we should be part.

Mr. Brian McEnery:

Also, the land was non-income generating; therefore, it was the element that was probably going to cost us the most if something did not happen with it.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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I ask NAMA to send on information on the valuations. The portfolio was eventually sold for £1.32 billion and we have already accepted that 50% of the underlying assets were outside Northern Ireland. The final amount related to the assets outside Northern Ireland is a minimum of £600 million. NAMA has stated that what was left in Northern Ireland was, effectively, a rump comprising residential land which was dispersed. Obviously, the land in Northern Ireland was less valuable in the context of the overall figure of £1.32 billion. This committee has suggested a valuation figure of approximately £400 million. The witnesses probably cannot put an exact figure on it, but I ask them for their best estimate of the value of the assets NAMA controlled in Northern Ireland. Most of the assets were not located in Northern Ireland.

NAMA only really controlled maybe £500 million worth of assets which is not as dominant in Northern Ireland as it has been giving us to understand all along. It was a relatively small holding. Can NAMA send us some information on its estimate?

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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I thank the witnesses for being here so long. It is difficult to put questions in a short time but we do our best.

Mr. McEnery said that he was grateful to the Comptroller and Auditor General for his support for NAMA from its birth to now and that he learned a lot from him. That rings a bit hollow when juxtaposed with the opening statement today. Mr. Soffe was given an opportunity to withdraw the word "unsubstantiated". I put it to him again because I think he should. I think he missed the point. He can have a difference of opinion with the Comptroller and Auditor General, he does not have to agree with his observations, assumptions or conclusions. He can disagree with them but he cannot disagree that he made his observations based on evidence and information that he and his office received on bidders' experience. They and he made substantiated observations. Mr. Soffe may disagree with the observations but they were substantiated. Would he take the opportunity now to withdraw the word "unsubstantiated" because he was offered that opportunity earlier by Teachta McDonald and he did not take it. It is important given what has been said since about the Comptroller and Auditor General's office and the good faith referred to that he take the opportunity to withdraw the word "unsubstantiated".

Mr. Willie Soffe:

I am looking at the sentence in the second last paragraph on page 6. I would be happy to accept that the board rejects the Comptroller and Auditor General's suggestion that serious credible bidders were excluded from the process.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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Mr. Soffe will remove the word "unsubstantiated". That is fair enough. Mr. Soffe strongly contests that any loss was incurred by NAMA, this £190 million loss the Comptroller and Auditor General talks about. I have studied the Comptroller and Auditor General's report in detail and he says that the loss happened when NAMA took a decision to embark on a loan sale strategy. It was a paper loss because the valuation at the time would have been based on the work out value of the assets and the strategy that NAMA was working towards. That was £1.49 billion. There is no issue about working out the cashflows. This was to do with the valuation. Nowhere does the Comptroller and Auditor General say that if and when a decision was taken by the board to embark on a loan sale strategy market rates would not apply. The Comptroller and Auditor General does not say that. He says that when the board made a decision to change strategy the value was £1.49 billion. To be fair to the Comptroller and Auditor General that is what he is saying. It is an important distinction that has been lost and there is maybe a disingenuous response to what he is saying. We have to be fair and factual about what he said in his report.

Mr. Willie Soffe:

The Comptroller and Auditor General says in the clarification on 29 September that 5.5% was not a market discount. The trouble is that the 5.5% is being used to arrive at the figure of £190 million probable loss. Unfortunately-----

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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The point he is making is the actual loss happened at that time. It is a different matter to say six months or a year down the line because of different circumstances and information that NAMA may have got less for that. When it took a decision to go for a loan sale and then applied for a market discount that was a different situation. I am trying to be fair to the witnesses.

Mr. Willie Soffe:

Potential losses was the first phrase used. When it became a probable loss that was quite different. I see the Deputy's point. Unfortunately, there was a leak in connection with this. Two things were said, one that there were irregularities which the Comptroller and Auditor General never said in the report.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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We do not have to go into leaks. We do not have to deal with that because-----

Mr. Willie Soffe:

The second thing was that we had lost £190 million.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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With respect, the Comptroller and Auditor General did not say that. We are all victims of leaks, misinformation and spin. NAMA has done a bit of spinning itself on this. We do not need to go into what was not said but what was said in the Comptroller and Auditor General's report.

Mr. Willie Soffe:

In case I am picked up incorrectly I would be absolutely certain that whoever was responsible for the leak it was not the Comptroller and Auditor General or us.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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I accept that. We are going to get the information that was------

Mr. Brian McEnery:

If the Deputy reads the paragraph where the Comptroller and Auditor General concludes there was a probable loss he is concluding it on the basis of the discount factor of 5.5%. We are saying, and there is a lot of evidence to support it, that if a company was taking cashflows out to 2020 it would not use a discount factor of 5.5%.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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NAMA needs to produce that evidence which it has not done up to now. We have requested that.

Mr. Brian McEnery:

It is inside. Ultimately-----

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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We have not got it, with respect.

Mr. Brian McEnery:

The Comptroller and Auditor General has said that he does not disagree with the four experts who have said-----

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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I do not wish to go over this because we have requested information.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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There is none for the 5.5% either. Let us be clear about that. I will not re-read what I read the last day that valuation means after a well conducted sales process.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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We have asked for specific information so we will get to that.

I want to come back to the engagement between PIMCO and NAMA. Mr. McEnery said NAMA would not accept the payments that would have involved Mr. Cushnahan and that it would not accept PIMCO staying in the process once NAMA was made aware of the success fees. Is that correct?

Mr. Brian McEnery:

Yes.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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Why would NAMA have arrived at that decision?

Mr. Brian McEnery:

For the simple reason that if it were true that Mr. Cushnahan was to receive these amounts of money as far as I was concerned that was not a plausible situation. If PIMCO wanted an accession in relation to that-----

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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Why was it not acceptable?

Mr. Brian McEnery:

It was not acceptable to me because Mr. Cushnahan was a former member of the Northern Ireland-----

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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Why was there a problem with that?

Mr. Brian McEnery:

For the simple reason that if it were to have pertained it would have been unethical and inappropriate.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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Inappropriate, unethical and wrong, and when the Department of Finance said it was shocking Mr. McEnery would have agreed with that.

Mr. Brian McEnery:

If it manifested, I would be disgusted.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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Disgusted, shocking and all that, it would have damaged the process.

Mr. Willie Soffe:

It certainly would have caused us a serious problem.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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Would it have damaged the process? If NAMA is saying it was shocking, unethical, wrong and all those words, if it had stayed in the race would it have damaged the process?

Mr. Willie Soffe:

In my personal view, yes.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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Yes, and it would have compromised the process.

Mr. Willie Soffe:

It would have raised questions about the process, yes.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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When Mr. Soffe said earlier that the process had not become corrupted, this is the sleight of hand, when we talk about corruption we talk about corruption of process, we can use the words "corruption" or "compromised". This is where there is a difficulty because NAMA accepts that because of the presence of the success fees involving Mr. Cushnahan it was so serious that the board had to meet. It decided that PIMCO had to go and that this was disgusting, something that could not be tolerated but Mr. Soffe accepts that the process was compromised and this could have damaged, and did damage, the process but he does not accept that it corrupted it.

I did not say that.

Photo of Shane CassellsShane Cassells (Meath West, Fianna Fail)
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Yes, you did.

Mr. Willie Soffe:

I said once PIMCO was off the scene the process was not damaged.

Mr. Brian McEnery:

Yes.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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My point is that at that point it was compromised.

Mr. Willie Soffe:

If they had stayed they would have damaged the process, yes, but they did not. We did not allow them to stay.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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There is a difference of opinion on that matter. The process at that point became damaged. Then we had the emergence of two of the three players in the success fee, as we know, seamlessly transferring over to Cerberus. Then we have the so-called letter of comfort that the Comptroller and Auditor General says NAMA should have investigated more. That matter has been gone over as well. That is where this issue of the corruption of process arose.

I have a number of questions on the important issue of decision-making. Who decided to adopt a departure and sales strategy? Who decided to move from an asset-based sale over a time period to the Project Eagle portfolio loan sale?

Mr. Willie Soffe:

The board did.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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Who made the decision to place restrictions on the process, good or bad or the parameters of the process? Who made that decision?

Mr. Oliver Ellingham:

Does the Deputy mean in terms of it being limited?

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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Yes.

Mr. Oliver Ellingham:

The board.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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I appreciate that answer. Is that the board of NAMA?

Mr. Oliver Ellingham:

Yes.

Mr. Willie Soffe:

It was agreed by the board, yes.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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When PIMCO approached NAMA about the success fees there was a discussion and decisions were made, a fact that the witnesses have relayed to this committee. Who made those decisions?

Mr. Willie Soffe:

What decision?

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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The decision that the board would have arrived at.

Mr. Willie Soffe:

Does the Deputy mean the decision that PIMCO could not continue?

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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Yes.

Mr. Willie Soffe:

The board made that decision.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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Did the board of NAMA make the decision?

Mr. Willie Soffe:

Yes.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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In terms of Cerberus, there were issues around two of the three players still involved in a success fee and assurances were sought. Who sought those assurances?

Mr. Oliver Ellingham:

The board.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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Are the witnesses sure it was not the NIAC?

Mr. Willie Soffe:

No.

Mr. Oliver Ellingham:

No.

Mr. Willie Soffe:

No. The NIAC was not involved in Cerberus at all.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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Did the NIAC play a role in any of these processes?

Mr. Willie Soffe:

No.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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On numerous occasions the Minister for Finance and Mr. Frank Daly have talked about this matter being "a Northern issue". That does not stack up then when the witnesses have told me that all of the decisions were made by the board of NAMA.

Mr. Willie Soffe:

Yes.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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So this was not "a Northern issue" but an issue for NAMA, as a corporate body. Is that not correct?

Mr. Willie Soffe:

There were issues in relation to Northern Ireland that the board discussed from time to time. They were issues which they might not discuss at all with the Northern Ireland committee.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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When issues are raised around conflicts of interest, a lack of decision-making, information not being sought, success fees and all of the rest, Mr. Noonan says, "That was a Northern issue" on the buyer side. It could not be if there was somebody connected with NAMA that was potentially involved in the process. Mr. McEnery said he would be disgusted and it was wrong if it were true, but that does not sit with the narrative.

Mr. Willie Soffe:

I do not understand what the Deputy means when he said it was "a Northern issue".

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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I am with Mr. Soffe on that because I do not understand what the phrase means either. I am simply saying to Mr. Soffe what Mr. Daly has said.

Mr. Willie Soffe:

When it came to making a decision about this portfolio never was it discussed with the Northern Ireland committee because the Northern Ireland committee had no decision-making functions.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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I am glad that Mr. Soffe has accepted that aspect. When Mr. Daly and the Minister for Finance were here they constantly spoke about these issues as being Northern problems, that they were problems in the North and thus were outside of what happened within NAMA. I have tried to find out from the witnesses where the decision-making lay and it was with the board of NAMA. We have established that fact and I thank the witnesses. Mr. McEnery also said earlier-----

Mr. Willie Soffe:

I mean what the board was dealing with were the sensitivities in relation to Northern Ireland.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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I understand but I am talking about decision-making. All decision-making-----

Mr. Willie Soffe:

Made by the board.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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-----in relation to how the board dealt with conflicts of interest-----

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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I ask Deputy Cullinane to give other members a chance to ask questions.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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Can I make one final point?

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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A final question, yes.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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It was mentioned earlier about pooling the good and the poor in terms of assets. Is it not true that it was not the good and the poor assets that NAMA pooled but the debtors?

Mr. Brian McEnery:

Yes, because ultimately when one looks at and analyses a portfolio one looks at what is the income coming from the underlying assets. The Deputy is absolutely correct. In a lot of instances it is the debtors who remain in control. In some instances they might be enforced upon and it becomes a receiver. Ultimately, when one is doing the analysis of the income streams it is at an asset level. One does not look at a debtor and say, "He owes us €100 million". One actually goes down into the underlying assets and one looks at the incomes flows out of those.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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Can I ask another question, Chairman?

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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A last question.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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Can the Chairman request the following from NAMA? Appendix E refers to communications between PIMCO and NAMA and there is a typed minute of a conference call on 10 March 2014. There were contemporaneous notes taken by the senior divisional manager on 11, 12 and 13 March, and there were copies of e-mail correspondences. Given that there are sharp differences between what the Comptroller and Auditor General has said and what NAMA has said to us, both with the board members today and when Mr. Daly was here, we need to see all of that documentation. I would appreciate if that could be arranged.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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We will request that information.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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I thank the Chairman.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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I call Deputy Connolly.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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I shall ask a number of brief questions for clarification purposes.

Page 5 of Mr. Soffe's opening statement reads: "I share the concern of the NAMA Chairman that the C&AG ignored the independent market advice". Can Mr. Soffe outline the circumstances? I think four firms gave advice.

Mr. Willie Soffe:

Yes.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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Was the advice given after the event?

Mr. Willie Soffe:

Yes, that is true. I accept that.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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Was that relevant up in Dublin?

Mr. Willie Soffe:

It was relevant when the discussions were taking place with the Comptroller and Auditor General, about the report, and the issues he was raising.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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Was that in 2016?

Mr. Willie Soffe:

That is right.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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The board had no independent advice when the decision was made.

Mr. Willie Soffe:

I have said that earlier.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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Out of those four, it has been said that Lazard gave independent advice. Was it also Wakefield & Cushman?

Mr. Willie Soffe:

No.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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Was it Cushman & Wakefield?

Mr. Willie Soffe:

The Deputy has it.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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Is Mr. Soffe saying the company gave independent advice?

Mr. Willie Soffe:

There were four of them.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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I want the four companies confirmed.

Mr. Willie Soffe:

I just do not have them to hand this minute.

Mr. Brian McEnery:

One of them was KPMG.

Mr. Willie Soffe:

KPMG, yes.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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KPMG was one. Lazard was two.

Mr. Oliver Ellingham:

Lazard were the advisers at the time of the sale.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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I understand but I am talking about the four companies that the witnesses have quoted as giving the board independent advice retrospectively. Who were those four companies?

Mr. Willie Soffe:

I think that may have been in the chief executive's statement but we can confirm that.

Mr. Oliver Ellingham:

We will come back to it.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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The witnesses have confirmed that they were independent. That is what you said.

Mr. Willie Soffe:

Oh yes, they were independent. We are saying that but I just do not have the names to hand.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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That is okay, I have them. Was the advice given retrospectively?

Mr. Willie Soffe:

Yes.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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That is okay so that is no problem.

Mr. Brian McEnery:

I am trying to find out the date of the section 227 report. That, in itself, alludes to the market in terms of discount factors. It says that the discount factors were being used and so it says: "Market intelligence would suggest that the target returns of buyers have tempered over time, declining from the high teens (16-19% levered return) to the mid to low teens (11-14%) depending upon the asset class."

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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I wish to stop Mr. McEnery. That was not said here. I asked a very specific question and the clock is running against me. The witness is an expert at talking me down on the clock time. My specific question is as follows. The witnesses have referred to independent advice. Mr. Soffe specifically mentioned the Comptroller and Auditor General in his ten page statement. I have asked Mr. Soffe to identify the four independent companies but he was unable to answer me. Mr. McEnery has just quoted section 227 and Mr. Soffe has confirmed that the advice was given retrospectively.

Mr. Brian McEnery:

Exactly.

Mr. Willie Soffe:

Yes.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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That is all I wanted to know in respect of the matter.

The following has been said already but I have lost it because I have grown tired. When did NAMA become aware that the same two sets of solicitors were advising Cerberus? When did the witnesses become aware of that?

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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What are the names?

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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I would like to get an answer from the executive.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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Yes, sorry.

Mr. Willie Soffe:

I cannot answer that.

Mr. Brian McEnery:

I will get it but I believe it was only a matter of hours before - it was imminently before - the decision was made to-----

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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Accept them as a bidder.

Mr. Brian McEnery:

------close the sale.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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It is on page 92, the decision.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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Just one second, sorry. With the process they were accepted as the bidder.

Mr. Brian McEnery:

To close the sale?

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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The sale closes later on. When did the witnesses become aware that the solicitors had the same advisers as PIMCO, in that process?

Mr. Brian McEnery:

On 3 April.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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Did the NAMA board become aware of it on 3 April for the very first time?

Mr. Willie Soffe:

Yes.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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That the same two solicitor companies were advising Cerberus. Was that the first time that the board became aware?

Mr. Brian McEnery:

Yes.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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Yes, on 3 April. When was the decision made to make Cerberus the preferred bidder?

Mr. Willie Soffe:

Later that day.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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I thank Mr. Soffe.

Mr. Ellingham has said that if a company was trying to use the same law firm, that would alert him. I think that is what he said.

Mr. Oliver Ellingham:

If two different bidders were using the same law firm, it would alert one. It does happen.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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It would alert someone to ask questions?

Mr. Oliver Ellingham:

Correct.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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That is the first time that has been said in front of this committee. I thank Mr. Ellingham for his clarity. He is clearly saying that if he was aware that the bidder was using the same law firm as the previous bidder, it would alert him to something being wrong. I would not even go that far. It would ring bells, would it not?

Mr. Oliver Ellingham:

Which is why we then had the dialogue we did to make them confirm that there were no payments going-----

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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I understand that but I am sticking with general points for the moment. It would concern Mr. Ellingham because it did not seem to concern the chairman of NAMA when he appeared before us. He spoke about them not functioning as legal advisers but having a different role. He did not seem to think that there might be a problem with the same but perhaps I am being unfair to him.

Mr. Oliver Ellingham:

I think there would be a difference between what I would call the top law firm which was producing the letter to Cerberus in terms of all the certificates of title which would then be using local intelligence from the other two-----

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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What Mr. Ellingham is saying clearly to us is that NAMA was aware that A&L Goodbody was the solicitor.

Mr. Brian McEnery:

Correct.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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Full stop.

Mr. Brian McEnery:

When we became aware that same day, it was noted in the board. It was not as if we were blind to the fact and we did ask whether there was a possibility that this was a surrogate.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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I heard Mr. McEnery say that. I just want to be fair to him and get the facts right. NAMA only became aware of it on 3 April. The two bids were put in on 1 April-----

Mr. Willie Soffe:

That was the last day.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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-----on April Fools' Day, which is significant. In any event, the two bids were put in and on 3 April, the preferred bidder was named. Is that right? Am I wrong?

Mr. Oliver Ellingham:

I think it was by the end of the day.

Mr. Willie Soffe:

By the end of that day.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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On 3 April, NAMA became aware that the same solicitors had now acted and got an assurance or a letter of comfort from it. Did NAMA ever think of writing separately to the two companies?

Mr. Willie Soffe:

Our contract was going to be with Cerberus. We took the view that it was up to Cerberus to clarify it for us.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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Are all three witnesses of that view?

Mr. Willie Soffe:

Yes.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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The same as Mr. Daly. I am almost finished. What bid was made by Cerberus? What is the exact figure?

Mr. Willie Soffe:

I think I gave it to the Chairman.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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Mr. Soffe did. What is it because there are so many figures?

Mr. Willie Soffe:

It was £1.23 billion.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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Is it £1.241 billion?

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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That is the exact bid?

Mr. Willie Soffe:

Yes.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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That was the exact bid accepted?

Mr. Willie Soffe:

Yes.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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I will return to the Ulster report and the statement that only a small percentage of the overall portfolio was residential. Was this the point the witnesses were making?

Mr. Willie Soffe:

About 8%.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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What was the value of that?

Mr. Willie Soffe:

I cannot say off hand.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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Will Mr. Soffe revert to me regarding the value of that 8%? Was that 8% all in Northern Ireland?

Mr. Willie Soffe:

From the figures I have seen, looking at it in the totality of the Project Eagle portfolio, residential was about 6% but it was 8% in respect of Northern Ireland.

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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A total of 8% was in respect of Northern Ireland.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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The witnesses might explain to the public the board meeting when this decision was made on 3 April, the day the information came to light. We have some of the minutes here. There is nothing wrong with the first thing that strikes me, but it is a bit unusual. The meeting was held at 4.30 p.m. Mr. Frank Daly, Mr. Ellingham, Mr. McEnery and Mr. Soffe were on the phone and were not in the meeting room. The only person in the boardroom was Mr. Brendan McDonagh. Will the witnesses give us a flavour of how this happened? The board members were all in different parts of the country or the globe and they were all at the other end of the phone. We have heard about board packs getting to them and forms to be signed about declarations of interest. Will the witnesses talk us through so we understand that meeting when they were all at the other end of a phone hearing about PIMCO and the two lads showing up with Cerberus? I know it says that no disclosures were made. I presume that was over the phone. Was the information couriered to the board members?

Mr. Willie Soffe:

That is not-----

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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Talk us through that day. Give us a flavour of it so we understand.

Mr. Willie Soffe:

This was the last stage in the process. We had held a series of meetings. As the chairman explained on the previous day, there was an urgency about finalising this.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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When did the board members get word? Did they get phone calls saying that an urgent meeting was needed and asking whether they would be ready at 4.30 p.m?

Mr. Willie Soffe:

Yes.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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Will the witnesses tell us what happened instead of my asking questions?

Mr. Oliver Ellingham:

What would typically happen is that when an adviser is waiting to close an auction, the adviser knows it has to come to the board so the board's secretary would say that an emergency board meeting is needed some time this afternoon or evening and we find a time when everybody can attend either by phone or in person. Some papers would be sent electronically to iPads, which are all NAMA-secure. The chairman is always very strict about making sure we have time to read the papers before we have a board meeting. On something like this, the clear issue was that we had some proposals regarding the sale of Project Eagle and it needed a board decision. All of the issues to be opined on were then set out and discussed.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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Did the board members have much documentation? The minutes are extensive and run to a few pages. They state that following further discussion, the board agreed that NAMA should seek written assurance from Cerberus that no fee, commission or other remuneration would be paid to anybody connected with NAMA. Was that in the papers or was it from one of the suggestions that it needed this confirmation? What happened from the conclusion of the meeting-----

Mr. Willie Soffe:

My recollection is that the chairman said that we had to have this in writing.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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The chairman would have said that.

Mr. Willie Soffe:

Yes.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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Did the board give approval subject to that letter of confirmation arriving or did the board give the chief executive-----

Mr. Willie Soffe:

It was not happy with just an e-mail. It wanted a letter.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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And it gave the chief executive the ability to drop it to £1.2 billion if some last-minute hitch arose. The board meeting was conditional on quite a few things happening once the members hung up the phone. Is that a good way to do business?

Mr. Oliver Ellingham:

It happens quite commonly. For example, if a report is being produced, discretion would be given to the chief executive and the finance director to make any changes that are deemed to be non-material or non-contentious. Anything that would be material or contentious would have to come back. If there was a negotiation to be completed, as happens with some of our debtors, we would leave the head of asset recovery and the chief executive with the discretion to deal with one or two of the last financial elements or matters of negotiation but only within defined parameters.

Mr. Willie Soffe:

There would be a limit on the extent to which they could refine it financially.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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The figure of £1.241 billion was set. Was the board happy with that? Was any other board meeting held? The reason I ask this is because this was one of the biggest financial transactions in the history of the State and we are trying to get a feel for how decisions are made in these big places. Were there many other meetings where nobody was physically present other than the chief executive? There was no non-executive board member in the room. This is very unusual because we have not seen a situation anywhere else where there is nobody in the room other than the chief executive. Was this the only time that happened?

Mr. Willie Soffe:

No, there would have been others. Meetings like that would be quite infrequent. There have been others because urgent items crop up.

Mr. Oliver Ellingham:

To put it in context, it would be one or two per year.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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We just wanted to understand because when we are drafting our report, we want to be fair to NAMA in respect of how the procedure works.

Mr. Willie Soffe:

As the Chairman knows, the legislation provides for it.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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It is specifically provided for members to attend by telephone, it is in the original legislation and we accept that.

Photo of Catherine MurphyCatherine Murphy (Kildare North, Social Democrats)
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Would the witnesses agree with me that Brown Rudnick would have known why PIMCO withdrew from the process? It seems that Brown Rudnick would almost have to have known because it was advising PIMCO. Is that a fair view?

Mr. Oliver Ellingham:

That is for Brown Rudnick and PIMCO to opine on. We cannot give an opinion on that.

Photo of Catherine MurphyCatherine Murphy (Kildare North, Social Democrats)
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We have spoken about competitive tension and the Chairman has asked the witnesses about whether the two entities which made bids were told that PIMCO had withdrawn. Even if they were not told that PIMCO had withdrawn, they would have known it because one of the entities engaged Brown Rudnick, and maybe Tughans, and the other entity, Fortress - as the witness has just told the committee - engaged the other adviser. Both entities would have known in advance of the bid that PIMCO had withdrawn. That is fairly obvious. Fortress was then not willing to bid the reserve price. Did the minium price in fact become the maximum price - the 1% over to which the Chairman has drawn attention? This strikes me as just about over, just to get over the line.

Mr. Willie Soffe:

It was made clear that we would not sell for less than £1.3 billion and we had a decision to make when that was the bid over it, and we did accept that we had reached our target.

Photo of Catherine MurphyCatherine Murphy (Kildare North, Social Democrats)
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It is, however, pretty clear that there were only two in the race and one was late enough to the race. It is pretty difficult to see a great deal of tension in that competitive process.

Mr. Brian McEnery:

There was a 14% difference between the two bidders. There was £155 million less on the Fortress bid than on the reserve. That was significant. Ultimately, that was for us the manifestation of the fact that there was competitive tension. First of all, the board's position was very clear that if the bids went below £1.3 billion the sale was not going to occur. We believed that £1.3 billion represented what we considered to be a fair market valuation from NAMA's perspective which was a good price in relation to that portfolio. We could clearly see that around 13.6% of variation between the two parties was an indication of competitive tension in itself.

Photo of Catherine MurphyCatherine Murphy (Kildare North, Social Democrats)
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I want to move onto a couple of other questions. Mr. Ellingham spoke about the attitude in Northern Ireland. Most of us presumed that the political concerns in Northern Ireland were really about the risk to the Northern Ireland economy of a fire sale but Mr. Ellingham has just given the committee a different kind of take on it with regard to what the attitude might have been in Northern Ireland to having a large vulture fund instead of NAMA being involved. What led Mr. Ellingham to that conclusion? It was said, I think by Mr Ellingham, that it was a very difficult environment there, that it was the worst of the collection of loan books or the culture with regard to the cost that might be carried. Will Mr. Ellingham indicate if that was across all the performing, non-performing, residential or commercial sections, was it a general culture or was it unique to any particular section?

Mr. Oliver Ellingham:

I do not think it was particular to any subsection of the loan book, but we heard from the asset recovery executive team at board meetings that the assets in the North and the relationships with the debtors in the North were very difficult. It was the hardest portfolio to manage and to make progress with. Therefore, if there was an opportunity to exit at the right price, then in the view of the executive managing these loans on a day-to-day basis, that is what we should do.

Photo of Catherine MurphyCatherine Murphy (Kildare North, Social Democrats)
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Would there have been any discussion about the difficulties? Were there any internal political considerations in relation to that and around the culture of an American vulture fund coming in and being preferred in terms of dealing with NAMA?

Mr. Willie Soffe:

I think that there was a problem certainly with part of the Northern political establishment, or family, of having somebody from the South there long-term, a State agency from a different Government operating with legislation that was legislated here. There would not have been a great acceptance that the provisions of the NAMA Act would apply there.

Photo of Catherine MurphyCatherine Murphy (Kildare North, Social Democrats)
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It is very strange to imagine that a vulture fund would have been preferable. My last question relates to the senior bonds. The rates at the time in 2014 were at practically zero. It is my understanding that there was sufficient space so there would not be a need for a fire sale so why the rush? I cannot figure out why there was a rush to sell. Was NAMA directly engaged with the ECB or was that through the Minister for Finance, or through the chairman? What was that relationship and was that the only imperative? These loans were supposed to have been worked out by 2020, which was then reduced back to 2018. It looks like there was almost a rush to bundle the loans. Given that the rates were almost at 0% why would that be the case?

Mr. Willie Soffe:

As I tried to explain earlier, the troika, the European Commission and the European Central Bank, wanted the loans paid down quickly. There was no question that Ireland could wait until 2020 to pay back the €30.2 billion. They wanted it as quickly as possible. A target was set of €7.5 billion by the end of 2013 which, given the difficulty we had so early on in sales, was a very stretched target but we met it. Then, when the opportunity arose starting towards the end of 2013 for loan sales where we could bundle and sell large groups of assets, we looked at it very seriously. That is why we reached a sum of €9.1 billion for redemption in 2014 and €10 billion since then up to now. There were a number of reasons we wanted to pay off the debt as quickly as possible, one of which was pressure from the European bodies. It was also being said to us at Government level all the time, and through the NTMA, that bringing down the debt substantially helped the Government's borrowing.

Mr. Oliver Ellingham:

It is important to state for the record that the term "fire sale" as applied to assets is one that I would describe as a very distressed sale. We very firmly refute the fact that Project Eagle was a fire sale. A fire sale would have been down at £1 billion which would have involved a very substantial discount. In our view, £1.3 billion was the normal discount for a group of assets of this size, rather than a fire sale.

Mr. Willie Soffe:

The other point is, of course, that what happened was Cerberus replaced us. It had the opportunity to work out the loans over any period it wished to use.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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I will be concise and I thank the witnesses for their patience. The sequence of events was the NAMA board had met on 11 March and 13 March to hear the shocking news about PIMCO and fixer fees. Whatever the precise chain of events, PIMCO exited and then there was no meeting for about three weeks. Then the board came together again on 3 April. This meeting was for the purpose, on the recommendation of the head of asset recovery, Ronnie Hanna, of agreeing to Cerberus as the preferred and successful bidder. At that meeting-----

Mr. Oliver Ellingham:

It was not Ronnie Hanna who brought forward Cerberus. Lazard was running the process and it-----

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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I am sorry to contradict Mr. Ellingham, but the minutes state the board then considered the-----

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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On what page?

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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Pardon me, it is on page 121 of the Comptroller and Auditor General's report. It states, "The board then considered the AR paper. It was noted that the paper contained a very clear recommendation in favour of Cerberus".

Mr. Oliver Ellingham:

Yes, but the process was being run and controlled by-----

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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But I did not say that.

Mr. Oliver Ellingham:

No, but as a statement of fact Lazard was running the process.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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I am conversant with that fact. I am also conversant with the fact it was the head of asset recovery who brought forward this paper. Not alone was the board asked to clear that, but it was then given news that, guess what, Cerberus had a fee-sharing arrangement with Brown Rudnick and Tughans. The board only became aware of this on the 3rd, but it is clear from the minutes that the chief executive and the chairman knew about it before the 3rd. Did the board ask Mr. Daly or Mr. McDonagh when they discovered this? At what point did the NAMA chief executive and chairman know there was this fee sharing arrangement? I accept the board only discovered on the 3rd. If I were a member of the board and I was presented with the need for a quick decision and that information all in one, I would have felt bounced and I would not have agreed to it given everything that had happened before. Maybe that is just me, but it would have been the prudent position to take. My question is, the board discovered on the 3rd this arrangement that Cerberus had with Brown Rudnick and Tughans. At what point, or on what date, did the chairman and chief executive know about this arrangement?

Mr. Oliver Ellingham:

The Deputy can assume it would have been some period of time before, one or two days, whatever it was, for them to then assess it and to then call a board meeting.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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Did any of the witnesses ask them? Did somebody say, "that is interesting Frank, thank you for that Brian, when did you discover this and on what date did you discover this?"

Mr. Oliver Ellingham:

I do not remember that, but I would be surprised had the chairman not mentioned it in conversation during the meeting.

Mr. Willie Soffe:

My recollection is the information became known earlier on the morning of the 3rd, and the decision was made later that day.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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So they only discovered this, that is your understanding, Mr. Daly and Mr. McDonagh-----

Mr. Oliver Ellingham:

We need to find out.

Mr. Willie Soffe:

I am not aware that the chairman and the chief executive knew earlier.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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Let me help you, they did. They could not not have. Somebody had to know to inform the meeting. The board minutes state, "The NAMA Chief Executive advised that following a discussion with the Chairman [so that is the two] AR [that is asset recovery, Ronnie Hanna] had engaged with Cerberus to ascertain whether there were success fees payable and to whom". Then they discovered that there were and to whom they were to be paid.

Obviously none of the witnesses can be categoric as to when the chief executive and the chairman knew this information. That is an important point and let me tell them why. I put this to Mr. Daly at a meeting we had on 9 July 2015. I asked him whether he was aware of a meeting on 25 March 2014, so this was between the board meetings. The NAMA board was not meeting at this stage but I will tell the witnesses who was meeting. It was Peter Robinson, then First Minister in the North, Dan Quayle from Cerberus, Ian Coulter, managing partner of Tughans solicitors, and Simon Hamilton, who was the successor to Sammy Wilson as the Northern finance Minister. Mr. Daly said he had no knowledge that meeting with Cerberus had happened, but he also told me he had had a conversation with John Snow, who is the chairman of Cerberus. The witnesses are probably familiar with Mr. Snow's name. He told me that phone conversation happened sometime towards the end of March. I do not see in the minutes of the board meeting where the board was presented with this information. It was told a decision was needed on Cerberus and by the way it has these fees. To me, this is presenting the board with a fait accompli. That is how it reads to me. I do not see any record of him telling the board he had been talking to John Snow.

Mr. Oliver Ellingham:

We certainly knew.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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How did you know?

Mr. Oliver Ellingham:

I can remember him saying that he had had the conversation, but I do not remember when, frankly. It is also relevant that it would be unusual for the chairman of Cerberus to know necessarily all the advisers involved in a bid process like this. We can come back to the Deputy as to whether it was raised. Certainly we were aware, well I certainly was, there was a conversation between John Snow and our chairman.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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Mr. Ellingham was aware of this conversation. Was Mr. Soffe aware?

Mr. Oliver Ellingham:

I am aware a conversation took place, but in terms of-----

Mr. Willie Soffe:

So am I, but I could not say when.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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How about Mr. McEnery? Can he enlighten us on this conversation?

Mr. Brian McEnery:

No, I am afraid I cannot.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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It is material to our considerations. Mr. Daly has placed on the record of this committee that he did have a conversation with Mr. Snow. At the time, I asked whether he could go back and confirm for us when it happened. We did not get that information either.

Photo of Seán FlemingSeán Fleming (Laois, Fianna Fail)
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It is on the list.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

We need to know this.

My broader point is this. The witnesses are members of the board. They take their commitments under section 10 and section 18, to act faithfully with due diligence and act responsibility, to heart, but there they are, at the end of a telephone line and they are told a decision is needed, asset recovery is recommending Cerberus and, by the way, it was checked out and it has a fee arrangement with Brown Rudnick and Tughans. How on earth did the board agree to this? I know it looked for subsequent confirmation, but was it wise?

Mr. Willie Soffe:

We needed confirmation on the fee. The chairman insisted that be sought and it was.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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No disrespect to the witnesses, and they are three accomplished persons, but they were not exactly probing or inquisitive, judging by this minute, as to how they met the news. They were shocked, horrified and disgusted when they heard about the PIMCO arrangement, and Mr. Cushnahan was named in that scenario, but if I am to go by this minute the gentlemen were quite blasé. I do not want to accuse them of negligence, but they were quite blasé. They received this information and at the same meeting they said okay, Cerberus it is.

Mr. Willie Soffe:

The substantive issue is whether we accepted the bid, and the recommendation we had-----

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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Yes, I am aware of this.

Mr. Willie Soffe:

-----through Ronnie Hanna and John Collison, was that Cerberus was recommended by Lazard. We were meeting our minimum price, exceeding it slightly, and that was the main decision we made. The other was an issue we needed to get clarified before the thing could proceed. That clarification was sought and was obtained on the same day.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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I put it to the witnesses that subsequent revelations, I believe, reflect the fact the board acted most unwisely at this juncture. We have criticised other parties for not intervening in different ways. From my reading, it was most ill-advised of the board. Now that there are inquiries in three separate jurisdictions in respect of this transaction, it reflects the lack of wisdom demonstrated here, where the board was given information that should have, as somebody said earlier, set off an alarm bell the size of Big Ben in their heads, and yet they went along with it.

Mr. Willie Soffe:

I do not think any conclusion should be drawn as to what will happen in investigations.

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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No. Mr. Soffe is correct that the investigations will run their course but there is money resting in an Isle of Man account that needs to be accounted for. At some stage, those questions will come back in one form or another and this sequence of events will be part of that. I would like an answer in terms of when the conversation with M