“money was used to part finance the purchase of shares in Anglo Irish Bank..”

There’s a detailed iol report, and a BBC report, on the record fines [€3.25million] imposed by the Republic of Ireland’s Financial Regulator on Quinn Insurance Ltd, and on Sean Quinn personally [€200,000]. Sean Quinn has resigned as chairman and as a director of that company, but not from the Quinn Group, following a lengthy investigation by the Financial Regulator which found reasonable cause to suspect “contraventions by QIL of obligations under the Insurance Acts and Regulations, including failure to notify the Financial Regulator prior to providing loans to related companies” – official statement [pdf file]. But RTÉ has the telling detail. Adds Irish Examiner report.From the RTÉ report

RTÉ News understands the key issue is a loan of €288m, which was extended from the insurance company to another related company.

This money was used to part finance the purchase of shares in Anglo Irish Bank. Mr Quinn and his family purchased 15% of Anglo Irish Bank in August.

That stake was worth €715m at the time based on Anglo’s share price of €6.28. The shares were trading at €1.63 today.

In a statement issued in tandem with its results, Quinn Insurance said it advanced funds that supported investments made outside the group during 2008 and at May this year the loans amounted to €288m.

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  • Glencoppagagh

    Creating Quinn Insurance has been his greatest achievement. It will be a great pity if he has to sell it eventually because of misjudgements in other parts of his group.
    Why he wanted to get involved with Anglo Irish is mystifying. He must have known about its huge exposure to property.
    By the way, it says a lot about the sort of people who frequent Slugger when so many of your interesting and original threads like this one are ignored.

  • Dave

    Well done to the State. Regulate the number of paperclips that a company must attach to its own money and then launch an investigation (being sure to announce to the media that “Quinn Insurance is under investigation from the Financial Regulator for alleges breaches of regulations”) to ensure compliance and to ensure that you – the dashing Regulator – are seen on the front line, defending the public those who created thousands of jobs for Irish people and pay hundreds of millions in taxation for the benefit of Irish people via their entrepreneurial flair. If ‘regulation’ breached, impose massive fine and make a big song and dance about how stern you were for imposing fine, thereby branding the company as a rogue operator, undermining the confidence of the public in the business, forcing its brilliant chairman to resign, and generally create the impression that Irish companies are dodgy and run by crooks. Just don’t mention that breach involved trivial procedural matters and presented no financial risk to third parties, lest you look like neurotic regulator imposing unnecessary time and cost burdens on businesses in an increasingly difficult trading environment.

  • Pete Baker

    Dave

    When someone opens up a company to funding through publicly owned shares then that is accompanied by an obligation to transparency about what you’re doing with that company’s finances – it’s not as if Sean Quinn didn’t know that.

    Particularly when, according to the Irish Examiner report, “outstanding exposure to such investments will result in total exceptional losses of close to €970m.”

    And that’s before factoring in the use of those finances to privately purchase shares in Anglo Irish Bank.

  • Dave

    I’m not sure what you mean by opening up “a company to funding through publicly owned shares.” The Sean Quinn Group is wholly privately owned, so no one has invested in that company other than Sean Quinn. If you are referring to Anglo Irish Bank joining the Credit Institutions Scheme (state guarantee), then Sean Quinn’s investment in that bank predates its joining the scheme and, ergo, was not subject to additional regulatory requirement that may now be applicable.

    AS Mr Quinn stated: “Quinn Insurance made loans to a related company which amounted to €288m in May 2008 when the accounts were finalised. These loans breached insurance regulations and as a result of this the Financial Regulator has sanctioned Quinn Insurance and myself. I accept complete responsibility for this breach of regulation. While I accept that I made mistakes, I feel that the levels of fines (€3.25m for the company and €0.2m for myself) do not reflect the fact that there was no risk to policyholders or the taxpayer but are a result of the pressures existing in the current environment. However we will pay the fines and move on.”

    The figure of €970m refers to losses incurred by the Sean Quinn Group on his private investments and not to any other party. With a worth of €3.8bn net of debt, he can well afford to lose a billon (or three).

    The actual transgression (which the Regulator admits wasn’t established by him but admitted to it by QIL) relates to a regulatory procedure which requires that a company should inform the Financial Regulator before providing loans to related companies – and wouldn’t you know that it is an Irish statute that is devised to implement an EU Directive? The transgression is not that any of these loans were improper or exposed any third parties to loss (the Financial Regulator never claimed this or even implied it, contrary to speculation by others); it was solely that a procedural requirement was not followed.

  • Dave

    By the way, this is the type of hysterical squealing aimed at a particular social constituency that responsible politicians would not engage in. There is an assumption is this that all regulation is good. Since all of it is good, we must then have more of it – the more the merrier. This is a good agenda to proffer if you are in the regulation business, particularly if you are a bureaucratic organisation with 170,000 little bureaucratic mouths to feed such as the EU (the originator of the relevant regulation). There is too much government, and it is too expensive and it is too prescriptive. So you can have a socialist hack like Joan Burton proffering the view that only bureaucracy can save us all from the evil of free enterprise, as if it was obvious that business is evil or that regulation can save us from evil. We have mountains of regulation imposing a cost burden of billions on businesses. Why does Ms Burton believe that EU regulations prevent ‘evil’ in the financial system when the Basel global framework and the EU regional framework of regulation did not prevent it? We need more of what doesn’t work? No, we need less and better, not more. She should also keep in mind that government produces nothing at all. It generates not a single penny in wealth, and it cannot give a single penny to a man who hasn’t earned it without taking it from a man who has earned it. Government is a parasite on the people. It is the men like Sean Quinn who create the wealth that her dismal ilk only knows how to distribute but not how to create. In hating such entrepreneurs as she and her comrades in the Irish Labour Party transparently do, they are undermining the very people they will need to create the wealth that they wish to distribute.

  • Dave

    Err, I don’t know what happened to the format of that post above. I’ll try again:

    By the way, this is the type of hysterical squealing aimed at a particular social constituency that responsible politicians would not engage in. There is an assumption is this that all regulation is good. Since all of it is good, we must then have more of it – the more the merrier. This is a good agenda to proffer if you are in the regulation business, particularly if you are a bureaucratic organisation with 170,000 little bureaucratic mouths to feed such as the EU (the originator of the relevant regulation). There is too much government, and it is too expensive and it is too prescriptive. So you can have a socialist hack like Joan Burton proffering the view that only bureaucracy can save us all from the evil of free enterprise, as if it was obvious that business is evil or that regulation can save us from evil. We have mountains of regulation imposing a cost burden of billions on businesses. Why does Ms Burton believe that EU regulations prevent ‘evil’ in the financial system when the Basel global framework and the EU regional framework of regulation did not prevent it? We need more of what doesn’t work? No, we need less and better, not more. She should also keep in mind that government produces nothing at all. It generates not a single penny in wealth, and it cannot give a single penny to a man who hasn’t earned it without taking it from a man who has earned it. It is the men like Sean Quinn who create the wealth that her dismal ilk only knows how to distribute but not how to create. In hating such entrepreneurs as she and her comrades in the Irish Labour Party transparently do, they are undermining the very people they will need to create the wealth that they wish to distribute.

  • Glencoppagagh

    Dave
    While we’re certainly of like mind on these matters, I think you’ve gone over the top a bit.
    “The transgression is not that any of these loans were improper or exposed any third parties to loss”
    The regulator has a resonsibility to ensure the solvency of insurers. The loan was not improper but since it was apparently used to purchase Anglo Irish shares, Quinn Insurance was certainly exposed to loss.
    You can argue that even if this loan had to be written off, Quinn Insurance would still be solvent but that’s not the point. There have to be limits on the extent to which the owners of an insurer can use it’s assets for their own benefit because of the risk to policyholders (third parties). So it’s only right that such loans should be subject to regulatory approval.

  • Comrade Stalin

    Dave,

    I have to admit that I find your narrative inconsistent. When it comes to UK finances, you believe that the failure of the UK government to intervene in monetary policy in order to curb lending was the problem – ie, you believe that greater intervention by the state is required.

    On this matter, when it comes to regulations governing the transparency of activities within financial services companies, you believe the state should have no business creating rules at enforcing that transparency.

    What is it to be ? Less intervention or more ?

  • Pete Baker

    Dave

    It looks like I mis-understood “limited by shares” to mean publicly traded shares.

    Mea culpa.

    But, whilst I do understand your railing against regulation, that regulation exists for good reason – as Glencoppagagh points out.

    And, again as I understand it, the losses in this case came close to breaching the company’s actual solvency limit.

  • That is the question

    more or Less intervention?