Oireachtas Joint and Select Committees
Tuesday, 22 November 2016
Public Accounts Committee
Special Report No. 94 of the Comptroller and Auditor General: National Asset Management Agency Sale of Project Eagle (Resumed)
10:00 am
Seán Fleming (Laois, Fianna Fail)
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Apologies have been received from Deputy Marc Mac Sharry.
Today the committee will continue its examination of Special Report No. 94 of the Comptroller and Auditor General 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 Auditor General; representatives of NAMA, including members of the board at the time; the Minister for Finance, Deputy Michael Noonan, and his officials; Mr. Brian Rowntree, a former member of NAMA's Northern Ireland advisory committee, or the NIAC as it is known; the deputy First Minister of Northern Ireland and representatives of the Chief Operating Office of Cerberus Capital Management, the investment firm that purchased Project Eagle.
I welcome Mr. Patrick Long, managing director, Lazard and Company Limited. I thank him for travelling to Dublin to assist the committee in its examination of NAMA's sale of Project Eagle. Lazard is a financial advisory and asset management firm that engages in investment banking, asset management and other financial services. It has offices in New York, Paris and London. Its role in the Project Eagle sale was as loan sale adviser to NAMA. We invited its representatives to appear before the committee to discuss the details of services it was contracted to provide for NAMA; its knowledge of and input into the sale process and its design and implementation; its understanding of the circumstances of PIMCO's withdrawal from the process and its letter of assurance to NAMA following completion of the sale.
We are also joined today by the Comptroller and Auditor General, Mr. Seamus McCarthy, and, from his office, Mr. John Riordan, deputy director of audit.
I remind members, the witness and those in the Gallery that all mobile phones should be switched off completely. I advise the witness that by virtue of section 17(2)(l) of the Defamation Act 2009, he is protected by absolute privilege in respect of his evidence to the committee. If he is directed by the committee to cease giving evidence in relation to a particular matter and he continues to so do, he is entitled thereafter only to a qualified privilege in respect of that evidence. He is directed that only evidence connected with the subject matter of these proceedings is to be given and he is asked to respect the parliamentary practice to the effect that, where possible, he should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable. Members are reminded of the provisions of Standing Order 186 to the effect that the committee shall refrain from enquiring into the merits of a policy or policies of the Government or a Minister of the Government or of the merits of the objectives of such a policy. 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 House or an official by name in such a way as to make him or her identifiable.
We do not have a formal opening statement from Mr. Patrick Long, but he will make some opening comments and observations. Thereafter, our lead speaker will be Deputy Connolly, who will be followed by Deputy Catherine Murphy. I propose that the first speaker will have 20 minutes, the second questioner will have 15 minutes and each speaker after that will have ten minutes. I will keep to that timetable. If people want to contribute a second time, they will get the opportunity to do so. I would like members to be focused on today's issue. I ask Mr. Long to make his opening remarks.
Mr. Patrick Long:
I thank the committee for inviting me here today to answer questions in order to assist it with its review of the Comptroller and Auditor General's report. By way of background, my name is Patrick Long. I am a managing director at Lazard. I am based in London. I lead Lazard's real estate mergers and acquisitions, M&A, activities in the UK and Ireland and I led the Lazard team which advised NAMA on Project Eagle.
Seán Fleming (Laois, Fianna Fail)
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Mr. Long will deal with the questions as members of the committee ask them.
Catherine Connolly (Galway West, Independent)
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Bhí mé díreach chun a rá gur beannaithe é an Cathaoirleach i measc na mban, ach tá Deputy Cullinane anseo anois, so tá mé mícheart.
Seán Fleming (Laois, Fianna Fail)
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That was a bit of Irish from the speaker. It is not relevant to Mr. Long's attendance.
Catherine Connolly (Galway West, Independent)
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I thank Mr. Long for coming before the committee. I will just ask a few questions. I will try to make a few statements and ask questions because we really just want to elicit information. I know Mr. Long will be co-operative. I have asked every single witness whether he or she has read the Comptroller and Auditor General's report.
Catherine Connolly (Galway West, Independent)
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Did Mr. Long read chapter 4, which concerns the Project Eagle loan sale process?
Catherine Connolly (Galway West, Independent)
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Would Mr. Long agree that it is the longest chapter in the report?
Catherine Connolly (Galway West, Independent)
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Yes, it is. It is 25 or 26 pages long. It is the longest chapter in the report. It raises concerns in respect of the sale process. Those concerns are clearly outlined and Mr. Long has read them.
Catherine Connolly (Galway West, Independent)
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Does Mr. Long have a difficulty with those concerns as outlined?
Catherine Connolly (Galway West, Independent)
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I will have very few questions if Mr. Long accepts the concerns. If he accepts the Comptroller and Auditor General's concerns as outlined, that is the end of my questioning process.
Catherine Connolly (Galway West, Independent)
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I do not mean to catch Mr. Long.
Catherine Connolly (Galway West, Independent)
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The concerns are outlined. I wish to save time.
Catherine Connolly (Galway West, Independent)
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Chapter 4 is the longest chapter. Mr. Long has read the report.
Catherine Connolly (Galway West, Independent)
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The Comptroller and Auditor General has identified and set out concerns regarding the sale process. I cannot go through 25 pages in the 20 minutes available to me. Mr. Long has gone through the report.
Catherine Connolly (Galway West, Independent)
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Mr. Long has the expert advice. The Comptroller and Auditor General has raised these concerns. Does Mr. Long accept them?
Catherine Connolly (Galway West, Independent)
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I am asking Mr. Long whether he accepts the concerns the Comptroller and Auditor General has raised regarding the number of bidders, the restrictions given and the qualified nature of the opinion given by Lazard. The Comptroller and Auditor General has raised all of these concerns. If Mr. Long accepts them, that is okay; if he does not, I ask him to tell me which ones he does not accept.
Mr. Patrick Long:
From my perspective, we ran a highly competitive sale process that was designed to meet NAMA's objectives, which did in fact meet NAMA's objectives and which resulted in a sale of the portfolio, code-named Project Eagle, to Cerberus at a price in excess of NAMA's reserve price. As such, I would say that the transaction was successful. Furthermore, in my view, the sale price achieved was the highest available in the market at the time. If the Comptroller and Auditor General believes that a different sale process would have resulted in a higher price, he is obviously entitled to that opinion. I believe that the sale process was appropriate in the circumstances.
Catherine Connolly (Galway West, Independent)
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It would really simplify matters if witnesses who have read the report either accept it or do not or tell me which concerns they do not accept. The Comptroller and Auditor General has raised concerns. I will go through some of them now-----
Catherine Connolly (Galway West, Independent)
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-----because Mr. Long is not identifying them for me, which is a pity, in a sense, because we are not here to accuse him of anything.
Catherine Connolly (Galway West, Independent)
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Mr. Long was brought in to do a job and he is saying he did that job to the best of his ability. I am not questioning that, so he can relax. I am asking him whether he agrees with the concerns raised.
Mr. Patrick Long:
Let us take each of them in turn. One of the Comptroller and Auditor General's concerns is that the process was not as competitive as it might have been. My response is to point out that competition is not simply a function of the number of parties involved in a process. It is to do with the motivation of those parties. Even though there were fewer participants in the Project Eagle sale process than in some other NAMA sale processes, there was real competitive tension throughout. It was that competitive tension, in my view, that motivated the bidders and which resulted in Cerberus being willing to pay a price for the portfolio in excess of NAMA's reserve price.
Catherine Connolly (Galway West, Independent)
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Mr. Long is telling this committee that there was competitive tension-----
Catherine Connolly (Galway West, Independent)
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-----at all stages.
Catherine Connolly (Galway West, Independent)
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I will come back to Mr. Long on that.
Catherine Connolly (Galway West, Independent)
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Mr. Long does not accept the Comptroller and Auditor General's concerns that there were questions about the competitive process. He has made a statement now. He can withdraw it if he wants but he is saying there was competitive tension.
Catherine Connolly (Galway West, Independent)
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Had Mr. Long worked for NAMA prior to working on Project Eagle?
Catherine Connolly (Galway West, Independent)
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Has he worked for NAMA since working on Project Eagle?
Catherine Connolly (Galway West, Independent)
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Had he been part of a process of a sale of loans similar to Project Eagle?
Catherine Connolly (Galway West, Independent)
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Where was that?
Catherine Connolly (Galway West, Independent)
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Was it called Project Eagle as well?
Catherine Connolly (Galway West, Independent)
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A loan portfolio similar to Project Eagle.
Mr. Patrick Long:
Let me come back to that point, if I may, because I think Project Eagle was quite unique. The circumstances which led to the Project Eagle sale process were unique, and Project Eagle, as a portfolio, had some quite unique characteristics. We advised RBS on a transaction code-named Project Isobel that was acquired by Blackstone. I was a core-----
Catherine Connolly (Galway West, Independent)
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I ask Mr. Long to hold on for one second. Was the transaction similar to Project Eagle? What role did he have in it?
Catherine Connolly (Galway West, Independent)
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Did Mr. Long advise on strategy? Did he evaluate the loans? Did he have a different role from that he had on Project Eagle?
Catherine Connolly (Galway West, Independent)
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It was broader in its scope than for Project Eagle and, therefore, it was not comparable.
Mr. Patrick Long:
At the heart of our role on Project Eagle was the sale, that is, the conduct of a sale process. On all of the loan portfolio sales on which Lazard has worked and in which I, personally, have been involved, that is really the core function that our client has invited us to undertake.
On Project Isobel there was more preparatory work than there was with Project Eagle. We also advised Commerzbank on the sale of a portfolio in Spain that was codenamed Project-----
Catherine Connolly (Galway West, Independent)
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Both of them were prior to Project Eagle.
Catherine Connolly (Galway West, Independent)
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Has Lazard worked for NAMA since or done work for NAMA since?
Catherine Connolly (Galway West, Independent)
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So Project Eagle was the sole work that Lazard has done for NAMA.
Catherine Connolly (Galway West, Independent)
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In the other two sales that Mr. Long mentioned, did Lazard advise on alternative strategies? Did it analyse market conditions?
Catherine Connolly (Galway West, Independent)
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It is a "yes" or "no". Did Lazard do that?
Catherine Connolly (Galway West, Independent)
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So Mr. Long did give an opinion on that.
Catherine Connolly (Galway West, Independent)
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That did not happen with Project Eagle.
Catherine Connolly (Galway West, Independent)
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No. On the competitive tension, three firms were invited in. Is that right?
Catherine Connolly (Galway West, Independent)
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Mr. Long should listen to my question. I want to be specific because the Chairman is hard on time. Three firms were invited first. Is that correct?
Catherine Connolly (Galway West, Independent)
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Lazard was satisfied that was good, competitive tension - those three firms.
Catherine Connolly (Galway West, Independent)
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My question is when Lazard invited three in, it was happy with that, depending on whether they were going to stay in the process or not.
Catherine Connolly (Galway West, Independent)
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Lazard was happy with the three.
Catherine Connolly (Galway West, Independent)
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The Comptroller and Auditor General sets out in his report, in the chapter that Mr. Long has read in detail, the first three that were invited to the process. If we first look at page 77 of the Comptroller and Auditor General's report, it sets out the companies. Mr. Long will see the percentage of UK-Ireland loan sales.
Catherine Connolly (Galway West, Independent)
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If one adds up those percentages, those companies - Cerberus, Lone Star, Goldman Sachs and Apollo/Deutsche - make up 89% of the loan sales in Ireland and the UK. Is that right?
Catherine Connolly (Galway West, Independent)
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Let me stay with my question. We will go back to page 71 of the Comptroller and Auditor General's report and look at it with page 77. The first three that Lazard invited in were Blackstone, Starwood and Oaktree. None of those appears on page 77 as the big companies that do loan sales. Is that right?
Catherine Connolly (Galway West, Independent)
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Mr. Long should listen to my question. None of the three that Lazard invited in is on that list of the first four that account for the biggest majority of the sales on page 77.
Catherine Connolly (Galway West, Independent)
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Of that list, in the second round of bidding, only one - Lone Star - comes in. Is that right? Cerberus comes in too. Two actually come in on the second round.
Catherine Connolly (Galway West, Independent)
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Three come in on the second round.
Catherine Connolly (Galway West, Independent)
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On the first round, none of those in the high group comes in.
Catherine Connolly (Galway West, Independent)
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Just a minute. On the first round when Lazard invited in three companies, none of those top four companies is brought in.
Catherine Connolly (Galway West, Independent)
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Subsequently when there is a leak in the paper, more people come forward. Is that correct?
Catherine Connolly (Galway West, Independent)
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Is that how the next stage happens?
Catherine Connolly (Galway West, Independent)
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My question was very simple. Was that how the next stage happened, after the leak? Is that how the third round happened?
Catherine Connolly (Galway West, Independent)
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Okay, that is lovely. Did Lazard approach Fortress at that stage?
Catherine Connolly (Galway West, Independent)
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Fortress approached Lazard. Who did Lazard approach? Did everybody come from the leak?
Catherine Connolly (Galway West, Independent)
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All of them came from the leak in the paper.
Catherine Connolly (Galway West, Independent)
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At that point, did Lazard go back and say to NAMA that there had been a leak and more people were coming out of the woodwork-----
Catherine Connolly (Galway West, Independent)
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-----interested people and big firms?
Catherine Connolly (Galway West, Independent)
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Lazard did. Tell us what happened.
Mr. Patrick Long:
NAMA allowed us to assess each of those approaches on their merits and NAMA agreed that we should allow two of those parties, namely, Goldman Sachs and Fortress, to join the process.
Catherine Connolly (Galway West, Independent)
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How many did Lazard refuse?
Catherine Connolly (Galway West, Independent)
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There were ten.
Catherine Connolly (Galway West, Independent)
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That is okay. Mr. Long knows exactly; he is the expert. Ten firms came forward. Lazard allowed two in. Why did it reject the other eight?
Catherine Connolly (Galway West, Independent)
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Was that the reason Lazard refused the eight of them?
Catherine Connolly (Galway West, Independent)
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Is Mr. Long saying that?
Catherine Connolly (Galway West, Independent)
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That was the reason Lazard refused the other eight firms.
Catherine Connolly (Galway West, Independent)
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Let us look at page 72 of the Comptroller and Auditor General's report at point 4.39, which says:
Following the media coverage, NAMA and/or Lazard received enquiries from a further ten firms. Two of these – Goldman Sachs and Fortress – were allowed to enter the process. Lazard informed NAMA that it had excluded the other eight firms, seven of whom it said were well known to Lazard and had excellent reputations.
If we look at page 75 and the reasons given for refusal and jump down to "Requests to enter process refused", they are to ensure confidentiality of the process and the need to adhere to timetable. Does Mr. Long not have the report?
Catherine Connolly (Galway West, Independent)
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Page 73.
Catherine Connolly (Galway West, Independent)
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No, page 73. It is a clash of accents. On page 73, it says, "Requests to enter process refused" and there are eight refused for the following reasons: confidentiality, the need to adhere to timetable, to maintain the motivation of bidders already in the process. Listen to that one.
Catherine Connolly (Galway West, Independent)
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It says "Maintain the motivation of bidders already in the process who were told that only a limited number of parties would be included" and "Some firms appeared only to be interested in parts of the portfolio". There is no mention of not meeting NAMA criteria here.
Catherine Connolly (Galway West, Independent)
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They were not admitted. That is not set out here. These are the reasons given by Lazard.
Mr. Patrick Long:
I would say that all of these are specific factors and the commercial principle which I have just outlined is the overarching factor. It is the thread that ties all of these factors together. If a firm was only interested in part of the portfolio then it is clear that such a firm would not have the capacity to buy the entire portfolio let alone to pay a price in excess of the price that was eventually achieved.
Catherine Connolly (Galway West, Independent)
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Let us look at page 76. It elaborates on the reasons. Does Mr. Long see where it says "Firms refused entry"?
Catherine Connolly (Galway West, Independent)
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We will not read it all. On 26 February 2014, NAMA e-mailed Lazard to inform Lazard that it had received two further inquiries. Lazard responded to NAMA the same day, saying:
We know both of these firms well and hold them in high regard. However, our advice would be not to include them in the process on the grounds that we already have sufficient competition [nothing to do with criteria, money or ability to buy] and including them would undermine our assertion to the existing participants that the process is restricted to a "handful" of parties.
There is no mention of criteria.
Catherine Connolly (Galway West, Independent)
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It does not seem like that. I am just reading what is here. I did preface all my remarks by asking if Mr. Long had read the report.
Catherine Connolly (Galway West, Independent)
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Mr. Long could have come back and said it does not capture. There is no mention of criteria or ability to buy. Lazard has given an assurance that it is going to be limited. In fact, at some other stage, there is a reference to "priority", which I have underlined. If we look at firm F on the same page:
Lazard separately emailed ... setting out its conversation with another firm that was refused entry ... [I told him] it was closed to new entrants [on 27 February].
Frustration is expressed by the potential bidder "given their track record ... and their relationship with ... NAMA". The email continues:
I didn’t say this to him but I recall discussing [Firm F] with you ... at the outset {This is Mr. Long's firm} but concluding that there were other firms who deserved priority. He said he would call his contacts at NAMA to express his unhappiness.
Limited time has been set by NAMA and Lazard is following that. There are limited restrictions and limited bidders. Lazard has set it out clearly.
Catherine Connolly (Galway West, Independent)
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Yes. Absolutely.
Mr. Patrick Long:
I thank the Deputy. As I stated earlier, "competition" is not about the number of participants. It is about having the right participants in the process and ensuring that they are highly motivated. Ultimately, the portfolio is only sold once and that to the highest bidder. I really do not think that it would have helped NAMA if we had received a lot of other bids well below the reserve price. That would have added nothing to the process. As the Deputy pointed out, the table in section 4.4.2 highlights clearly that the parties that were included in the process, that is, that were invited to participate in the process, accounted for the vast majority, almost the totality, of loan portfolio sales-----
Catherine Connolly (Galway West, Independent)
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No, Mr. Long. I do not accept that. Lazard invited three bidders, to start with, that did not feature at all in the major companies that were in this business.
Catherine Connolly (Galway West, Independent)
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Lazard certainly did, on an ad hocbasis when things happened and things emerged. I am laying no blame. I am asking Mr. Long just to help me. What questions did Lazard ask or what information was it given when PIMCO withdrew?
Mr. Patrick Long:
When PIMCO withdrew, we were obviously disappointed because it seemed as if it was a highly motivated bidder. As with any bidder that withdrew, to the extent that we thought it had seemed to be willing to pay a high price, we were sorry to lose it. However, we understood that PIMCO withdrew for commercial reasons.
Catherine Connolly (Galway West, Independent)
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Did Mr. Long hear my question? What question did Lazard ask in respect of PIMCO's withdrawal and the circumstances around it and what information was given to Lazard?
Catherine Connolly (Galway West, Independent)
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Nothing was mentioned to Mr. Long about success fees.
Catherine Connolly (Galway West, Independent)
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Nothing occurred to Mr. Long that there might be something amiss with this company, allegedly.
Catherine Connolly (Galway West, Independent)
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Mr. Long might wait a second. Is Mr. Long aware of how long PIMCO was in the process prior to his arrival?
Catherine Connolly (Galway West, Independent)
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Good. Was he aware then?
Mr. Patrick Long:
I was aware that it had made an inquiry and an approach to NAMA in the autumn. I was not aware of precisely how much time it had spent on this transaction.
Seán Fleming (Laois, Fianna Fail)
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We are approaching the end of the Deputy's time.
Catherine Connolly (Galway West, Independent)
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I will finish up with PIMCO.
Mr. Long is aware now. What is he aware of now in terms of when it came into the process prior to him? To Mr. Long's knowledge, when did PIMCO come on the scene?
Catherine Connolly (Galway West, Independent)
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Just answer.
Catherine Connolly (Galway West, Independent)
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If we look at the evidence, it seems it came on the scene much earlier than that.
Catherine Connolly (Galway West, Independent)
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When did it have access to the data room?
Catherine Connolly (Galway West, Independent)
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I do not know.
Catherine Connolly (Galway West, Independent)
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Were these not questions for Lazard so that it could see if one company was getting or had an unfair advantage? Was that not a relevant part?
Catherine Connolly (Galway West, Independent)
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Yes.
Catherine Connolly (Galway West, Independent)
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Withdrew.
Catherine Connolly (Galway West, Independent)
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If Mr. Long would, I need an answer to my question about PIMCO. Lazard needed to know that information. If PIMCO was involved as far back as April that year and had access to the data room before the other bidders, would it confer an unfair advantage on it or give it leverage?
Catherine Connolly (Galway West, Independent)
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Did Mr. Long hear my question? Sorry, now, but would it give it an unfair advantage? Would it give it an extra advantage? Would it give them a plus in the process? Would it?
Catherine Connolly (Galway West, Independent)
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Not necessarily.
Catherine Connolly (Galway West, Independent)
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It had access to information. We know that now because it has been said here repeatedly and we have had a letter. It had access for all of 2013 and then they had specific access to a data room. Then bidders are brought in. I will finish up, because the Chairman is looking at me. In fact, there is a reference. Its further limited open nature was as much to give protection to PIMCO as to give integrity to the process. That is my interpretation. It seemed PIMCO was the only game in town. Lazard was brought in with a design around that and other bidders were brought in on a very limited basis to give the illusion that there was competition. "Yes" or "No"?
Catherine Connolly (Galway West, Independent)
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Mr. Long, why was that?
Seán Fleming (Laois, Fianna Fail)
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Okay, I will-----
Catherine Connolly (Galway West, Independent)
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I will leave it to my colleagues. I thank Mr. Long.
Seán Fleming (Laois, Fianna Fail)
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I call Deputy Catherine Murphy. Deputies Madigan, Cullinane and McDonald have indicated. That is the sequence. Deputy Murphy has 15 minutes.
Catherine Murphy (Kildare North, Social Democrats)
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I thank the Chairman. The witness sees how tight the time is, so I would appreciate if his answers could be quite short as well as to the point. I think NAMA was described as the biggest property entity in the world at one point, so big firms would have been aware of it and NAMA would have been aware of the very big firms that are likely to buy the big portfolios. That would be true. Between 2013 and 2015, there were just four firms that acted for the bulk - nearly 90% - of sales, or purchases, with a par value of more than €1 billion, yet none of those four firms featured in the first list for Lazard. Why would that be the case?
Mr. Patrick Long:
We made a judgment at the time to approach three other firms first, none of which was in that top four at the time, but we were trying to identify firms that we thought would be best qualified and most interested in acquiring this portfolio. Once the firms that we approached initially declined to participate in the process, then we approached other firms. Just to recap, apart from the approach from PIMCO, of those in the first batch, as Deputy Connolly mentioned earlier, Oaktree was one of those three. Oaktree did engage in the process for several weeks and, for a large part of the process, appeared to be working on this transaction very intensively. Blackstone and Starwood Capital may have withdrawn from that first batch, but Oaktree, at any rate, was seriously interested.
Catherine Murphy (Kildare North, Social Democrats)
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These were firms that were capable. These four firms would have had the capacity because they have demonstrated capacity. Why not contact as many as possible that had the capacity? Why do one group and then go to the next group to see what was the interest? There was a difficulty anyway with the process in that it was going to be a single process rather a two-stage process that would be open and in which there would be interest from all comers that would then be narrowed down, which would be normal and, perhaps, best practice. Would that be the kind of practice that Lazard would advise in the normal course of events, that is, that it would be a two-stage process? That is normally what happens, and it appears to be best practice.
Catherine Murphy (Kildare North, Social Democrats)
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Yes.
Mr. Patrick Long:
We felt that a sequential approach was best.
When we approached the first three parties, we did not preclude the possibility of approaching more subsequently, and that is what we did. We widened the field. We wanted to make the parties we approached feel as motivated as possible to invest the time and resources necessary to acquire a portfolio of this complexity.
The Deputy's second question was on one round versus two rounds. It is typical for processes relating to the sale of loan portfolios to have two rounds. In this case, NAMA felt it was appropriate to have a single round process and to have a shorter timeframe than might have been usual. My sense as to why that was NAMA's preference was that it did not want to lose the offer it had from PIMCO. When PIMCO showed up and indicated a valuation range for the portfolio - I beg your pardon; I am talking too much-----
Catherine Murphy (Kildare North, Social Democrats)
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Yes. When PIMCO withdrew, did Mr. Long advise NAMA that the breakneck speed might not be a good idea and that it might be better to go back to the drawing board, given that it had lost the certainty?
Mr. Patrick Long:
While we knew PIMCO had withdrawn, we did not know the precise circumstances of PIMCO's withdrawal. We advised NAMA that we felt there was sufficient competitive tension left, that Fortress and Cerberus were sufficiently engaged in the process that we were confident NAMA could achieve its objective of selling the portfolio in its entirety in excess of the reserve price, which is what happened. For some parties a compressed timetable was difficult while for others it was attractive. I could quote from the Comptroller and Auditor General's report.
Catherine Murphy (Kildare North, Social Democrats)
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What was Mr. Long told about PIMCO's withdrawal and what did he tell the firms he talked to about it?
Mr. Patrick Long:
PIMCO told us it had decided not to continue in the process and that it did not want to buy the portfolio after all. That was it, and that is what we told Fortress and Cerberus. As it happens, it was wrong, although we were not aware of it at the time. As I said earlier, it was consistent with the reasons for which other participants had left the process.
Catherine Murphy (Kildare North, Social Democrats)
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We have a single process that was being added to. Particular groups were dropping out and others were being added. It was rushed. In its letter, Fortress, and others, told us:
Considerations taken into account by Fortress included the quality and completeness of the diligence information made available to Fortress; that the portfolio constituted a large exposure in a very small, concentrated region: and that the bid process required an unconditional bid which could not be syndicated or financed pre-bid.
Fortress was telling us there were constraints. Others complained about the fact that they were not allowed to use local information regarding valuing. Looking at it from the outside, it seems almost every possible obstacle was put in the way in order to eliminate entities from the bid. Was this dictated by NAMA? Did Mr. Long discuss it with NAMA? What approach did he take?
Catherine Murphy (Kildare North, Social Democrats)
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Which ones?
Mr. Patrick Long:
For example, bidders not having access to values in Northern Ireland. NAMA was concerned about confidentiality and the closeness of the relationship between values in Northern Ireland and the debtors associated with the portfolio. NAMA also stipulated a requirement for bidders to have the resources internally to buy the portfolio without recourse to syndication. The rationale was to reduce the execution risk associated with involving third-party finance providers. While there were limitations, there was a rationale for them.
Catherine Murphy (Kildare North, Social Democrats)
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Did Mr. Long agree with the rationale? His expertise was to advise, in most cases, although he had much more limited criteria set out for him regarding the bid. If he had been setting out the process and wanted to get the greatest competitive tension into the process, would he have put the same range of constraints in place?
Mr. Patrick Long:
It is a very good and relevant question. The fact that PIMCO had made an approach for the portfolio, which NAMA viewed as attractive, was a very relevant factor. NAMA wanted to run a marketing process. It had to, and it wanted to, and that was what we were brought in to do. At the same time, NAMA was not aware that the portfolio could be sold in its entirety until PIMCO came along and made the offer it made. While NAMA wanted to run a marketing process, and we did, it did not want a consequence of the marketing process to be that it lost the PIMCO offer.
Catherine Murphy (Kildare North, Social Democrats)
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Which it subsequently did.
Catherine Murphy (Kildare North, Social Democrats)
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Fortress has told us it was aware of the constraints. Cerberus and any other company bidding would have been conscious of the constraints. They would have known it would have limited the competition for them. Might this have had an impact on the amount of money that was eventually paid for the portfolio?
Mr. Patrick Long:
As I said earlier, there was competitive tension throughout the process and while it is true that some investors declined to participate, for a host of reasons, including, in certain cases and at some level, the nature of the process, at the same time Cerberus and Fortress accepted the way the process worked and Cerberus bid a price in excess of NAMA's reserve price, which NAMA was happy to accept. Ultimately, the process was successful. The fact that certain parties did not meet NAMA's criteria and, as such, were not included in the process, is not especially relevant in light of the outcome. As I said earlier, we were trying to ensure the leading bidders were as motivated as possible. The leading bidders accepted the way the process worked, hence the outcome.
Catherine Murphy (Kildare North, Social Democrats)
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There was criticism about the process being closed. It seems to have been closed only for some. It was reopened for Fortress and Goldman Sachs after others had been told it was closed. It is hardly good business practice to have different criteria for different groups of people. Why was it the case? Who decided it? Did NAMA dictate it or did Mr. Long suggest it?
Mr. Patrick Long:
The criteria were the same. Fortress and Goldman Sachs met NAMA's criteria and others did not. We were exercising our professional judgment as to which parties would have been additive to the process and which parties would not have been. As I said earlier, having many extra participants who could not have got to the price or who did not have a real interest in acquiring the entire portfolio would not have been helpful.
Catherine Murphy (Kildare North, Social Democrats)
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Firm E was informed by Lazard that the process was closed after press coverage yet it was afterwards that Goldman Sachs and Fortress were allowed back in. Is that what happened Mr. Long? Were others told the process was closed after press coverage?
Mr. Patrick Long:
I am afraid I cannot remember the precise sequence. In other words, I would need to check whether firm E was told the process was closed before we admitted Fortress and Goldman Sachs to the process or afterwards.
The thing about firm E, and I can remember exactly who it was but I shall not name them now, is that we did not believe - I did not believe then and I do not believe now - that they met NAMA's criteria in the sense that they did not have the resources or the expertise to acquire this portfolio. It was more tactful to say to them at the time that the process was closed than to get into a lengthy argument with them about whether they had the capacity to buy this portfolio.
Catherine Murphy (Kildare North, Social Democrats)
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It certainly would not build confidence for someone if one told them for tactical reasons rather than the reason-----
Mr. Patrick Long:
I said tactful not tactical. I did not want to - I did not feel as if firm E was qualified to acquire this entire portfolio. I think that now, re-examining my assessment now, I am sure of my ground. Rather than saying to them, "we don't think you are qualified to buy this portfolio" it was more tactful to say to them, "the process is closed" and to leave it at that.
Catherine Murphy (Kildare North, Social Democrats)
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Did Lazard say that to other bidders? Did Lazard put other bidders or potential bidders off on the same basis?
Seán Fleming (Laois, Fianna Fail)
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I ask the Deputy to conclude.
Catherine Murphy (Kildare North, Social Democrats)
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If Mr. Long could go back would he adopt a different approach to the Project Eagle sale and what would his relationship be like with NAMA?
Mr. Patrick Long:
That is a very difficult question to answer. I guess I would be in danger of straying into the realms of the hypothetical. What I would say is that the process, as the Deputy pointed out earlier, evolved over time. The timetable was lengthened. We included slightly more participants in the process than NAMA originally intended. Perhaps if I could go back in time we would have started with a slightly longer timeframe and slightly wider participation. We would have started in effect where we ended up. Beyond that I would not like to conjecture any further.
Catherine Murphy (Kildare North, Social Democrats)
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I thank Mr. Long.
Josepha Madigan (Dublin Rathdown, Fine Gael)
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I thank Mr. Long for being here today.
A couple of things have struck me about the sales process. Does Mr. Long think any aspect of the sales process was unusual compared with standard practice of a loan sale of this size, in Lazard's view?
Mr. Patrick Long:
Yes. I think this is a key area of focus for the C&AG in his report. There were a number of unusual features. As the previous Deputy mentioned, the fact that there was one round of bidding for example. That is not unheard of but that is not usual. The fact that there were fewer participants. The fact that there is a relatively tight timeframe. These were unusual features.
Josepha Madigan (Dublin Rathdown, Fine Gael)
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It is very helpful of Mr. Long to say that was unusual.
Josepha Madigan (Dublin Rathdown, Fine Gael)
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That struck me reading the Comptroller and Auditor General's report. The loan sale advisers for Project Arrow have said that it is not market practice to have a single marketing phase. As Mr. Long said earlier, he was employed to engage in a marketing process on behalf of NAMA.
Josepha Madigan (Dublin Rathdown, Fine Gael)
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Why does Mr. Long think NAMA wanted to do so? Earlier I was struck by a comment made by Mr. Long that it was his sense, which was the word he used-----
Josepha Madigan (Dublin Rathdown, Fine Gael)
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-----that NAMA did not want to lose PIMCO-----
Josepha Madigan (Dublin Rathdown, Fine Gael)
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-----from the process.
Josepha Madigan (Dublin Rathdown, Fine Gael)
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Later Mr. Long said it was kind of irrelevant because PIMCO did not secure the bid anyway.
Josepha Madigan (Dublin Rathdown, Fine Gael)
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Still, that is quite an important aspect. I do not think NAMA should give preferential treatment to any potential bidder.
Josepha Madigan (Dublin Rathdown, Fine Gael)
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If Mr. Long's sense or prevailing sense as he said is that NAMA were because it did not want to lose PIMCO. I ask Mr. Long to elaborate on the matter.
Josepha Madigan (Dublin Rathdown, Fine Gael)
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The matter is very concerning.
Mr. Patrick Long:
Absolutely. I do not believe that NAMA gave preferential treatment to PIMCO. There was no bias in favour of PIMCO except in so far as PIMCO had made what NAMA viewed as an attractive offer for a portfolio that NAMA found difficult to manage and which they thought it would be difficult to sell. So, in that sense, I think I understand their rationale for not wanting to lose PIMCO. The fact that there were only two bids at the end of the process is partly at least a reflection of the fact that this was not a very attractive portfolio in a difficult jurisdiction.
Josepha Madigan (Dublin Rathdown, Fine Gael)
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The transfer expertise of Brown Rudnick and Tughans from PIMCO to Cerberus seems unusual to me. Has Mr. Long seen that happen before in anything like this?
Mr. Patrick Long:
Yes, indeed. There were actually several other examples of the same thing happening within this process. For example, two of PIMCO's other advisers, namely Cushman and Wakefield and New River Retail, also found new clients following PIMCO's withdrawal. So Cushman and Wakefield ended up working with Fortress and New River Retail ended up working with Cerberus. That is actually relatively commonplace.
Josepha Madigan (Dublin Rathdown, Fine Gael)
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Does Mr. Long believe it conferred unfair advantage on Cerberus?
Josepha Madigan (Dublin Rathdown, Fine Gael)
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If Mr. Long were a betting man what would he think?
Josepha Madigan (Dublin Rathdown, Fine Gael)
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I appreciate Mr. Long's difficulty in answering my question. Are success fees, to Mr. Long's knowledge, standard practice in the industry?
Mr. Patrick Long:
Success fees are commonplace and indeed our fee, or Lazard's fee, with NAMA was a success fee. We got paid on success. Had the transaction not gone through then we would not have been paid. So, yes, success fees in that sense are commonplace.
Chairman:Can Mr. Long clarify whether he was on a success fee?
Seán Fleming (Laois, Fianna Fail)
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So Lazard had a vested interest in recommending a particular bid?
Mr. Patrick Long:
Well, we had a vested interest. This is standard market practice that the buy side advisers, I mean investment banks or property advisers, and sell side advisers are only paid by their clients if deals go through. For lawyers it is slightly different. That is standard practice and it is not something I am embarrassed about.
Josepha Madigan (Dublin Rathdown, Fine Gael)
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How was Lazard's success fee calculated? Was it calculated as a percentage?
Josepha Madigan (Dublin Rathdown, Fine Gael)
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Is Mr. Long of the view that Lazard's was impartial in the sales process?
Josepha Madigan (Dublin Rathdown, Fine Gael)
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I note that some firms requested an extension of time but were denied same. They had wanted to carry out due diligence but were refused an extension. NAMA, subsequently, agreed to extend the time by two weeks for the two remaining firms - Cerberus and Fortress.
Josepha Madigan (Dublin Rathdown, Fine Gael)
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Why was an extended time granted to the two firms and not others?
Mr. Patrick Long:
With an extension we were completely even-handed. An extension of time was granted to those parties, all those parties, rather both of those parties, who were still in the process at the time. When it was originally asked for we did not think it was appropriate. When it was eventually asked for then we did extend the timetable. We extended it twice by one week in each case.
Josepha Madigan (Dublin Rathdown, Fine Gael)
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Does Mr. Long thing there was a concern that the key player was gone and, therefore, other firms would have had insufficient time to prepare their bids?
Josepha Madigan (Dublin Rathdown, Fine Gael)
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Did NAMA ever discuss why it wanted to keep the sales process confidential?
Josepha Madigan (Dublin Rathdown, Fine Gael)
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How realistic would it have been to keep it confidential?
Josepha Madigan (Dublin Rathdown, Fine Gael)
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I understand some of the firms were not allowed to use local advisers and valuers.
Josepha Madigan (Dublin Rathdown, Fine Gael)
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What is Mr. Long's view on that?
Josepha Madigan (Dublin Rathdown, Fine Gael)
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What about the fact that PIMCO, Brown Rudnick and Tughans could have been using local valuers until that time? They did not sign the non-disclosure agreements with NAMA until October or November 2013.
Mr. Patrick Long:
I do not know if they were but they could have been using valuers before the process started. There is nothing either Lazard or NAMA could do about that.
Josepha Madigan (Dublin Rathdown, Fine Gael)
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Does Mr. Long accept any shortcomings on behalf of Lazard in terms of the unusual practices? Would he accept there were unusualities in this process?
Josepha Madigan (Dublin Rathdown, Fine Gael)
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What would Mr. Long do differently? It is not a hypothetical question. Would he like to see those unusual practices eradicated?
Josepha Madigan (Dublin Rathdown, Fine Gael)
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The higher the price achieved, the more money Lazard would have received.
David Cullinane (Waterford, Sinn Fein)
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I thank Mr. Long for coming here today. Reading through the Comptroller and Auditor General's report on the loan sales strategy, there seems to be confusion at board level about how to handle the PIMCO approach and what type of loan sale strategy the board should have adopted. I will go through different elements of the report.
On page 63, the report states:
The loan sale process undertaken for Project Eagle differed significantly from that undertaken by NAMA for other large loan sales. While the processes adopted for Project Tower and Project Arrow conformed to the standard NAMA sales procedures, the Project Eagle process did not.
Does Mr. Long agree with that?
David Cullinane (Waterford, Sinn Fein)
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Paragraph 4.6 on that page indicates:
In October 2013, the Board approved a NAMA executive proposal to explore the possible disposal of the loans of the Project Eagle debtors to PIMCO... The paper presented to the Board for that meeting noted... "...in line with our Board policy... will only be recommending the sale subject to an open marketing process".
That was in October 2013 and the board was very clear it had to be an open marketing process. Does Mr. Long agree with that?
David Cullinane (Waterford, Sinn Fein)
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In December 2013, two months later, the report indicates:
when the NAMA executive sought Board approval for Project Eagle, it did not recommend an open marketing process. Instead, it sought guidance from the Board as to how to respond to PIMCO’s continuing request that it be granted exclusivity.
An objective reading of that, from what I can see, is that in October it was very clear it had to be an open marketing process but there was continuing pressure coming from PIMCO for a closed or no formal open marketing campaign. Paragraph 4.7 indicates it did not recommend an open market process. Is it fair to say that maybe NAMA met PIMCO halfway?
David Cullinane (Waterford, Sinn Fein)
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That is not the question. In October 2013, it was clear it had to be an open marketing process but in December it did not recommend an open marketing process. There is talk about continuing requests from PIMCO. How did it go from an open marketing process to not being an open marketing process? Paragraph 4.9 indicates there would be a limited, focused and time-bound open marketing process.
David Cullinane (Waterford, Sinn Fein)
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We will get to the competition part of it later because I have questions on that. The reading of the report suggests there were certainly discussions - perhaps robust discussions - at board level as to what type of marketing process and loan sales strategy there should be because of the approach or maybe pressure from PIMCO. It mentions continuing requests from PIMCO. It was not just one request for a closed process and there were obviously repeated requests.
David Cullinane (Waterford, Sinn Fein)
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Mr. Long can see there was a possibility the board may have shifted its position, maybe because of pressure from PIMCO.
Mr. Patrick Long:
This pre-dates our involvement and we had not been appointed at that time. We did not attend the board meetings being referred to. Personally, I feel the line of questioning would be more appropriately addressed to NAMA.
David Cullinane (Waterford, Sinn Fein)
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I thank Mr. Long. I will be the judge of that and we will ask the NAMA representatives those questions when they come in. Paragraph 4.10 states:
The paper presented by the NAMA executive for the Board meeting on 8 January 2014 proposed a plan that involved the immediate appointment of loan sale advisors.
I assume that was Lazard.
David Cullinane (Waterford, Sinn Fein)
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Paragraph 4.11 indicates:
The Board minutes for the meeting on 8 January 2014 recorded that its key priorities were to obtain the optimum price and to conduct an open marketing sales process... the marketing strategy should be "appropriate, focused, time bound... an appropriate marketing approach, to undertake marketing to suitable targeted bidders, to make a recommendation in relation to the preferred bidder and to provide a statement in relation to the probity of the marketing process.
Does Mr. Long believe there was a fair and open marketing strategy?
David Cullinane (Waterford, Sinn Fein)
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Has Mr. Long seen the letter from Fortress given to this committee?
David Cullinane (Waterford, Sinn Fein)
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It expressed some concerns relating to constraints put in. When it was asked the rationale for making a bid below the reserve price, it indicated one of the problems was that it could only make a cash bid and there were restrictions with the bid not being syndicated or finance pre-bid, which was problematic for Fortress. Does that raise any concern for Mr. Long?
David Cullinane (Waterford, Sinn Fein)
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With respect, if Fortress was told it had to be an unconditional bid, that is Fortress's understanding of the process. Whether it was said to Lazard was irrelevant as it was an unconditional bid that could not be syndicated or financed pre-bid.
David Cullinane (Waterford, Sinn Fein)
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Who were the last two bidders in the game?
David Cullinane (Waterford, Sinn Fein)
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Hold on for a second. They were the last two bidders. The witness speaks about competitive tension.
David Cullinane (Waterford, Sinn Fein)
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One of the two bidders left standing was not approached by Lazard at all. It approached Lazard.
David Cullinane (Waterford, Sinn Fein)
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Why did Lazard not approach Fortress?
We felt there were other bidders who had better access to capital who would, if you like, cope better with the fact that one of the requirements of the process-----
David Cullinane (Waterford, Sinn Fein)
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How could it have been a competitive situation when, in Mr. Long's words, one of the two bidders left standing was not in the same position to make the same sort of bid as other bidders? That is what Mr. Long is saying. How could it have been a competitive process? First, if they were not approached by Lazard and they approached it, the reason Lazard did not approach them is that it did not think that they had the same level of cash-----
David Cullinane (Waterford, Sinn Fein)
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-----or ability to put in an appropriate bid. They also talked about the conditionality that was imposed that was a difficulty for them. That is what I am trying to get at, if there were only two bidders left and one of them approached Lazard and not the other way around.
Mr. Patrick Long:
Sure. Fortress is a highly reputable, internationally recognised investment firm and Cerberus was genuinely concerned in my view about the competitive threat which it posed. The fact that Fortress at the end of the day found it difficult to cope with the requirement of the process that it should make a cash bid for the portfolio in my view does not undermine the competitive threat which it posed to Cerberus because until the bid deadline Cerberus did not know what Fortress would bid. In fact, as far as I am aware, right until the transaction closed Cerberus did not know the level at which Fortress had in fact bid. There could have been a competitive threat, if Fortress did pose a competitive threat to Cerberus, even though it ultimately ended up-----
David Cullinane (Waterford, Sinn Fein)
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I have that point. I have limited time and I have a number of other questions. Mr. Long was asked earlier by Teachta Catherine Murphy about the rationale for limitations in terms of the loan sale strategy, and he said that was a good question, the fact that PIMCO made an approach made that a very relevant factor in regard to the board's position on that, that the board wanted to have a marketing process. It had a marketing process, but while it wanted to have one it did not want a consequence of that to be that it would ultimately lose PIMCO. Does that not reaffirm what I was said earlier, that it was certainly influenced heavily by PIMCO's involvement and wanted to keep it in the game, that perhaps it did meet PIMCO half way and that there potentially was an inherent bias towards PIMCO?
Mr. Patrick Long:
I do not think there is any bias towards PIMCO by virtue of it being PIMCO. It made an offer which NAMA viewed as attractive and, rightly in my view, NAMA decided to appoint a loan sale adviser to undertake a marketing process to see if that price could be bettered, and, indeed, it was bettered. Cerberus paid a price in excess of the reserve price. If the Deputy recalls, PIMCO did not actually bid £1.3 billion for this portfolio, it indicated a range of £1.1 billion to £1.3 billion, so at the end of the day NAMA achieved a sale price in excess of the top end of the range-----
David Cullinane (Waterford, Sinn Fein)
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The last line of paragraph 4.14 in the reports states, "The Board agreed that a lower fee should be paid to Lazard if PIMCO emerged as the preferred bidder". That suggests there was potentially a bias towards PIMCO. That it would have been cheaper for it. The whole language seems to suggest that there was a bias towards PIMCO.
David Cullinane (Waterford, Sinn Fein)
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I want to move on to Mr. Long's work.
Seán Fleming (Laois, Fianna Fail)
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I ask the Deputy to make this his last question.
David Cullinane (Waterford, Sinn Fein)
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Paragraph 4.17 on page 68 of the report, which sets out the criteria that Mr. Long would have set out, states: "Strict confidentiality was to be maintained and potential bidders were to be prohibited from contacting the debtors". Mr. Long will have seen from letters from PIMCO and from correspondence to this committee, and this is also contained in the Comptroller and Auditor General's report, that there was an association with Mr. Cushnahan and debtors and that he was working with Brown Rudnick and Tughans who were also working with PIMCO. In fact, they approached PIMCO. Does it concern Mr. Long that potentially there was an association with one or possibly two of the bidders and debtors?
David Cullinane (Waterford, Sinn Fein)
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Paragraph 4.17 of the report goes on to state: "The process needed to be run in a fair and transparent manner". Focusing on the word "transparent", in all of the deals or sales processes in which Mr. Long would have been involved, would it have been unusual for those sales processes to be subjected to two criminal investigations in two different jurisdictions?
David Cullinane (Waterford, Sinn Fein)
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It certainly would not suggest that they were the most transparent processes if they were subject to criminal investigations.
David Cullinane (Waterford, Sinn Fein)
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Mr. Long was a loan sale adviser.
David Cullinane (Waterford, Sinn Fein)
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We heard earlier that Mr. Long was not given the information on the conflicts of interest-----
David Cullinane (Waterford, Sinn Fein)
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-----so we can see from the Comptroller and Auditor General's report that on 10, 11 and 12 March that there was a lot of discussion at board level about the conflicts of interest. The board would have been made aware of the fact that there was a difficulty here where one of the Northern Ireland Advisory Committee, NIAC, members had an association with Brown Rudnick and Tughans which were working with PIMCO and they were trying to work this out but they did not communicate that with Lazard.
David Cullinane (Waterford, Sinn Fein)
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Lazard's job was to make sure there was a transparent process. Did Mr. Long ever question why Lazard was not informed of what was happening?
Mr. Patrick Long:
We could not ask that question at the time because we were not informed. It seems that NAMA-----
David Cullinane (Waterford, Sinn Fein)
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Why was Lazard not informed? What we are trying to establish is whether the process that was carried out was in any way flawed and whether mistakes were made? Mr. Long was the loan sale adviser and this seems an obvious mistake in that the board was discussing clear conflicts of interests and its members were very exercised about it and said it was shocking. When the board members appeared before the committee they confirmed it was shocking, and all the other words they used to described it, but they did not make Lazard aware of that as loan sale advisers. Similarly, in the case of Cerberus, and they had two days to turn this over and when they were made aware-----
Seán Fleming (Laois, Fianna Fail)
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I am moving on to the next speaker.
David Cullinane (Waterford, Sinn Fein)
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I will come back in on the second round of questions.
Seán Fleming (Laois, Fianna Fail)
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Mr. Long cannot answer as to why NAMA did not tell him about this.
Seán Fleming (Laois, Fianna Fail)
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We will have to ask NAMA that question. Lazard was not informed of this. This is a question for NAMA that the Deputy is asking Mr. Long to answer.
David Cullinane (Waterford, Sinn Fein)
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I do not accept that, but I will come back to it on the second round of questions.
Seán Fleming (Laois, Fianna Fail)
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The Deputy asked Mr. Long why was he not informed. The Deputy is asking him to speculate why NAMA did not tell him this. That is a question for NAMA.
David Cullinane (Waterford, Sinn Fein)
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I am not asking him why he was not informed. He is a loan sale adviser and would it have been better if he was informed? That is the question.
Seán Fleming (Laois, Fianna Fail)
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That is the question.
Mr. Patrick Long:
Perhaps. At the time I was not informed and therefore I cannot speculate as to why NAMA chose not to inform us. It is our client's prerogative on this transaction, as on all transactions, what information they tell us. I agree with the Chairman on this point that it would be idle for me to speculate as to why NAMA did not inform us-----
Seán Fleming (Laois, Fianna Fail)
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I call Deputy McDonald. Deputy Cullinane can come back in again but I want to move on.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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I welcome Mr. Long. He had not worked with NAMA prior to the sale of Project Eagle. This was his first engagement with them.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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-----advisory panel.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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The fee paid to Lazard was £4.32 million sterling. Am I right on that?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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It is a big amount of cash, is it not? It is a great fee for a truncated deal. NAMA referred to this as a bespoke deal.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Mr. Long has identified its uniqueness.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Did Mr. Long have previous dealings with Brown Rudnick?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Lazard has not ever had dealings with Brown Rudnick.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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It also has an office in London.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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It is a big international outfit.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Would Mr. Long be in a position to ascertain the facts in that regard for us-----
Mary Lou McDonald (Dublin Central, Sinn Fein)
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and to correspond with us on that?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Could Mr. Long also ascertain for us whether there would be a personal-professional history or work relationship with specifically Mr. Tuvi Keinan of Brown Rudnick-----
Mary Lou McDonald (Dublin Central, Sinn Fein)
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-----and personnel within his organisation?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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How big was the team that Mr. Long headed up for the purposes of this transaction?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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I would particularly like Mr. Long to check what the personal history and professional interactions might be. Does he know Frank Cushnahan?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Is he surprised that he was in line to get cash success or fixer's fees in respect of this transaction?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Yes.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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How surprised?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Indeed. When Lazard was appointed there was no tender process. Who in NAMA approached Lazard?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Of course.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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With Ronnie Hanna. What was Cian Kealy’s role in NAMA? Can Mr. Long recall that?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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The approach was made directly. There was no tender procedure. Is that not very unusual?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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To bid for a gig like this, to sell a portfolio of this magnitude ordinarily there would be quite a rigorous selection process would there not?
Mr. Patrick Long:
Yes, there was a very rigorous selection process when NAMA constituted its loan sale advisory panel.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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I am aware of that but I am not asking about that. I would like Mr. Long to focus on the fact and to confirm for me and the committee that it was most irregular to become a loan adviser on the sale of such a portfolio with no procurement process.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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We will come to that. Can Mr. Long just confirm that I have it right that this was most unusual, unique and irregular?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Has Lazard ever got to be loan adviser on a portfolio of that scale? He cited for instance, project Isobel and Octopus, unless I was mishearing. I assume Lazard had to go through a tendering process for both of those.
Mr. Patrick Long:
No, we did not. We did for project Octopus but we did not for project Isobel. On project Isobel, as for project Eagle, the seller wanted the process to be confidential for as long as possible and did not want investors, or anyone, frankly, to know about the process until we were ready to approach investors. It is typically the case that there is some kind of tender process but it is certainly not unprecedented.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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It was to be NAMA's standard procedure that there would be such a process. Mr. Long then got a verbal briefing.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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That was from Ronnie Hanna I presume.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Does Mr. Long have any contemporaneous note of what was said to him in that briefing?
Mr. Patrick Long:
Of course, as the Deputy would expect, my team and I made notes at the time and we used our notes to produce a document that this committee may already have seen. It is dated 22 January 2014. It is a short slide presentation and we used the notes we took at that meeting to draft that presentation having-----
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Can we see those notes or would there be a difficulty in our having access to the original notes?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Was it unusual for Mr. Long to be briefed on a transaction of this scale and for it to be reduced to a verbal briefing?
Mr. Patrick Long:
Not necessarily, NAMA chose to brief us in person because there were some unique features of this transaction which it wanted us to understand. It wanted to impress upon us the politically sensitive nature of the transaction.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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We will come to that in a moment. Mr. Long was verbally briefed. According to the Comptroller an Auditor General’s report, he does not have a valuation role in respect of the portfolio, he advises on marketing but only in a very circumscribed way because the board had taken a position on the transaction. Am I also right in saying that he did not control the data room?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Why was that?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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I am assuming in the course of any transaction the information and data is in the possession of the client that Lazard is representing. That was hardly unusual in the case of NAMA.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Would Lazard ordinarily be the overseer of the data room?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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What reason was Lazard given? Ronnie Hanna would have run the asset recovery gig? Was Lazard given a reason or rationale for that?
Mr. Patrick Long:
Personally I think the fact that NAMA wanted to manage the data room itself is entirely innocuous.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Is "entirely"?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Irrelevant.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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It would have meant that it rather than Lazard would have had a sense of who was accessing the data room, what the dynamic was, who was shaping up to make a bid, who was not. Is that right?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Lazard did not need to have the oversight of the data room but NAMA did.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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How was it more efficient for it to have it rather than Lazard?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Would it not have afforded it a greater level of control?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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That obviously was important for it.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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That did not bother Mr. Long.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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I do not work in Mr. Long’s world so I am working on assumptions. I am assuming for an outfit such as Lazard, credibility and bona fides are its calling cards. Are they?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Lazard’s capacity to hold the rein, to be an honest broker for its client and for its bidders would be essential would it not?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Front and centre but would it be equally fair to say that it relies on bidders trusting it as a fair and transparent agent in any transaction because it has to bid in order for Lazard to sell?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Does it bother Mr. Long that it was a bespoke and unique arrangement and that Lazard’s role was very limited, or more limited in NAMA terms, than other transactions at around the same time? Looking at all of these factors, one could come to a conclusion or a suspicion that Lazard was prepared to go along with whatever NAMA suggested. One could be forgiven for thinking that rather than confidentiality being an issue that secrecy was sought?
Mr. Patrick Long:
Let me think about the best way to answer that question: the circumstances of this transaction are quite unusual. As I mentioned earlier, the fact that PIMCO had made an approach to sell a portfolio that NAMA probably did not believe it could sell in its entirety-----
Mary Lou McDonald (Dublin Central, Sinn Fein)
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That was highly unusual, I will grant Mr. Long that.
Mr. Patrick Long:
Exactly, and the fact that this was a politically sensitive transaction, that NAMA had a difficult relationship with its debtors-----
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Will Mr. Long explain to me what he understands to be “politically sensitive” about project Eagle? He has used that term repeatedly.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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By whom, by Ronnie Hanna?
Mr. Patrick Long:
By everyone in NAMA. I think it was almost universally recognised as being politically sensitive. This was a portfolio of debtors in Northern Ireland that was controlled by an Irish Government agency. How is that not politically sensitive?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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How is it? I would like Mr. Long to explain it to me.
Seán Fleming (Laois, Fianna Fail)
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We are not here to be political. Was Mr. Long told it was political?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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The witness cites political sensitivities as a factor. I want to understand what he understood by that.
Mr. Patrick Long:
With the benefit of hindsight and having read in the Comptroller and Auditor General's report some of the background to the transaction, the role of the Northern Ireland Executive and the interaction between the Northern Ireland Executive and the Minister of Finance, there was a high degree of political involvement. The fact that we are sitting here today is an indication of the political sensitivity of it.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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No, it is the political sensitivity of protecting taxpayers' money. I will return to it in the second round, as I wish to conclude with this. Cerberus, at the highest level, met senior NAMA executives and the Minister for Finance on 31 March, a day before its bid was submitted. What does Mr. Long have to say about that? Was he aware that the meeting took place?
Mr. Patrick Long:
I believe so. I believe we were aware that the meeting happened. I cannot say precisely when we were made aware, but that that type of interaction is quite common in the sense that this was a way for Cerberus to demonstrate its commitment to the transaction. I believe that commitment was well received by NAMA.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Did Fortress similarly meet Mr. Frank Daly and Mr. McDonagh of NAMA and the Minister? Was it afforded the same meeting?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Did it have such a meeting?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Who organised that meeting between Cerberus and the people concerned? Does the witness know?
Mr. Patrick Long:
I do not know. I assume that Cerberus asked for the meeting and NAMA agreed to it.
Seán Fleming (Laois, Fianna Fail)
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The next speaker is Deputy Cassells.
Shane Cassells (Meath West, Fianna Fail)
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I welcome Mr. Long. Earlier Mr. Long said that the process would not be helped by inviting people to the process who would bid below the reserve price. On what basis was Mr. Long making that expert adjudication on possible bidders?
Mr. Patrick Long:
The point I was getting at is that NAMA had criteria that we applied on its behalf, such as appetite to acquire the portfolio-----
Shane Cassells (Meath West, Fianna Fail)
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How does one judge somebody's appetite?
Shane Cassells (Meath West, Fianna Fail)
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I ask because last Thursday Mr. Neporent, in evidence on behalf of Cerberus, said there were approximately eight funds with the capacity to bid for this. His was one of them. He was of the firm opinion that there were many potential bidders.
Mr. Patrick Long:
During the course of Project Eagle we engaged with nine firms. I assume they were the firms to which Mr. Neporent was referring. Indeed, those are the firms listed in the Comptroller and Auditor General's report as being largely the dominant players in loan portfolio sales in Europe in the period 2013 to 2015.
Shane Cassells (Meath West, Fianna Fail)
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However, when it came to the core of the matter, Lazard did not believe there was that number of real bidders.
Shane Cassells (Meath West, Fianna Fail)
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Cerberus wanted to acquire the services of Brown Rudnick for £15 million. It paid that money so, effectively, others would not have that service or information, regardless of whether it was of value or not, and to keep others off the field. It obviously paid fees to ensure it had the optimum chance here. It felt that there were others who could have acquired this.
Shane Cassells (Meath West, Fianna Fail)
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However, the witness did not think there were others there with that capacity because Cerberus obviously did have it.
Shane Cassells (Meath West, Fianna Fail)
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The witness said the fact that ultimately there were only two bidders is a reflection of the fact that it was not a very attractive portfolio.
Shane Cassells (Meath West, Fianna Fail)
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That appears to be quite an odd statement on something that has caused so much controversy, intrigue and possibly Machiavellian tactics.
Shane Cassells (Meath West, Fianna Fail)
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It is perfectly clear with regard to something that has caused so much controversy, with a litany of possible background Machiavellian tactics in respect of this portfolio. It is not just Mr. Long who has said it. Repeatedly, NAMA officials who have appeared before the committee have spoken about the non-attractiveness of this portfolio, yet so many people believe it goes to the heart of so many things. It appears to be an odd statement, given that so many people are assembled in this room today talking about something that was so unattractive.
Shane Cassells (Meath West, Fianna Fail)
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The Comptroller and Auditor General said in his report that there were many attractive aspects to the portfolio. In fact, this constant running it down is perhaps a way of throwing people off guard. Does Mr. Long not accept that there were attractive aspects to this portfolio?
Mr. Patrick Long:
I am not saying it was totally unattractive. I am saying it was not particularly attractive and many of the investors who reviewed this opportunity or had the opportunity to bid for the portfolio concluded that there were other portfolios coming to the market that they wanted to focus on instead.
Shane Cassells (Meath West, Fianna Fail)
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Mr. Long said earlier that the circumstances that led to Project Eagle and the characteristics of Project Eagle were unique. Deputy McDonald started to refer to aspects of the political sensitivities as well. Will Mr. Long expand on that constant reference to the unique characteristics? Again, it is not just Mr. Long who has mentioned it. Senior NAMA officials who have appeared before the committee also mentioned it. It appears to be a get out of jail card. Everybody continues to refer to this as a unique project, as if it allows one somehow to cover over any other aspect to it. Will Mr. Long expand on that, please?
Mr. Patrick Long:
Yes, by all means. I think it is really a response to the Comptroller and Auditor General's report in the sense that there is a presumption in that report that the sale process for Project Eagle should have been the same as the sale processes for projects Tower and Arrow, for example. The point I have tried to make today is that this is not necessarily the case. The circumstances and background to Project Eagle required a different approach.
Shane Cassells (Meath West, Fianna Fail)
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Why?
Mr. Patrick Long:
There are a host of reasons, but one of the important ones is that NAMA had received an approach from PIMCO at a level which it viewed as attractive. My sense is that prior to that approach it probably did not expect to be able to sell this portfolio in its entirety. It had an offer which it viewed as attractive but, at the same time, it wished to run a sale process to see whether that offer could be exceeded. That is one of the-----
Shane Cassells (Meath West, Fianna Fail)
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Okay. To explore those unique elements, the Northern Ireland Executive Minister, Mr. Sammy Wilson, appeared to like the prospect of an exclusive deal with PIMCO. Obviously, that did not come to pass. The deputy First Minister, Mr. Martin McGuinness, who appeared before the committee last week, spoke about his exclusion from conversations with the First Minister and the Minister of Finance in the North in respect of this and Cerberus. What was the role of the Northern Ireland Executive members in expressing preferences to Mr. Long on who should be a preferential bidder?
Shane Cassells (Meath West, Fianna Fail)
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They were not?
Shane Cassells (Meath West, Fianna Fail)
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So there was no pressure on Mr. Long. Again, I am trying to understand this uniqueness, the fact that everybody continues to characterise this as unique, and what the interaction was.
Shane Cassells (Meath West, Fianna Fail)
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Does Mr. Long think the reserve price of £1.3 billion was a fair price?
Shane Cassells (Meath West, Fianna Fail)
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The witness does not believe that the fact it mirrored what PIMCO potentially was going to pay is unusual.
Shane Cassells (Meath West, Fianna Fail)
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I know that. I am asking about the fact that, amazingly, it mirrored the amount PIMCO was going to pay.
Mr. Patrick Long:
As I was not involved, I do not know the extent to which NAMA was influenced by the approach it had received from PIMCO, or by the level of that approach, in how it set the reserve price for this transaction.
Shane Cassells (Meath West, Fianna Fail)
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Mr. Long has said the process was ultimately successful. Was that despite itself and the processes involved?
Shane Cassells (Meath West, Fianna Fail)
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I am trying to explore the processes involved. Perhaps the fact that the objective was achieved covers over a litany of processes that were not good. Is that a fair assessment?
Shane Cassells (Meath West, Fianna Fail)
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Having read the report and analysed it, what does Mr. Long think constitute normal processes? He has said some of them were not normal, Therefore, with hindsight, could he say the objective was achieved, despite the fact that the processes involved were not what they should have been?
Shane Cassells (Meath West, Fianna Fail)
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That depends on what one believes is acceptable to get to the end. Not everything in life that has a successful outcome is legally or ethically proper.
Shane Cassells (Meath West, Fianna Fail)
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There seems to be a sense that the successful outcome masks a litany of failures in the processes used. In the second round of questions to him the Comptroller and Auditor General referred to the processes used.
Mr. Patrick Long:
In the answer to an earlier question I said there had been a high level of competitive tension throughout the process and that my colleagues and I in Lazard had felt this was appropriate and helpful in achieving the outcome. The Comptroller and Auditor General may take a different view, which is his prerogative.
Alan Kelly (Tipperary, Labour)
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Mr. Long's comments on behalf of Lazard, to the effect that the ends justify the means, are astonishing. We are all beginning to know a lot more about Lazard as a global estate agent. In replies to Deputy Mary Lou McDonald and others Mr. Long said credibility, honesty, etc. were the benchmarks and DNA on which Lazard traded. I do not want to misquote him and will check the minutes of the meeting, but he seemed to say one measured success by a successful outcome. I find that to be one of the most extraordinary comments I have heard since we started this process. That is because it is not the case. The process has to be correct and have integrity. That is what we are checking. We are checking to see whether the taxpayer lost money because of the report and whether the process was correct. Did it, at all times, adhere to the rules of engagement? To say one measures success by the outcome is absolutely extraordinary.
Mr. Patrick Long:
I understand the Deputy's point of view. I did not mean to say the ends justified the means. I was trying to get across the fact that, notwithstanding that there were challenges along the way in respect of PIMCO's fee arrangements and the circumstances of its withdrawal and that the sale process had some unusual features, the process had been successful and the outcome had been successful. We ran a very fair process. One of the concerns of the investors we had approached and invited to participate was whether PIMCO had an unfair advantage by virtue of its prior involvement. We did our best to ensure PIMCO would not have such an unfair advantage. Another Deputy touched on the prior work-----
Alan Kelly (Tipperary, Labour)
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Will Mr. Long clarify what he meant by "such an unfair advantage"?
Alan Kelly (Tipperary, Labour)
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Mr. Long used the word "such". That assumes PIMCO had an unfair advantage.
Alan Kelly (Tipperary, Labour)
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That is twice now.
Mr. Patrick Long:
It was important that we reassured investors that there would be a level playing field. I sincerely believe there was a level playing field. The fact that an investment firm other than PIMCO acquired this portfolio is an indication that there was a level playing field and that PIMCO did not have unfair advantage or at least, if it did, it was not unable to capitalise on it.
Alan Kelly (Tipperary, Labour)
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I am not sure if Mr. Long has explained what he said, but I look forward to reading the transcript. I agree with the last comment of Deputy Shane Cassells and Mr. Long in providing clarity has reinforced my view that there was a rush to complete the process. Adherence to the process at all times was not absolute but was a means to an end. I have arrived at this view from consideration of the other commentary we have received, not just that of Mr. Long. Mr. Long's reply is extremely worrying. His use of the word "such" in talking about a competitive advantage is also extremely worrying. I presume he is very surprised to be here. There is a multi-jurisdictional investigation into these sales and he is in front of the Committee of Public Accounts in the Republic of Ireland. I assume he has never experienced anything like this before and that it is unique for him and his company.
Alan Kelly (Tipperary, Labour)
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I appreciate that.
Lazard said this repeatedly and, I presume, with diplomatic sensitivity given the cross-jurisdictional issue. Who expressed this to Lazard? What people?
Alan Kelly (Tipperary, Labour)
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Name them please.
Mr. Patrick Long:
Ronnie Hanna, Cian Kealy, John Collison, Aideen O'Reilly; all the people I dealt with at NAMA in respect of this.
Alan Kelly (Tipperary, Labour)
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Everyone basically.
Alan Kelly (Tipperary, Labour)
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Did they all express it at the same level?
Alan Kelly (Tipperary, Labour)
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They all emphasised it.
Alan Kelly (Tipperary, Labour)
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In what way did they emphasise it? In other words, the fact that it was politically sensitive was fair enough but what were the dimensions of that? What was the make-up of the political sensitivity?
Alan Kelly (Tipperary, Labour)
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Did they communicate this orally or in writing or both?
Alan Kelly (Tipperary, Labour)
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They did not put anything in writing to Mr. Long regarding this issue.
Alan Kelly (Tipperary, Labour)
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I am only asking the question. If it is a "No", it is a "No" and that is fine.
Alan Kelly (Tipperary, Labour)
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Could Mr. Long check? It would be interesting for us to see the dynamic of the time.
Mr. Patrick Long:
Whether we have a written record as to NAMA describing the transaction as politically sensitive.
Alan Kelly (Tipperary, Labour)
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It would be interesting to us if there was anything in that whole area. Mr. Long can check, if he would. Thanks.
Alan Kelly (Tipperary, Labour)
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Mr. Long has, in fairness, repeatedly said that this piece of work was different to the others that are compared in the report by the Comptroller and Auditor General. I am anxious to know if this was one of the handiest gigs Lazard ever got as regards workload. How sizeable was the workload relating to this matter? It was a very quick process - let us be honest - compared to other examples. This was a very, very quick process. How large was the workload in terms of the volume of people and the number of man hours involved? All consultancy of this sort, which I note was based on a success fee, has to be calculated in terms of all this internally. How much work was involved, particularly as €4.3 million is a hell of a payment for such a short period? Lazard must have been working all the hours God gave.
Alan Kelly (Tipperary, Labour)
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I should sit over there.
Alan Kelly (Tipperary, Labour)
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How many people were working on this?
Alan Kelly (Tipperary, Labour)
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Six or seven people for half a year.
Alan Kelly (Tipperary, Labour)
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For €4.3 million.
Alan Kelly (Tipperary, Labour)
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It is good if one can get it.
Alan Kelly (Tipperary, Labour)
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Yes, I have no issue with that. I do not want to repeat questions. However, the Comptroller and Auditor General said in the report that in the context of the data room, which is an interesting topic, no questions and answers were expected. Why was that? Does Mr. Long have any view on that? I know there were 6,000 odd documents but surely the volume of documents would mean there should be more questions.
Alan Kelly (Tipperary, Labour)
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Was that strange? Compared to other projects of similar size that Lazard worked on, was that normal or abnormal?
Alan Kelly (Tipperary, Labour)
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I would have thought so.
Alan Kelly (Tipperary, Labour)
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According to the Comptroller and Auditor General, it was fairly definitive. Perhaps Mr. Long can clarify it for us on the basis of his experience in this case. Were there questions and answers from bidders?
Alan Kelly (Tipperary, Labour)
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At what scale? This is new information for us.
Alan Kelly (Tipperary, Labour)
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Again, Mr. Long can come back to us.
Alan Kelly (Tipperary, Labour)
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I did not expect Mr. Long would be able to answer it now, in fairness.
Alan Kelly (Tipperary, Labour)
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That is fair enough.
Mr. Patrick Long:
To give the Deputy as full an answer to his question as possible, it was more a case of managing. We were trying, at the outset of the process, to manage bidders expectations, if you like, as to the amount of engagement they would have with NAMA via us and the amount of additional colour we might be able to give them.
Alan Kelly (Tipperary, Labour)
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Okay. I have two final questions. This is kind of a straight question. Not being asked to value a portfolio like this is, obviously, abnormal I presume.
Alan Kelly (Tipperary, Labour)
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How many sales processes has Mr. Long worked on for Lazard?
Alan Kelly (Tipperary, Labour)
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Yes. Approximately.
Alan Kelly (Tipperary, Labour)
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In those 50 cases, how many times has he had to value the sale?
Alan Kelly (Tipperary, Labour)
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But it is the norm.
Alan Kelly (Tipperary, Labour)
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That is interesting. That is a very important piece of information Mr. Long has given to us. My final question relates to the payments to Brown Rudnick and Tughans or its managing director, Mr. Cushnahan. Obviously, Lazard was not briefed on these.
Alan Kelly (Tipperary, Labour)
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If Lazard had to be briefed on it, would it have changed its interpretation of the standard or quality of the marketing and sales process?
Alan Kelly (Tipperary, Labour)
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I am asking Mr. Long's opinion. That is all. It is a fact that this happened. It is a fact that Mr. Long's organisation, for whatever reason critical to this process, was not told about it. In other words, in respect of his final conclusions as regards the sales and marketing strategy - an area in respect of which his organisation is a massive player worldwide - Lazard was not told about these payments, yet is standing over what it did. Would it have changed anything at all? Mr. Long has already cited to multiple Deputies that it was unusual. Would it have changed anything in respect of the quality and the authenticity of the work Lazard carried out in any percentage at all?
Mr. Patrick Long:
I do understand the question. I would not like to speculate as to how our advice would have been different had we known about the precise circumstances of PIMCO's withdrawal. What I would say is that we knew about the fact that it had withdrawn from the process and we advised NAMA at the time that we felt there was still sufficient competitive tension.
Alan Kelly (Tipperary, Labour)
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That is not really it and this is a critical question. I am not asking Mr. Long to say how it would have been different.
Alan Kelly (Tipperary, Labour)
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That is technically hypothetical because one could not expect that. There were too many dynamics going on. I just want to establish whether or not it would have been different. For me, it could not have been the same, surely.
Alan Kelly (Tipperary, Labour)
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I accept that Mr. Long cannot say.
Alan Kelly (Tipperary, Labour)
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Okay. I thank Mr. Long very much for being so honest.
Seán Fleming (Laois, Fianna Fail)
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I have some questions following on from that. When did Mr. Long hear about the actual reasons for PIMCO's exit from the process? He was not aware at this stage but when did he become aware?
Seán Fleming (Laois, Fianna Fail)
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The transaction closed in June, several months later, so Mr. Long was not aware at any stage up to that.
Seán Fleming (Laois, Fianna Fail)
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I will ask a few questions and we can have a second round in a moment.
The list of potential bidders is on page 71 of the report as follows: PIMCO; Blackstone; Starwood; Oaktree; Apollo; Lone Star; Cerberus; Goldman Sachs; and Fortress. I would not know all of these. Are they all American-based or European-based organisations?
Seán Fleming (Laois, Fianna Fail)
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When NAMA started out, it was the largest property-holding company on the planet. Why would it confine such a sale just to Americans? In London one can see the investment from eastern Europe and the Middle East. Why did Lazard not look further afield, given that NAMA was the biggest property-holding company on the planet?
Mr. Patrick Long:
Understood. I think there are two reasons. The first is that these firms really dominate or dominated this type of investment at the time, as the other table in the Comptroller and Auditor General's report makes clear. The second is that while these firms are American firms, headquartered in America, but, as I mentioned earlier, with a significant presence in London, the capital which they manage comes from around the world. So the investors in the funds which these groups manage would be from all over the world and would not be confined to America.
Seán Fleming (Laois, Fianna Fail)
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Are there people from the Middle East or Asia in this market today?
Seán Fleming (Laois, Fianna Fail)
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I thank Mr. Long; I just wanted to clarify that.
Was it unusual to require no external funding? How much of an impact would that have had on price given that the nine potential bidders could not obtain finance to support their bids?
Mr. Patrick Long:
It is very difficult to say what impact it had on price. I am sure there are precedents for that being a stipulation. It was a stipulation of NAMA's at the start of the process. As I mentioned earlier, I believe that the rationale for that stipulation was to reduce execution risk to avoid too many other parties getting involved.
Seán Fleming (Laois, Fianna Fail)
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In Mr. Long's professional career with his company he has dealt with about 50 sales. Would that condition have applied in many of the 50? How common or unusual would that be?
Seán Fleming (Laois, Fianna Fail)
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Would it be 10% or 2%. How many would it be, ballpark? The thing is unusual and would have an impact on price.
Seán Fleming (Laois, Fianna Fail)
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It would be quite a minority.
Seán Fleming (Laois, Fianna Fail)
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I thank Mr. Long; I just wanted to check that.
On the letter of engagement, there was the verbal agreement, a slide presentation. As Deputy McDonald mentioned earlier, we wrote to NAMA some time ago looking for some documentation. There was a concern from NAMA that Lazard had not consented to the release of information. Is Mr. Long familiar with that?
Mr. Patrick Long:
Yes, I am familiar with that point. My understanding of that point is that there was a degree of sensitivity on Lazard's part in relation to the formal letters of advice which we wrote to NAMA. I do not believe there was any particular concern about our engagement letter, itself. I think-----
Seán Fleming (Laois, Fianna Fail)
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Would Mr. Long have no problem with NAMA forwarding us a copy of-----
Seán Fleming (Laois, Fianna Fail)
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We will formally ask for that so. The issue was with Lazard's subsequent advice to NAMA.
Seán Fleming (Laois, Fianna Fail)
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I will come back to that.
Mr. Long said earlier that when PIMCO withdrew, Lazard notified Cerberus and Fortress. Why would that have been done if Lazard wanted to maintain competitive tension? Surely by telling them the biggest and most prominent player on the field has left the pitch,-----
Seán Fleming (Laois, Fianna Fail)
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-----it was diminishing the competitive tension. Surely Lazard was there to keep the competitive tension. Why would it have done that?
Mr. Patrick Long:
Yes indeed. I cannot remember precisely how we notified them, but they certainly became aware of it. The Chairman will recall that advisers, apart from Brown Rudnick and Tughans, in the form of NewRiver Retail and Cushman & Wakefield joined Cerberus and Fortress, respectively. Cerberus and Fortress certainly knew that PIMCO had withdrawn. I cannot quite remember precisely how they became aware of that information. While at one level it might have been convenient for us - for NAMA - for them not to have been aware of it, at the same time we were trying to run a fair and transparent process. I do not believe PIMCO's withdrawal demotivated PIMCO; if anything it might have-----
Seán Fleming (Laois, Fianna Fail)
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Demotivated Cerberus.
Seán Fleming (Laois, Fianna Fail)
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It might have felt it was a smaller race thereby giving it a better chance.
The letter Mr. Long mentioned a minute ago was Lazard's letter of recommendation to NAMA on 2 April 2014. Lazard had an issue with some of it being released. Mr. Long might discuss that issue with NAMA again with a view to releasing it or if there is a particular aspect that requires to be redacted, Mr. Long might revisit that with NAMA.
Seán Fleming (Laois, Fianna Fail)
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On 2 April 2014, the one after the conclusion of the bid.
Seán Fleming (Laois, Fianna Fail)
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Fine, we will check our records.
Seán Fleming (Laois, Fianna Fail)
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I do not know.
Seán Fleming (Laois, Fianna Fail)
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Based on Lazard's reluctance, it has not been forwarded.
Seán Fleming (Laois, Fianna Fail)
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Mr. Long will discuss it with NAMA. We will take it up with NAMA directly. Mr. Long seems to be willing to provide it to the committee once it is not put on the public record. Is that correct?
Seán Fleming (Laois, Fianna Fail)
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We, as a committee, will discuss how to handle that. I accept what Mr. Long is saying, but it is slightly unusual. We will come back to that issue.
I have a question on page 83 of the report. In the letter of 2 April, Lazard gave its recommendation to NAMA. I should have said page 82.
Seán Fleming (Laois, Fianna Fail)
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Page 82 of the report states that in a letter dated 2 April Lazard noted that:
The process involved a limited number of highly qualified bidders, [that is a qualification; it was a limited process] limited due diligence information, [that is a second qualification] a single round of bidding [a further qualification] and the requirement for bidders to acquire the portfolio 'entirely in cash'.
Lazard's letter to NAMA stated that this was the best that could be done with those four restrictions as I would call them.
Seán Fleming (Laois, Fianna Fail)
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It was not that it was a great process. Lazard was putting on record NAMA's restrictions that the chairman has separately described as a very bespoke process - all of those made it highly bespoke. Has Mr. Long ever seen those four restrictions in a process like this before - a single round; entirely for cash; limited due diligence available; and a limited number of bidders? It was a very tight process.
Mr. Patrick Long:
I understand the question. I have seen each of those. Just for the record, these were NAMA restrictions.
Seán Fleming (Laois, Fianna Fail)
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Yes, absolutely.
Seán Fleming (Laois, Fianna Fail)
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That is most interesting. NAMA will explain why it was so restrictive.
Page 83 of the report refers to the Lazard letter as stating, "the sell-side process for the transaction was appropriate for the sale of a loan portfolio of this nature". Again it is all connected. Lazard was only dealing with the sell side.
Lazard was on a success fee. I again thank Mr. Long for coming here today.
Seán Fleming (Laois, Fianna Fail)
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I know an issue was made about the limited amount of work Lazard put in and the amount of hours it took. Had it not reached a successful financial conclusion, despite other issues, Lazard would not have received a fee.
Seán Fleming (Laois, Fianna Fail)
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So there is a risk on the company's behalf, whether or not it is going to get paid at all. In fairness, that must be said because Mr. Long is assisting. Given those levels of restrictions that NAMA put on the process before Lazard arrived on the scene, was it fair to Lazard that it had to operate on a no foal, no fee basis, as we would describe it here. I can understand if a person was going to sell a product, loans or assets he or she would take the risk if it did not sell, but Lazard was going into a process that had been so constrained before the start that it was difficult for it to enter that. Did the Mr. Long have an issue with that?
Seán Fleming (Laois, Fianna Fail)
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So eventually Lazard accepted it despite the inherent risks from the witness's point of view?
Seán Fleming (Laois, Fianna Fail)
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I want to move on to page 152, part of appendix C and it is an important document. It is the summary of the bids received from Fortress and Cerberus. I refer again to the restrictions that NAMA placed on the bid before it got near Lazard. Page 152 of the report shows the prices and the fact Fortress did not meet the reserve price. On the same page, under the heading of financing, it shows that Fortress was not specific with regard to not having to obtain syndicate financing. At the bottom of the page it refers to conditionality and it states: "Fortress have refused to allocate their bid on an asset-by-asset basis ...". Therefore, Fortress did not meet the big conditions on the three key requirements of not reaching the reserve price, not satisfying the information required on the source of financing and in not giving a breakdown by assets.
Mr. Patrick Long:
In so far as financing is concerned Fortress may not have specified how it was proposing to finance it, but the clear inference from the letter it wrote to the committee recently was that its bid was priced on the basis that it would be entirely in cash. I do not believe it is particularly significantly that Fortress did not allocate its bid on an asset by asset basis. To me the most important difference between the Fortress and Cerberus bids was the price. Clearly, there is a big difference.
Seán Fleming (Laois, Fianna Fail)
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Did it meet the reserve?
Mr. Patrick Long:
Yes and I guess it had a choice between not bidding at all - because it was not comfortable paying the reserve price - or sending us a letter with a price it was comfortable paying. That is what it chose to do; the logical thing to do. Had it said to us that it could not get to the reserve price but was still interested in acquiring this portfolio then we would have asked it, inevitably, what price it could get to.
Seán Fleming (Laois, Fianna Fail)
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Ultimately, only one bid met the reserve price.
Seán Fleming (Laois, Fianna Fail)
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Mr. Long has said that price was the key, crucial issue.
Seán Fleming (Laois, Fianna Fail)
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That was not very competitive. Lazard had only one valid bid on the table based on the conditions of the sale. How could one describe that as competitive?
Mr. Patrick Long:
What I meant when I said the process was competitive was that there was competitive tension throughout the process which, I believe, had the effect of motivating Cerberus to put forward a bid at the highest level it was willing to pay. The process was competitive in that sense. Ultimately, we only needed one compliant bid because we only needed a single counter party to buy the portfolio.
Seán Fleming (Laois, Fianna Fail)
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So, at the end of the day, the witness was happy with one. My last question concerns the meetings with Cerberus the night before the bids were submitted. Was Lazard involved in those meetings?
Seán Fleming (Laois, Fianna Fail)
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Was Mr. Long aware of the meetings in advance?
Seán Fleming (Laois, Fianna Fail)
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Given that Lazard was the sales agent, and a meeting was going to happen between Cerberus, who Mr. Long had said was very heavily involved in the process, the Minister for Finance-----
Seán Fleming (Laois, Fianna Fail)
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Why would Lazard not have attended?
Mr. Patrick Long:
We were not invited to the meeting, nor would we have felt at the time, and I do not feel now, that it was inappropriate in any way that we were not there. On many transactions there are, at various stages, meetings between the principals that the advisers do not attend. I do not believe that any of the Cerberus advisers attended and it was natural that NAMA's advisers could not have attended either.
Seán Fleming (Laois, Fianna Fail)
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The witness was not there but could a meeting like that, or information gleaned at it, have had an impact on the bids submitted? It is very strange that the person running the bidding process was not there. Other sales are not quite the same as selling State assets. These are State assets being sold by the Irish State and any loss will be carried by the Irish public. Similarly, on the other side, there are procurement rules. It would be extraordinary if a company was submitting a bid for procuring a State contract - for a private sector company to build a motorway, for example - and the night before the company submits its bid the most senior people in that company met with the Minister for Finance and the head of the procurement agency. It would render the process fatally flawed if that meeting happened within 24 hours of a bid if the State was buying an asset. It seems to have been okay for that to happen when the State was selling an asset. I find that very strange. Is Mr. Long in a position to comment on that? We will also put this question to other people. Does Mr. Long get the parallel I am drawing?
Mr. Patrick Long:
I do indeed Chairman. My response would be to a point the Chairman made a moment ago. It is highly unlikely that Cerberus learnt anything at that meeting which influenced the level of its bid. It is my understanding that the meeting was rather designed to impress on NAMA Cerberus's seriousness of intent and commitment to the transaction. I do not believe it was about the price, it was about trying to present Cerberus as a reliable counter party for NAMA.
Seán Fleming (Laois, Fianna Fail)
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Deputy McDonald has asked if Mr. Long was aware of a similar type meeting or contact with Fortress around the same time.
Mr. Patrick Long:
Not around the same time but I am aware that there was interaction between NAMA and Fortress during the course of the process.
Seán Fleming (Laois, Fianna Fail)
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Separate from Lazard's involvement?
Seán Fleming (Laois, Fianna Fail)
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I thank the witness. The speakers for our second round have indicated in the following sequence: Deputies Connolly, Cullinane, Madigan, Catherine Murphy, McDonald and Burke. I propose a ten minute break and then we will resume for another hour.
Seán Fleming (Laois, Fianna Fail)
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We are back in public session. The next speaker is Deputy Catherine Connolly.
Catherine Connolly (Galway West, Independent)
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I thank Mr. Long for bearing with us. I know it is not easy.
On the sale process, am I correct that Lazard received a verbal briefing from NAMA?
Catherine Connolly (Galway West, Independent)
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Had any written document been provided from NAMA at that point in relation to Lazard's role in the process?
Catherine Connolly (Galway West, Independent)
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Following the verbal briefing, Lazard drew up a letter of understanding. Is that correct?
Mr. Patrick Long:
We drew up a document, which I believe the committee has seen, which summarised the approach that we intended to take in light of the verbal briefing that we had received from NAMA.
Catherine Connolly (Galway West, Independent)
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So Lazard related back in its document its understanding of what it had been told in the verbal briefing.
Catherine Connolly (Galway West, Independent)
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That is okay. Lazard fleshed it out and returned it to NAMA. Was there any discussion on that document with NAMA?
Catherine Connolly (Galway West, Independent)
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Did NAMA make or suggest any changes to it?
Mr. Patrick Long:
I think we may have debated some of the content, including, for example, the ranking of investors. NAMA was already very experienced in managing-----
Catherine Connolly (Galway West, Independent)
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Perhaps Mr. Long would avoid the history and tell me what changes were made by NAMA.
Catherine Connolly (Galway West, Independent)
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The ranking order of them.
Catherine Connolly (Galway West, Independent)
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What did NAMA change?
Mr. Patrick Long:
I cannot remember precisely what it changed but the ranking, as I think I acknowledged earlier, was subjective to a degree. NAMA wanted to ensure that we were approaching investors in the right order.
Catherine Connolly (Galway West, Independent)
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Which investors did NAMA rank ahead of those selected by Lazard?
Catherine Connolly (Galway West, Independent)
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Was a letter or e-mail issued by NAMA setting out the issues on which it disagreed with Lazard?
Catherine Connolly (Galway West, Independent)
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Is Mr. Long sure of that?
Catherine Connolly (Galway West, Independent)
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It was a verbal briefing.
Mr. Patrick Long:
Yes, we flew to Dublin for a face-to-face meeting. We then produced these slides. The point I wanted to make on the record is that it is not the case that we produced these slides in isolation in a darkened room. There was some input from NAMA as well.
Catherine Connolly (Galway West, Independent)
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What did NAMA change? Mr. Long spoke about ranking. I presume he was speaking in that regard about the ranking of bidders.
Mr. Patrick Long:
Yes. I could not say today given the length of time that has passed precisely what it changed. The point I wanted to make was that we had a discussion about the ranking of investors, including which investors to put into tier 1 and which investors to put into tier 2. We had a discussion about that.
Catherine Connolly (Galway West, Independent)
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NAMA had a strong input into that.
Catherine Connolly (Galway West, Independent)
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What input did it have?
Mr. Patrick Long:
I am genuinely sorry that I cannot remember more precisely but I did not want the committee to think that NAMA had no input into this document. That was the point I was trying to get across. For example, there may have been a investor that we said should go into tier 2 and NAMA said it should go into tier 1 or there may have been an investor that we said should go into tier 1 and NAMA said that it should go into tier 2. That is what I am trying to get across.
Catherine Connolly (Galway West, Independent)
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During an earlier discussion I had with Mr. Long in regard to the list he accepted that the first three companies chosen by Lazard did not come within the list of the major companies. Is that correct?
Catherine Connolly (Galway West, Independent)
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Yes.
Mr. Patrick Long:
If this table had been replicated as at the date that we were having this discussion with NAMA, it would have presented a different picture. This is the picture with the benefit of hindsight. We were not only trying to take into account market presence.
Catherine Connolly (Galway West, Independent)
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Perhaps Mr. Long would listen again to my question. Of the three companies that Lazard put into the first round of bidding, which I think were Blackstone, Starwood and Oaktree, did NAMA have an input into that?
Catherine Connolly (Galway West, Independent)
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Did it change the proposal? Were those three companies chosen by Lazard or NAMA?
Mr. Patrick Long:
This document was initially produced by us but it was on the basis of a verbal briefing which we had already had from NAMA. It is really hard to separate within this document what was Lazard's work and what was NAMA's input because it was an iterative process.
Catherine Connolly (Galway West, Independent)
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Are there e-mails or documents that we could see?
Catherine Connolly (Galway West, Independent)
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Did NAMA ever give Mr. Long a document and say "These are your instructions."
Catherine Connolly (Galway West, Independent)
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Did that happen with other sales Mr. Long dealt with?
Catherine Connolly (Galway West, Independent)
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Did it happen in other sales that Mr. Long got written instructions?
Catherine Connolly (Galway West, Independent)
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But it did not happen on this occasion.
Catherine Connolly (Galway West, Independent)
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Did Mr. Long say there is no documentation from NAMA to him on bidders or anything else in relation to the sales process?
Mr. Patrick Long:
There is no documentation that I am aware of, produced by NAMA and addressed to Lazard, that stipulates how the sale process should be conducted. In terms of the written record, what does exist and is included in the Comptroller and Auditor General's report-----
Catherine Connolly (Galway West, Independent)
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That is-----
Catherine Connolly (Galway West, Independent)
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That is okay. I am just dealing with Mr. Long and his company. Mr. Long submitted a letter, a copy of which I have here. The Chairman has touched on this already. Mr. Long gave a letter of comfort, I think it is called, or a letter of confirmation. Did he qualify that?
Catherine Connolly (Galway West, Independent)
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It was very much qualified in terms of the restrictions NAMA set. Within those restrictions Lazard gave a qualified letter.
Catherine Connolly (Galway West, Independent)
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Then subsequently in 2016, after all of this, Lazard sent another letter. Was Lazard then approached by NAMA to give that letter?
Catherine Connolly (Galway West, Independent)
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I think Mr. Long was quoted as saying another letter was given.
Catherine Connolly (Galway West, Independent)
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Yes, I see. That is very good. That is on page 77, a response to a series of questions on 31 March and Mr. Long went through the questions.
Could Mr. Long turn to the last bullet point on the next page? There is a reference to "In our professional judgment and given, inter alia, NAMA's objectives and the nature of and limited information available on the portfolio, the process was appropriate for a transaction of this nature." Even on reflection, in looking back in March 2016, Mr. Long is stating "we did what we could on the restricted information".
Catherine Connolly (Galway West, Independent)
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I wish to raise two or three more little things. In relation to non-disclosure, could Mr. Long enlighten the committee about disclosure or non-disclosure agreements, NDAs, that he or NAMA sent out to the potential bidders?
Catherine Connolly (Galway West, Independent)
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Could Mr. Long tell us the key feature of those agreements? What was the key issue not to be disclosed when writing out to a bidder?
Catherine Connolly (Galway West, Independent)
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When the letter of non-disclosure went out, who had to sign up to that?
Catherine Connolly (Galway West, Independent)
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The investors. What about their legal team?
Mr. Patrick Long:
There was a protocol for investors to seek our consent to share information with their advisers. What that required, as I recall, was that the advisers should enter into similar undertakings with their clients, which were similar to the undertakings which the investors had entered into with NAMA.
Catherine Connolly (Galway West, Independent)
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I have asked this question and other Deputies have asked it and we are waiting. Did Mr. Long send out a non-disclosure agreement to all bidders?
Catherine Connolly (Galway West, Independent)
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As part of that non-disclosure agreement, were their property advisers and legal teams pre-empted from disclosing information? Once they signed up to that non-disclosure agreement, did that stop them sharing the information they learned about with anybody else?
Catherine Connolly (Galway West, Independent)
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Let us move to Cerberus and when the legal teams changed over, did they disclose to Lazard?
Mr. Patrick Long:
They did not disclose to us. Lazard and NAMA only found out about Brown Rudnick's involvement with Cerberus at the 11th hour.
Catherine Connolly (Galway West, Independent)
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I will just put my question again. Did Cerberus disclose to Lazard that it was now taking on Brown Rudnick and Tughans?
Catherine Connolly (Galway West, Independent)
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Yes.
Catherine Connolly (Galway West, Independent)
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Did Cerberus disclose to Lazard?
Catherine Connolly (Galway West, Independent)
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So Cerberus did not disclose to Lazard. Cerberus signed a non-disclosure agreement. I am only listening to Mr. Long and learning with him.
Catherine Connolly (Galway West, Independent)
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Please. I am not asking Mr. Long to tell me his understanding of Cerberus's position. That would be too much. Cerberus had its own legal team in here and it had its opportunity. I am asking Mr. Long, as an employee of the company that was chosen to advise on this. Lazard sent out a letter of non-disclosure. Did Cerberus comply with that non-disclosure agreement?
Catherine Connolly (Galway West, Independent)
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I beg Mr. Long's pardon if he was.
Mr. Patrick Long:
No, I am sure the fault was mine. Cerberus appointed Brown Rudnick, or appeared to have started working with Brown Rudnick before Lazard or NAMA knew about it. My understanding of Cerberus's position on this point is that to the extent that it was not disclosing confidential information that was covered by the NDA with Brown Rudnick, that it did not need to advise us of that.
Catherine Connolly (Galway West, Independent)
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I am sorry Mr. Long, but that has happened every time I have raised this - not just with Mr. Long. PIMCO withdrew. According to his evidence, Mr. Long knows nothing about the circumstances. Is that not correct?
Catherine Connolly (Galway West, Independent)
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The legal team for PIMCO marched across and went to Cerberus. Is Mr. Long aware of that?
Catherine Connolly (Galway West, Independent)
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It happened within a very brief time. Did Cerberus tell Lazard?
Catherine Connolly (Galway West, Independent)
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Should Cerberus have told Lazard, according to the non-disclosure agreement that was sent out?
Catherine Connolly (Galway West, Independent)
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That is okay. I appreciate Mr. Long wants to be very careful.
Mr. Patrick Long:
My answer to Deputy Connolly's question is "not necessarily", because the NDA, the non-disclosure agreement, required notification or permission - I forget exactly which - to the extent that it was proposed that confidential information would be shared. I watched some of the testimony from Cerberus before the committee last week and my understanding of the reason that the Cerberus representative gave for not having notified Lazard and NAMA of Brown Rudnick's appointment was that Cerberus did not in fact share confidential information with Brown Rudnick.
Catherine Connolly (Galway West, Independent)
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Mr. Long was also reminded that no informational materials, including the fact that the portfolio exists, may be disclosed to any external advisers without pre-approval from the seller. Mr. Long sent out the letters. Were the agreements complied with by Cerberus? Is Mr. Long's answer that he does not know?
Catherine Connolly (Galway West, Independent)
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In simple, plain English, not legal language, did Brown Rudnick come back and say it was working for PIMCO up to a few days ago and now we are working for Cerberus, is that okay with Lazard?
Catherine Connolly (Galway West, Independent)
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Good. They did not say that. That is great.
David Cullinane (Waterford, Sinn Fein)
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I will just add some factual information, because Mr. Long might not have heard this part of Cerberus's evidence. When Cerberus was before the committee it said that there were technical breaches of the non-disclosure agreement. I am not sure if Mr. Long is aware of that. Did Cerberus disclose that to Lazard at any point, because that is important as well? I am on the same line.
Catherine Connolly (Galway West, Independent)
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Mr. Long can come back to the technical breach.
Seán Fleming (Laois, Fianna Fail)
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Deputy Connolly has nearly finished her time.
Catherine Connolly (Galway West, Independent)
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I will finish very quickly. In relation to the continuous mantra that this was a very difficult property portfolio, Mr. Long has looked in detail at the Comptroller and Auditor General's report. If he looks at the chapter that I cite repeatedly, figure 4.5 on page 70 relates to the European real estate loan sales market. It goes on to show the various companies interested and the various interest in the market. There is no evidence anywhere that this was a difficult portfolio. It is a mantra that is repeated ad nauseam. Did Mr. Long meet with NAMA prior to today's evidence?
Catherine Connolly (Galway West, Independent)
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Mr. Long did not.
Catherine Connolly (Galway West, Independent)
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Did Mr. Long meet with NAMA since he was called to come before the committee as a witness?
Catherine Connolly (Galway West, Independent)
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Mr. Long said that he was repeatedly told that this was a difficult portfolio.
Catherine Connolly (Galway West, Independent)
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Mr. Long's evidence was that he was told repeatedly by NAMA board members and he listed them.
Catherine Connolly (Galway West, Independent)
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We were repeatedly told there were difficult debtors.
Mr. Patrick Long:
We were not told that it was a difficult portfolio to sell. We experienced that for ourselves. What we were told is that, as Deputy Madigan kindly pointed out, it was politically sensitive. We were also told by NAMA that it had a difficult relationship with the debtors-----
Catherine Connolly (Galway West, Independent)
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There is no evidence of that anywhere in the report. Number two-----
Catherine Connolly (Galway West, Independent)
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Of difficult debtors. In fact, when I looked at the meetings of the Northern Ireland Advisory Committee, they spoke about performing loans and returns on loans. I asked Mr. Long whether he read the report, which drew conclusions. In respect of what he said about competitive tension, PIMCO withdrew and he has no idea why it withdrew.
Catherine Connolly (Galway West, Independent)
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They were there from earlier on. The NAMA board held a normal scheduled meeting. What was recorded was that Lazard was to be appointed and simultaneously PIMCO was to continue on with NAMA's permission to examine the portfolio in parallel with NAMA going out to Lazard. The final sentence stated that this was as much to give protection to PIMCO about the integrity of the process. Mr. Long should tell me if I am wrong. From that and from what Mr. Long has said today, I am presuming that NAMA never wanted to lose PIMCO. I am making a statement it was set up to give an illusion that there was competitive tension, that even before Lazard got into gear, NAMA was continuing with its investigation and that when Lazard came in, it was allowed to have two or three bidders to protect PIMCO. Does Mr. Long agree with that statement?
Catherine Connolly (Galway West, Independent)
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Not entirely?
Catherine Connolly (Galway West, Independent)
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One of the many conclusions of the Comptroller and Auditor General was that PIMCO appeared to have had an advantage having been in the race from early on. Even when he wrote this report, he was not aware that PIMCO was in it. It has come out that PIMCO was in it even further back, was in the data room and had a competitive advantage. Now that Mr. Long knows all of this, would Mr. Long agree that PIMCO had a competitive advantage?
Peter Burke (Longford-Westmeath, Fine Gael)
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I welcome Mr. Long and thank him for presenting to the committee today. The closing price was a £1.24 billion deal. We have been made aware at this stage that first, the data room was managed by the client which was a major organ of the Irish State in one respect and backed by the taxpayer. Second, a verbal briefing was given at an initial meeting between Lazard and NAMA of which we have no detailed record to revert to now to assess what conversations were held in terms of the objectives of the sale. We also know there was no advice in terms of strategy, timing and value of the portfolio. We also know that there was a very tight timeframe in which to execute the sale. In terms of Mr. Long's professional approach as an adviser, would he consider that a prudent approach?
Peter Burke (Longford-Westmeath, Fine Gael)
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I never said there was no advice. I said there was no advice in terms of strategy. We were told very clearly that Lazard did not invite in terms of the strategy - in terms of when to sell and whether a group of assets should be sold piecemeal or together. There was no advice on that. Second, there was no advice in terms of timing - when to sell. Lazard was given that instruction. Third, there was no evaluation. I am very clear on those three points. I will ask the question again. Does Mr. Long think that is a prudent approach?
Peter Burke (Longford-Westmeath, Fine Gael)
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So Mr. Long would not see Lazard's approach as advising its client as to whether it had carried out a risk assessment in terms of the procedure or instructions it has followed considering that this was a major sale which could, in theory, expose the Irish taxpayer? In terms of Lazard getting the best value for its client, as a professional adviser, should Lazard not have asked its client at that juncture whether it had carried out a risk assessment of curtailing the sale in all these different avenues? Does Mr. Long not think this would have been prudent?
Mr. Patrick Long:
In general terms, it is our role to help our clients achieve their objectives and we firmly believe that we helped NAMA the best outcome in the circumstances.
Peter Burke (Longford-Westmeath, Fine Gael)
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Whether the best outcome was achieved is obviously questionable in light of the report of the Comptroller and Auditor General laid before us. That is open to speculation and is what we must assess. At a basic level, it concerns me that in respect of the process surrounding this and the limitations placed upon Lazard's engagement that Lazard was reluctant to say it should advise a client to assess what risk was there and that as advisers on competitive tension and trying to maximise the best value, ask the client about whether it had looked at everything in terms of having such a narrow focus on executing this sale.
Peter Burke (Longford-Westmeath, Fine Gael)
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So Lazard took NAMA's judgement and proceeded on the basis that it only wanted to sell the asset. Value was not a concern. It just wanted to get the asset sold.
Mr. Patrick Long:
No, value was a concern and was clearly NAMA's most important objective. The point I was trying to make is that our role as advisers is principally to help our clients achieve their objectives. NAMA's objectives were met. If things had turned out differently, I would have a greater understanding of the point being made by Deputy Burke.
Peter Burke (Longford-Westmeath, Fine Gael)
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I understand what Mr. Long is saying. He is saying that Lazard's job was to assist NAMA in achieving its objectives. What I do not understand is how he can put that as one with not questioning the process by which NAMA was constraining itself, which Mr. Long has already said was unusual in terms of the 50 sales in which Lazard has been involved.
Mr. Patrick Long:
Had we thought that in running the process NAMA had in mind, we would not have been able to sell the portfolio for a price in excess of NAMA's reserve price, we would have said so but we believed at the time that NAMA's objectives could be achieved and indeed they were achieved.
Peter Burke (Longford-Westmeath, Fine Gael)
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Mr. Long's firm found this to be a difficult sale.
Mr. Patrick Long:
Yes. The fact that I am here today is a reflection of that. There were certainly some challenges. A point I made earlier was that this was not viewed by the market as being a particularly attractive portfolio. There were not that many people out there who wanted to buy the entirety of NAMA's Northern Ireland debtor portfolio in a single transaction. Fortunately, there were several parties who were sufficiently interested in the transaction to take part in the process and the process achieved a successful sale.
Peter Burke (Longford-Westmeath, Fine Gael)
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I have three brief final points. In respect of 13 February when there was a loss of confidentiality, should Lazard not have considered amending the sales approach or advising NAMA to carry out a risk assessment at that point?
Mr. Patrick Long:
In response to the leak, NAMA agreed that we should allow additional parties to enter the process, provided that we felt that they would be additive to the sale process. This was the point-----
Peter Burke (Longford-Westmeath, Fine Gael)
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None of the other constraints - for example, the timing in pressing ahead, the strategy of bulking everything together, etc. - changed. Would it not have been prudent at that point to assess the situation? The information had changed and there had been a breach in something that NAMA held dear.
Peter Burke (Longford-Westmeath, Fine Gael)
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But Lazard did not ask about it.
Mr. Patrick Long:
I expect that we asked NAMA what the implications of the leak were for its sale process. Its guidance at the time would have been that it wanted us to press on.
Peter Burke (Longford-Westmeath, Fine Gael)
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Would it be unusual during an initial consultation regarding such a major deal for a meeting to happen of which we had no written agreement signed by the parties at the meeting detailing what was discussed and what approach was to be taken?
Peter Burke (Longford-Westmeath, Fine Gael)
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If something happened to that document down the road or a concern was raised about it, what would be the cornerstone? There would be no record of the initial meeting.
Peter Burke (Longford-Westmeath, Fine Gael)
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I am not saying that it is, but is it not good business practice to put adequate safeguards in place when having an initial meeting and putting a document together? A detailed note should have been taken of the initial meeting. I am concerned about this but Mr. Long does not seem to be concerned.
Mr. Patrick Long:
Lazard's notes were translated into a formal Lazard document, which the committee has seen. As to NAMA's note-taking policies, that is a question for NAMA.
Peter Burke (Longford-Westmeath, Fine Gael)
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Lazard, as adviser, was a party to the initial meeting. We are trying to assess what NAMA and Mr. Long's company were thinking at the time. Lazard put together a document on foot of the conversations that were held but it would be good practice and ensure that all parties were safeguarded to have detailed and clear minutes of the meeting, given that it had such a high profile and involved an organ of the State and a high-value deal.
Mr. Patrick Long:
I understand the Deputy's point but I did not know at the time that NAMA had not taken a record of the meeting.
Peter Burke (Longford-Westmeath, Fine Gael)
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Mr. Long believes that it should have.
Mr. Patrick Long:
I am not commenting on whether NAMA should have taken a note of that meeting. It is outside-----
Peter Burke (Longford-Westmeath, Fine Gael)
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If Mr. Long was doing it all over again, surely he would agree that this would be good practice. That is a straightforward question. We are discussing putting adequate safeguards in place.
Seán Fleming (Laois, Fianna Fail)
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Mr. Long is saying that it is a matter for NAMA.
Peter Burke (Longford-Westmeath, Fine Gael)
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When Blackstone, Starwood and Oaktree were admitted, were any advised by NAMA as potential clients or was it done through Lazard?
Mr. Patrick Long:
We suggested which firms should be invited to participate in the sale process. It was perfectly right and proper that NAMA should have had some input into the tiering of investors and the sequence in which they were approached because NAMA had many dealings with these investors itself. At one stage, NAMA was one of the larger property owners in the world. My understanding is that many investors came through its door on a daily basis. We applied our professional judgment to that selection and it is quite right and proper that NAMA should have had an input as well.
Peter Burke (Longford-Westmeath, Fine Gael)
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Were those three suggested by NAMA?
Mr. Patrick Long:
I believe that we suggested them all and then we discussed with NAMA what the tiering should be.
Peter Burke (Longford-Westmeath, Fine Gael)
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The source was Mr. Long's company.
Peter Burke (Longford-Westmeath, Fine Gael)
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And then they were discussed.
Peter Burke (Longford-Westmeath, Fine Gael)
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We have seen the matrix in terms of due diligence and financing in respect of particular bidders. How does Lazard assess a client that is capable of purchasing a major portfolio? What does Lazard ask it to prove in terms of funding arrangements? For what documentation does it generally ask?
Mr. Patrick Long:
A part of the reason that we were hired by NAMA was our access to investors and our understanding of same. We already had a good sense of how much capital those investors had available and their track records from previous transactions. It was on the basis of our experience and expertise that we made the decision to admit Fortress and Goldman Sachs to the process and not the other firms that approached us.
David Cullinane (Waterford, Sinn Fein)
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Mr. Long has been helpful. I thank him for his patience in sticking with us. I wish to address three issues. Mr. Long mentioned the uniqueness of this sale's characteristics a number of times. We are under time pressure, so I will be as concise as I can. Will Mr. Long help me to understand the uniqueness of the arrangement? Section 4.3 of the Comptroller and Auditor General's report stated that there was a deviation from the standard sale strategy. Does Mr. Long accept that?
David Cullinane (Waterford, Sinn Fein)
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Would that be unusual?
David Cullinane (Waterford, Sinn Fein)
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So that would be unusual.
David Cullinane (Waterford, Sinn Fein)
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There was no tender competition for Lazard's appointment.
David Cullinane (Waterford, Sinn Fein)
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Mr. Long stated that he had been involved in 50 loan sales. Would this have been unusual in those when dealing with a State body?
David Cullinane (Waterford, Sinn Fein)
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When dealing with a State body, would it be unusual not to have a tender process for appointment?
David Cullinane (Waterford, Sinn Fein)
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Lazard did not carry out valuations or was not asked to do so. Was that unusual, given the context of the work it was doing?
David Cullinane (Waterford, Sinn Fein)
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So that was not unusual. Was a single round of bidding unusual?
David Cullinane (Waterford, Sinn Fein)
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That there are two criminal investigations into a loan sale would be unusual as well.
David Cullinane (Waterford, Sinn Fein)
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Mr. Long referred to this process being a success, so I am not sure as to how he would characterise a failure. It does not read like a success.
David Cullinane (Waterford, Sinn Fein)
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I will address that in a minute.
David Cullinane (Waterford, Sinn Fein)
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That relates to the ends justifying the means but we will revert to that matter in a moment. Mr. Long stated several times that there was a level playing field for all bidders.
David Cullinane (Waterford, Sinn Fein)
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Mr. Long stated that there was a level playing field.
Mr. Patrick Long:
Yes. Deputy Connolly made that point. I was not aware while the sale process was under way of quite how much time PIMCO had already spent on the transaction in advance. I acknowledged that that probably conferred an advantage on PIMCO, but we were trying to maintain a level playing field-----
David Cullinane (Waterford, Sinn Fein)
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Mr. Long has acknowledged that. Does he accept that the field was not as level as he would have liked or he suggested?
David Cullinane (Waterford, Sinn Fein)
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Is Mr. Long aware of the PIMCO letter that was read into the committee's record two weeks ago by the Chairman and has he read it?
David Cullinane (Waterford, Sinn Fein)
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Was he surprised when he read that, as far back as April 2013, Mr. Tuvi Keinan, who worked for Brown Rudnick, Mr. Ian Coulter, who worked for Tughans, and Mr. Frank Cushnahan, who was a member of the NIAC, had approached PIMCO on the basis that they were aware of the potential of a portfolio that could be put together? They discussed the concerns of the Northern Ireland Government and so on, but they were the stakeholders who had approached PIMCO.
Was that news to Mr. Long?
David Cullinane (Waterford, Sinn Fein)
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When did Mr. Long become aware of that? We were not aware of it.
David Cullinane (Waterford, Sinn Fein)
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The first time we became aware of the April 2013 approach by the PIMCO individuals was when we received this letter. If Mr. Long is saying he was aware of it before he read this, will he indicate how be became aware of it?
Seán Fleming (Laois, Fianna Fail)
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Was April 2013 not mentioned in the NAMA minutes?
David Cullinane (Waterford, Sinn Fein)
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That is contested. That is NAMA-----
Seán Fleming (Laois, Fianna Fail)
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It was mentioned before.
David Cullinane (Waterford, Sinn Fein)
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That concerns NAMA but I am talking about Mr. Long saying he became aware of it before we knew. We had to tease out the April 2013 date in the minutes.
David Cullinane (Waterford, Sinn Fein)
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When did Mr. Long become aware that Mr. Tuvi Keinan and Ian Coulter, or basically Brown Rudnick, and Tughans and Mr. Cushnahan approached PIMCO in April 2013?
David Cullinane (Waterford, Sinn Fein)
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I am specifically asking about the April 2013 date because the actual issue of a loan sale portfolio was not considered by NAMA until much later.
David Cullinane (Waterford, Sinn Fein)
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He is now aware that these parties were working together to approach PIMCO. Did that cause Mr. Long any concern?
David Cullinane (Waterford, Sinn Fein)
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When Mr. Long found out. I am not talking about the retrospective position.
David Cullinane (Waterford, Sinn Fein)
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Surprised. Was Mr. Long concerned?
David Cullinane (Waterford, Sinn Fein)
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But Mr. Long was never made aware of this. I want to get back to this later.
David Cullinane (Waterford, Sinn Fein)
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We are concerned also. I will proceed in a moment to the conflicts of interest as to when Lazard was informed of this. If Mr. Long was concerned and surprised, he should note the information would have been valuable for Lazard to have at some point during the process. Does Mr. Long accept that?
David Cullinane (Waterford, Sinn Fein)
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Paragraph 4.17 of the Comptroller and Auditor General's report states, "Strict confidentiality was to be maintained and potential bidders were to be prohibited from contacting the debtors."
David Cullinane (Waterford, Sinn Fein)
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I would imagine that one of Mr. Long's concerns is that we now know from the Comptroller and Auditor General's report that Mr. Cushnahan actually had an association with 50% of the debtors of the portfolio. This was a point of which Mr. Long was not made aware. Was he made aware of it?
David Cullinane (Waterford, Sinn Fein)
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He was not aware of it and he is the loan sale adviser. Does that concern him?
David Cullinane (Waterford, Sinn Fein)
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He is aware of it now. Much of what he is saying mirrors what he said when he knew what was happening in real time. He is still sticking to the view that it was a competitive process with no difficulties. Let me refer him to page 82 of the Comptroller and Auditor General's report. Mr. Long is a professional. I have no doubt that he tried to do his job and that he did it to the highest standard. He can do his job based only on the information he is given.
David Cullinane (Waterford, Sinn Fein)
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He can provide evidence, papers or letters to NAMA based only on the information he has. Is that correct?
David Cullinane (Waterford, Sinn Fein)
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Page 82 states that Lazard, on 2 April, provided a letter to the board of NAMA: "In its professional advisory judgment, given NAMA's objectives, the process had been appropriate ..." The process had become compromised by virtue of Mr. Cushnahan's involvement with Brown Rudnick and Tughans and their transfer from PIMCO to Cerberus. Given that Lazard did not have that information, Mr. Long is basically confirming the process had been appropriate but he was acting blind. Would he accept that?
David Cullinane (Waterford, Sinn Fein)
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How would Mr. Long characterise it if he did not have the information and was hardly clear in his information.
David Cullinane (Waterford, Sinn Fein)
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It was incomplete. I am saying that Lazard had professional responsibility to ensure the integrity of the process and transparency. I refer to what I was saying about the terms of reference. Lazard had to ensure that the process was transparent. Very close to the end, on 2 April, it was signed off that the process had been appropriate. Would Mr. Long still hold that view given what he now knows about the conflicts of interest? Would he still say the process had been appropriate and had not become in any way compromised?
David Cullinane (Waterford, Sinn Fein)
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I am not asking about NAMA. I am asking Mr. Long.
Mr. Patrick Long:
Can I just reflect for a moment before answering that question? It is a very difficult question to answer. What I am concerned about in hindsight and where the process may have been appropriate are, I believe, where the Deputy is heading with his question. To the extent that Mr. Cushnahan had been involved with Tughans and Brown Rudnick, could he ever be totally separated fro them? Is that the Deputy's point?
David Cullinane (Waterford, Sinn Fein)
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That is one part of it but Mr. Long was involved in a number of exchanges with NAMA in respect of the letter of assurance sought from Cerberus. That was in connection with the organisation's association with Brown Rudnick and Tughans. At that point, was Mr. Long aware of the conflicts of interest with PIMCO. I refer to the fact that there had been a success fee with Brown Rudnick, Tughans and Frank Cushnahan. When Lazard was asked to give that advice-----
David Cullinane (Waterford, Sinn Fein)
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That is pretty valuable information not to have when Lazard was trying to advise them on their letter of assurance. Had Lazard been advised at that point that Brown Rudnick and Tughans were actually in a relationship with Frank Cushnahan, and that Frank Cushnahan had an association with debtors? NAMA knew this. Why did it not share that information with Lazard? I cannot ask Mr. Long to speak for NAMA but, in his view, the information is valuable information not to have been shared with him.
David Cullinane (Waterford, Sinn Fein)
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It is not just a matter of valuable information. Those concerned were essentially trying to retrofit the response from Cerberus. Mr. Long's communication was to try to line up the ducks and ensure that everything was satisfactory. They had the full information. Mr. Long did not, yet he was very handsomely paid to make sure this process was transparent. We are trying to get to the bottom of failures in the process. Is Mr. Long accepting there were failures in process?
David Cullinane (Waterford, Sinn Fein)
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I thank Mr. Long.
Josepha Madigan (Dublin Rathdown, Fine Gael)
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I thank Mr. Long for his forbearance thus far. I do not believe anybody has actually asked him whether he has had any dealings with Cerberus prior to acting in the Project Eagle sale..
Mr. Patrick Long:
Lazard, as an international firm of significant scale, has dealings with all the investors we were in contact with and some of the investors we did not admit to the process. Part of the reason NAMA hired us was because of our relationships with investment firms such as Cerberus and others.
Josepha Madigan (Dublin Rathdown, Fine Gael)
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So Lazard and Cerberus have worked together before.
Josepha Madigan (Dublin Rathdown, Fine Gael)
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So the answer is "Yes". Has Mr. Long had personal dealings with Mark Neporent?
Josepha Madigan (Dublin Rathdown, Fine Gael)
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On page 77 of the Comptroller and Auditor General's report, there is a very revealing paragraph on Lazard's position in these proceedings. Paragraph 4.44 states:
In response to a series of questions put to them by NAMA, Lazard stated to NAMA on 31 March 2016 that
- Apart from the nine global investors who participated in the process, there is no evidence that any other investor existed at the time [...] who was as credible and as well qualified such that it appeared that they were in a position to pay a higher prices to NAMA than that secured from Cerberus.
I have read the paragraph a few times as it is quite astonishing. Earlier Deputy Kelly said that the end justified the means but to me the end is inherent in the means. Mr. Long has equated here that "credible and qualified" with meaning the highest price. In a competitive bidding process it is irrelevant what other criteria a bidder had as long as he or she had the highest price.
I touched on self-interest earlier. It was my last question and I did not get to ask Mr. Long anything else. There is a self-interest from Lazard's perspective and I am not saying that it was necessarily Mr. Long's fault. Earlier he alluded to the fact that it is common practice to have success fees for these types of agencies.
Josepha Madigan (Dublin Rathdown, Fine Gael)
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It is difficult, as an average taxpayer, to understand how Lazard could remain impartial in those circumstances when the higher the price paid, the more money Lazard would get.
Josepha Madigan (Dublin Rathdown, Fine Gael)
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That is very concerning when we consider the process from the perspective of Cerberus and take account of the complaints made by other bidders. Does Mr. Long understand my point?
Josepha Madigan (Dublin Rathdown, Fine Gael)
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Yes.
Josepha Madigan (Dublin Rathdown, Fine Gael)
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That means what I have said is correct. Mr. Long spoke about managing bidders' expectations.
Josepha Madigan (Dublin Rathdown, Fine Gael)
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There was no point in them having expectations other than the amount they wanted to pay.
Mr. Patrick Long:
Except in so far as a bidder, an institution or an investor might set a high value on the portfolio but that is only available to the extent that they are capable of buying it. It is all very well for an investor to say that they would value the portfolio in excess of the price Cerberus paid. Unless they are actually capable of paying that price, then it does not get one anywhere.
Josepha Madigan (Dublin Rathdown, Fine Gael)
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A successful sale for NAMA is a successful sale for Lazard. That is how it works.
Josepha Madigan (Dublin Rathdown, Fine Gael)
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It is common practice. I disagree with it and believe there should be a set fee in these circumstances. The Chairman mentioned there is a case of no foal, no fee. I am a solicitor so I know how the system works.
Josepha Madigan (Dublin Rathdown, Fine Gael)
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I do not think it is a good idea. Did Lazard have a break-even fee? If Lazard did not secure a certain amount in the sale, surely with overheads and everything else, Lazard was in line to fall off a cliff and lose a significant amount of money and labour, albeit over a short period.
Josepha Madigan (Dublin Rathdown, Fine Gael)
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Therefore, Lazard was motivated to get the highest bidder possible. Did Mr. Long have a reserve break-even price?
Josepha Madigan (Dublin Rathdown, Fine Gael)
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Yes.
Mr. Patrick Long:
The first question that the Deputy asked just now is the one that I would prefer to address first which was Lazard's success fee meant we got paid more the higher the price we achieved for the sale. I would have thought that as an Irish taxpayer the Deputy would view that positively. If we sell a portfolio at a low price, we get a low fee. If we sell a portfolio at a high price, we get a higher fee.
Josepha Madigan (Dublin Rathdown, Fine Gael)
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I understand that perspective. Please forgive me if my question was unclear. I referred to the competitiveness of other bidders, how they were introduced and how they would remain a competitive bidder. I questioned how Lazard could remain impartial when it was obvious that Lazard would want the highest bidder. Does Mr. Long know what I am saying? Therefore, some bidders may have been closed off.
Josepha Madigan (Dublin Rathdown, Fine Gael)
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It is a farce for Mr. Long to say that other criteria other than the highest price would be of relevance.
Josepha Madigan (Dublin Rathdown, Fine Gael)
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Does Mr. Long believe that the Irish taxpayer got the best value for the sale?
Josepha Madigan (Dublin Rathdown, Fine Gael)
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What is Mr. Long's personal view of success fees in general?
Josepha Madigan (Dublin Rathdown, Fine Gael)
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Does Mr. Long think they are worthwhile?
Josepha Madigan (Dublin Rathdown, Fine Gael)
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Fine.
Seán Fleming (Laois, Fianna Fail)
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I thank Deputy Madigan. The next speaker is Deputy Murphy.
Catherine Murphy (Kildare North, Social Democrats)
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Lazard took a risk but there was a bigger reward in terms of the way the process was set up. Lazard knew when it took on the process that PIMCO had already been in the process and there was a bid on the table that NAMA did not want to lose. The approach adopted was so long as PIMCO stayed at the table, the risk was very limited.
What was the tone like when PIMCO withdrew? Did NAMA panic? Did Lazard have a discussion with NAMA? Lazard would have been left in much riskier territory and that must have had an impact.
Mr. Patrick Long:
I understand the questions. By the time that PIMCO withdrew, Cerberus and Fortress were exhibiting a very high degree of commitment to the transaction. At the time that PIMCO withdrew, we were still confident of being able to sell the portfolio, albeit to someone else. There was not panic.
Catherine Murphy (Kildare North, Social Democrats)
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What was the engagement with NAMA? Did Lazard discuss that matter with NAMA? Did Lazard ask the reason at that point? Was there a discussion?
Catherine Murphy (Kildare North, Social Democrats)
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Did Lazard try to talk PIMCO into remaining in the process? Did Lazard engage with it afterwards?
Catherine Murphy (Kildare North, Social Democrats)
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What was the nature of the conversation?
Catherine Murphy (Kildare North, Social Democrats)
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Mr. Long has mentioned that others were then excluded from the process and others were interested in part of the portfolio.
Catherine Murphy (Kildare North, Social Democrats)
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Did that lead Mr. Long to think there was a prospect of a greater outcome if Project Eagle was broken into two or more parts?
Catherine Murphy (Kildare North, Social Democrats)
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Cerberus attended here last week and this was a new market for the company in the North and South. It did not give the impression, even though it was raised, that the project was politically sensitive. Is Mr. Long surprised by that?
Catherine Murphy (Kildare North, Social Democrats)
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Cerberus told us that it wrote off a sizeable power value. As everyone will know, one never gets all the money back in a distressed situation. I shall return to this matter later. Did Lazard view the data room?
Catherine Murphy (Kildare North, Social Democrats)
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Did Mr. Long and his Lazard colleagues question whether NAMA had conducted its own valuations? Did they question how NAMA reached the reserve figure of €1.3 billion?
Did Mr. Long and his colleagues satisfy themselves that when they invited people to make a bid that the £1.3 billion was a good reserve price but that more could be achieved?
Mr. Patrick Long:
We did not interrogate NAMA as to how it had arrived at that reserve price but at the time the reserve price was communicated to us we were aware that PIMCO had already made an approach to NAMA at around that level. We already had the evidence that PIMCO was interested at that level. Its range was £1.1 billion to £1.3 billion and that gave us comfort that the price was capable of being achieved in the market.
Catherine Murphy (Kildare North, Social Democrats)
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If Lazard was advising NAMA or anyone else on a sales process would it advise them to value individually what it was going to sell?
Mr. Patrick Long:
Our presumption at the time, and this is what happened, was that NAMA had valued the portfolio.
Catherine Murphy (Kildare North, Social Democrats)
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Does it surprise Mr. Long that it had not?
Mr. Patrick Long:
I think it has and did, did it not? Is that not contained within the Comptroller and Auditor General’s report? A lot of the report is taken up with NAMA’s valuation of the loan portfolio.
Catherine Murphy (Kildare North, Social Democrats)
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In terms of the single process, obviously this is a big deal for anyone. A great deal of effort has to go in if someone is going to make a bid and people do not bid lightly. Does Mr. Long think the single sales process excluded people from the process who may well have been able to put together a bid, had there been a longer lead in and a dual process?
Mr. Patrick Long:
With a two-round process and a longer time frame more people might have participated in the first round but I am not sure that would have changed the outcome. There is a helpful table in the Comptroller and Auditor General’s report which compares the number of participants in Projects Tower, Arrow and Eagle and it shows that even though Projects Arrow and Tower started with a figure of £4.12 billion and a higher degree of participation they ended up with the same number of binding offers as Project Eagle and that is what matters. That illustrates the point I tried to make earlier, that having many participants in and of itself does not necessarily maximise competitive attention. What matters is where one ends up.
Catherine Murphy (Kildare North, Social Democrats)
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If people who potentially could bid are excluded one is not getting the maximum competitive attention.
Catherine Murphy (Kildare North, Social Democrats)
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There was a lot of local engagement available to Mr. Cushnahan. He had represented many of those involved in the process. Someone putting together a bid will include the costs, for example, if €15 million is paid for advice that will be included in the cost of the bid.
In its statement to us last week Cerberus said:
Ultimately, Cerberus agreed to the fee on the basis that the services offered were expected to be particularly useful in the circumstances and, when looked at as a percentage of the reserve price, it was approximately 1.1% which we viewed as within a customary advisory fee range. Brown Rudnick also told Cerberus that if Cerberus did not wish to enter into this arrangement, it would offer its services to another bidder.
Given that the real estate sector in Northern Ireland would be quite small and people would know each other, that is quite a threatening statement. Cerberus had no choice but to take on Brown Rudnick and Tughans, and Cushnahan went with that. Is that how Mr. Long would see it or would he accept that?
Catherine Murphy (Kildare North, Social Democrats)
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I am making that assumption. Am I wrong?
Seán Fleming (Laois, Fianna Fail)
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The Deputy is wrong. Cerberus confirmed that there is no payment that involved any current or former member of NAMA.
Catherine Murphy (Kildare North, Social Democrats)
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Excuse me.
Seán Fleming (Laois, Fianna Fail)
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There is concern but the evidence says the opposite.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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A sum of £7.5 million ended up in a bank account, let us put it that way.
Seán Fleming (Laois, Fianna Fail)
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The evidence to date does not confirm that.
Catherine Murphy (Kildare North, Social Democrats)
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I asked Cerberus last week to try to find out if there were other bidders in the process. I would have been very surprised if it had said anything. It would have been keen to find out what the competition was. The information available to Brown Rudnick by virtue of having been in the process before would on the face of it be quite valuable. Is that something that Mr. Long would see as inappropriate and would he regard it as a technical breach in terms of the non-disclosure agreement or as something more significant?
Mr. Patrick Long:
As I mentioned earlier, in response to Deputy Connolly, I am not a lawyer so I cannot really opine precisely on what constitutes an actual versus a technical breach if indeed there is such a distinction. The point I made earlier and which I happily restate now is that I would have vastly preferred Cerberus to have let us know of its intention to work with Brown Rudnick and Tughans at the time when it appointed them rather than NAMA finding out at the eleventh hour. That would have been preferable.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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The Lazard website refers to insight, judgment and performance as its calling cards. Is that correct?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Is Mr. Long angry that NAMA misled him and kept him in the dark?
Seán Fleming (Laois, Fianna Fail)
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That issue not clear, the Deputy should identify it.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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I am referring to PIMCO’s exit from the process.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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How does Lazard keep itself on the right side of the law? I am sure because it read the report that PIMCO approached NAMA with concerns about the law and compliance with the law here and in Britain. I have a sense that we are discussing the fees which Mr. Long says are standard and we are missing-----
Mary Lou McDonald (Dublin Central, Sinn Fein)
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I mean the success fees. We are missing the point that the concern that PIMCO had was not just that this was not appropriate but that it was potentially illegal. As the loan sales adviser, how did Mr. Long ensure that the law was not broken? I am very surprised that Mr. Long is so mild in his response to NAMA and the fact, as it seems to me, that he was deliberately kept in the dark.
It appears from the board minutes, which Mr. Long has also read, that they deliberately did not tell Lazard about something that was not just an inconvenient blip but rather something so serious that PIMCO's legal and compliance unit were in long conversations with the head of NAMA legal and compliance. What I want to know is how Lazard, as the loan sale adviser, ensured that the law was not broken.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Lazard is a large organisation and Mr. Long is an experienced and respected professional. How is it that Lazard entered into a transaction of this nature? Given the amount of money involved and the potentially large profit to be made, I would have thought Lazard would have sought watertight assurances that it was acting in an environment of compliance.
Mr. Patrick Long:
Indeed. On that note, we were aware and took comfort from the fact that, without knowing the precise circumstances of PIMCO's withdrawal and the involvement of Mr. Cushnahan, in so far as Cerberus was concerned, when we heard via NAMA of the arrangements that Cerberus had entered into or was proposing to enter into with Brown Rudnick and Tughans, that NAMA had sought and received undertakings from Cerberus confirming its compliance with FCPA and the bribery Act and that no fee was - I forget exactly what the formulation was - payable to anyone connected with NAMA. We were aware of those assurances.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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So Lazard was made aware of that information but it was not made aware of the fact that there had been potential breaches in the PIMCO arrangement.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Sorry, is Mr. Long confirming that that is how it happened?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Mr. Long harbours no professional angst at the fact that NAMA kept that information from him.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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In terms of "what ifs" if PIMCO had not approached NAMA and this had just sailed through Lazard would have been a party to something outside of the regulation and the law potentially.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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I am very concerned because much of the conversation around this report from the Comptroller and Auditor General, NAMA's response and all of the debate has been anchored in an idea of reputational damage.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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The concern is for any reputational damage to the Office of the Comptroller and Auditor General, which as Mr. Long is aware is a constitutional office. There is also a lot of angst in respect of reputational damage to NAMA. I put it to Mr. Long as the representative of Lazard that reputational damage accrues to himself also. With the greatest of respect to Mr. Long far from demonstrating insight and judgment, whatever we might think of performance because Lazard got the deal over the line, Lazard appears to have spectacularly lacked insight. It was kept in the dark and therefore its judgments were compromised. I think Mr. Long has as much as accepted that but astonishingly he sits at this Oireachtas committee, which is not a cosy chat in a coffee shop, and for whatever reason he is not placing on the record any concern with the behaviour of NAMA in this scenario. NAMA kept Lazard in the dark. I am not sure if Mr. Long has ever heard the word "eejit", which is an Irish term. NAMA made an eejit of Mr. Long. I am guessing that given his name Mr. Long has some Irish connections.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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I thought as much.
Mr. Patrick Long:
I do not think it is my place to be angry with NAMA or to second-guess the reasons it did not inform us of the precise circumstances-----
Mary Lou McDonald (Dublin Central, Sinn Fein)
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For the purposes of clarity for the general public, let us set out what happened. Lazard secured this gig with no tender, which was strange. Lazard received a verbal briefing from Ronnie Hanna in which it was told about political sensitivities and so on. It had no role in valuation. It did not control the data room: that fell to NAMA. The whole process then became very complicated and compromised to the extent that there was legal concerns around the key bidder, about which Lazard is not informed, and that bidder exits. I put it to Mr. Long that all of this represents a very bad day out for the reputation of Lazard. I think it was kept in the dark and that it was aware that it was kept in the dark yet that does not seem to be a matter of angst or concern to Mr. Long or maybe it is the case that he is not prepared to put anything critical on the record here, which I find astonishing.
Mr. Patrick Long:
I acknowledged earlier in response to a question from Deputy Kelly that had we been fully informed of the precise circumstances of PIMCO's withdrawal then it is likely that we would have taken that into account in the advice that we gave to NAMA.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Let me come at this in a different way. I ask Mr. Long to pull up paragraph 4.17 of the report on his screen. In regard to the arrangement between Lazard and NAMA and the confidentiality which Mr. Long has referenced several times, it states that potential bidders were to be prohibited from contacting the debtors. In other words, there was to be a Chinese wall in terms of debtor information. We now know, and Mr. Long knows, that that condition was breached and compromised and was untenable from the get-go because Frank Cushnahan had an advisory relationship with those debtors accounting for 50% of the portfolio and because Frank Cushnahan, Brown Rudnick and Tughans had, it seems, contrived this approach around debtors and had themselves made the approach to PIMCO. That debtor information that was put together - the witness from Cerberus was quite helpful in setting out that it was abstract in terms of each of the loans, business plans and so on - was in the form of a portfolio of information. When PIMCO exits Brown Rudnick then bequeaths that to Cerberus, which was the successful bidder. As the loan adviser and an organisation which we established earlier stakes its reputation on insight, judgment, transparency and other corporate virtues Lazard failed in that regard. If I were sitting in Mr. Long's seat I would not be quite as gentle as him in respect of NAMA but maybe that is just a temperamental difference. Whatever the misdemeanours of others Lazard failed in respect of those criterion.
Mr. Patrick Long:
We failed in respect of confidentiality because the transaction was leaked. In so far as contact with debtors is concerned - maybe this is only a subtle distinction - I am not aware that Cerberus actually had contact with debtors. If the Deputy's point in that regard was about PIMCO then its contact with debtors predated our involvement so I do not think we can be held liable for it.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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No, the parties concerned were still active and engaged and had been the architects of things. In regard to the term "prohibited from contacting the debtors" I take that kind of standard on its word.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Mr. Long appears to be suggesting that so long as the contact would be mediated through a third party or in some kind of-----
Mary Lou McDonald (Dublin Central, Sinn Fein)
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What is Mr. Long suggesting?
Mr. Patrick Long:
I do not know what services Cerberus thought they were getting or eventually got from Brown Rudnick or Tughans.
Let me help the witness. The Cerberus representative told us at committee last week and did not put a tooth in it. There are two things. The first is debtor information, and he was quite specific about that, and the second is access to what they called key stakeholders; movers and shakers, politicians North and South. They paid £15 million for that. One of them was debtor information.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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That would therefore render null and void any job or responsibility that Lazard, as an organisation, would have had in terms of that piece of confidentiality and creating the wall between the bidder and the debtors.
Mr. Patrick Long:
Not quite. The point I was trying to make was that the debtor contact in this case between the Brown Rudnick group and the debtors must have already taken place prior to NAMA appointing Lazard-----
Mary Lou McDonald (Dublin Central, Sinn Fein)
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How is that relevant, even if that were the case? Lazard was taken on in the circumstances I have described as the loan adviser. One of the key elements signed off with NAMA is the issue around contact with debtors. I have put it to the witness, Cerberus has confirmed it and we know through the goings on with PIMCO that this was absolutely breached. It was decimated. It did not stand up at all. I am putting it to Mr. Long that it was a failure on Lazard's part.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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For the purposes of reassuring me, please tell me it was not a case of Lazard seeing what it wished to see and looking the other way in the course of this transaction as things unfolded. Please assure me that did not happen.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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I am not convinced by the earlier testimony given by the witness. He stated that when PIMCO withdrew, he was not hugely concerned because other parties and potential bidders had shown an interest before going cold and pulling away.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Yes, I heard that.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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No. I have a note and when asked by another Deputy Mr. Long said it withdrew, right enough, but he was not hugely concerned because others had been involved and had withdrawn.
Mr. Patrick Long:
I remember the point now. What I meant was I did not view PIMCO's withdrawal as suspicious. Without knowing the precise circumstances of its withdrawal, I did not view its withdrawal as suspicious as other bidders, having started to look at the portfolio, had decided not to pursue it.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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I will go back to the verbal briefing. I assume when Mr. Ronnie Hanna initially gave Lazard a verbal briefing, PIMCO was part of that briefing.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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I put it to Mr. Long that I think he is being disingenuous, with all due respect. PIMCO withdrawing from this was a horse of a very different colour from others that may have shown an interest at some point. Lazard would have known that as it was briefed at the get-go by Mr. Ronnie Hanna that PIMCO had made this reverse inquiry, it was front and centre, it was the most active bidder and the only show in town at one stage. With respect, I do not accept what Mr. Long is saying in that Lazard just regarded it as not suspicious or very significant.
Mr. Patrick Long:
With the greatest of respect, when I was aware PIMCO made an approach to acquire this portfolio, I was not aware it had any information about the portfolio other than what NAMA had made available to them.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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I understand that but Lazard was aware of its significance and centrality in this process. Mr. Ronnie Hanna would have said it, would he not?
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Mr. Long has conceded, or put on the record, that PIMCO enjoyed an advantage over other bidders.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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He is accepting that it is the case. Of course, that advantage accrued to PIMCO because NAMA afforded it that advantage.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Hang on a minute, Mr. Long. Nobody else was selling this portfolio. The only people who could have conferred that advantage were in NAMA.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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As the witness knows, it was not just about access to the data room. PIMCO had access to debtor information and so on and so forth. I accept Lazard could not have known that at the time. That is not my point at all.
Mr. Long remains resolute in a position that there was competitive tension and this was a competitive process. That is entirely at variance with his acceptance that PIMCO enjoyed a competitive advantage. He cannot have it both ways. I do not understand how Mr. Long can at this time in this committee room remain so resolute in his position that the process was competitive while at the same time accepting that PIMCO enjoyed an advantage over other bidders. That is a contradiction.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Maybe we just have different views of what represents a competitive process? Perhaps I should have used the term "fair competition" or a "fair competitive process". One cannot claim fair competition if one party enjoys an advantage, which Mr. Long has conceded.
Mr. Patrick Long:
There is an important distinction, as the Deputy notes, between fairness and competition. It seems, in looking back, that PIMCO had an advantage over other bidders by virtue of the greater time it spent in the data room and access to debtors that it had before the process started. It seems as if PIMCO had that advantage. PIMCO withdrew from the process. Without at the time being aware of the services that Brown Rudnick and Tughans were offering to Cerberus, it seemed to me as if there was genuinely a level playing field between Fortress and Cerberus.
Mary Lou McDonald (Dublin Central, Sinn Fein)
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Does Lazard have a different definition of "open competition" than any legal definition of open competition? It is very firmly rooted in fairness, equality of access to information and processes and so on. I do not understand the basis for Mr. Long's claim any longer for-----
David Cullinane (Waterford, Sinn Fein)
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Could I seek clarity on one point, as it is very important?
Seán Fleming (Laois, Fianna Fail)
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Yes, on one point.
David Cullinane (Waterford, Sinn Fein)
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Nobody is asking Mr. Long to speak about issues that he was not aware of or which predated his involvement in the process. In terms of paragraph 4.17 of the Comptroller and Auditor General's report and the objective of prohibiting contact or association with debtors, the point is that NAMA became aware of an association with debtors and a success fee that involved Mr. Cushnahan. Given the information was not shared with Lazard, the guardian of those objectives, Mr. Long does not seem to be angered, put out or upset by that, which really puzzles me. NAMA was made aware of breaches but it was not conveyed to Lazard, the guardian of those objectives.
Mr. Patrick Long:
The reason I am not angry is two-fold. It is our clients' prerogative as to what they tell us or do not tell us. That is always the case. The Deputy may feel that NAMA should have told us this information.
I guess my response would be that it is up to NAMA. I have acknowledged that our advice would have been different had we been aware of those precise circumstances.
The second point I would make in response - the other reason I am not angry - is that we gave the best advice that we could in the knowledge that we had at the time. That has been our consistent approach throughout the process.
Seán Fleming (Laois, Fianna Fail)
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I have one or two final questions. I thank Mr. Long for his time; we are almost finished. Issues arose during the process. Did the letter Lazard gave to NAMA at the end of the day deal with the two competitive bids that were on the table and on which Lazard was adjudicating or did it refer to the whole process that had potentially nine bidders because Lazard only received two? In Mr. Long's letter to NAMA, when he talked about competitive tension, was he talking about the end of the process, in terms of NAMA having to make a decision and bearing in mind there were seven other potential bidders, including PIMCO which did not make a final bid? Had Mr. Long's letter to do with the process covering all nine or had it to do with the final bids that were received?
Seán Fleming (Laois, Fianna Fail)
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Throughout the process.
Seán Fleming (Laois, Fianna Fail)
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Then tell me briefly, at the very end did Cerberus and Fortress know that there were only the two of them in the race?
Seán Fleming (Laois, Fianna Fail)
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They would have known that at that stage.
Seán Fleming (Laois, Fianna Fail)
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That is important. Why did Lazard never invite Fortress into the process? Fortress had to force its way in, through the Taoiseach's office and through NAMA head office. How did Lazard discount it, given that it was there at the very last minute? I would have said, in terms of asking Lazard a question, there are lots of issues but there was a real bidder out there which had to force its way in at the last minute only because of a breach of media leak. From what we have seen today, Lazard would not have brought it to the table had Lazard been left to its own devices. Why did Lazard exclude Fortress?
Mr. Patrick Long:
We produced a long list of bidders which was contained in our presentation dated 22 January 2014 and Fortress was on that list. We then selected seven bidders and put them into tier one and tier two, and we identified those bidders based on NAMA's criteria in terms of appetite, expertise, resources and so on. When Fortress eventually made an approach, we admitted it to the process.
Seán Fleming (Laois, Fianna Fail)
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Okay, fine. We get the point.
I have two brief questions in relation to the bidders. Reference has been made to non-disclosure agreements but in the conditions of participating in the process, were the bidders obliged to notify Lazard who their advisers were or were they obliged to notify NAMA? They were obliged to notify somebody.
Seán Fleming (Laois, Fianna Fail)
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For the purposes of confirmation, did they notify Lazard before they submitted their bid that they had engaged Brown Rudnick and Tughans?
Seán Fleming (Laois, Fianna Fail)
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Mr. Long believes they should have. He said so already.
Seán Fleming (Laois, Fianna Fail)
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Mr. Long heard the gentleman from Cerberus here last week state there was a technical breach. This past week everybody has been concerned here about information that Brown Rudnick and Tughans could have possibly brought to Cerberus, that they might have breached some previous confidentiality agreement or information they gathered. They said they had no contractual difficulties in providing the information to Cerberus and Cerberus was happy to deal with them on that basis. However, the breach appears from Cerberus's side, that the other advisers that it had who had signed disclosure agreements with Cerberus shared information with Tughans and Brown Rudnick, both of which were not listed as advisers to Lazard and should not have received confidential information.
Seán Fleming (Laois, Fianna Fail)
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Mr. Long heard Mr. Neporent mention that here last week. There was a technical breach.
Seán Fleming (Laois, Fianna Fail)
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Okay. Would Mr. Long tell me what he thought Mr. Neporent had in mind?
Seán Fleming (Laois, Fianna Fail)
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It was about the bid.
Seán Fleming (Laois, Fianna Fail)
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Okay. We will check that. I am merely saying, given Mr. Long was here to give comfort to NAMA, we now know that there was an actual breach admitted by the successful bidder.
Seán Fleming (Laois, Fianna Fail)
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There were two breaches. First, he did not notify NAMA or Lazard that he taken on these people. The second potential breach was - Mr. Neporent stated it was a breach - that they shared the information that Cerberus had with these people who were not a party to the non-disclosure agreement signed by Cerberus. Does that concern Mr. Long?
Mr. Patrick Long:
Yes, it does. That does not mean that NAMA was wrong to sell the portfolio to Cerberus for the price that Cerberus paid.
Seán Fleming (Laois, Fianna Fail)
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Was Mr. Long surprised that Mr. Neporent made that comment here last week because that had not been in the public arena previously.
Seán Fleming (Laois, Fianna Fail)
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Okay. We will leave it at that.
Mr. Long will be relieved. The questioning was a bit robust. Sometimes I will say to a witness before he or she leaves whether we on the parliamentary side found his or her evidence credible or disingenuous. I ask Mr. Long neither to take offence, nor to take the view that the committee has formed an opinion in relation to his evidence. We are merely testing Mr. Long to the limit-----
Seán Fleming (Laois, Fianna Fail)
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-----and we will test other witnesses to the limit. Then we will come to a conclusion at the end of the process, not here today. I want to put that on record in case Mr. Long thinks in some way we were not accepting his evidence.
On behalf of the Committee of Public Accounts, I sincerely thank Mr. Long for travelling to Dublin to meet us today. I thank the Comptroller and Auditor General and Mr. John Riordan for their attendance here today.
The next meeting will be at 9 a.m. on Thursday, when we will meet the chairman and CEO of NAMA.