What exactly is going on with this ‘draft’ letter to Tughans?

In Dublin Frank Daly of Nama told his critics to put up or shut up after the PAC in Dublin failed to land a single blow on him over Project Eagle. Meanwhile away from the northern antics of the Finance and Personnel Committee, Julian O’Neill unearths something very odd

The sale of the Northern Ireland Nama loan book was claimed to be the idea of a Belfast accountant who has said he was due the £7.5m success fee.

The BBC has obtained a draft letter, on the headed notepaper of David Watters, which contains the claim.

It was addressed to the Belfast law firm Tughans, but never sent.

Interesting. A draft copy of a letter (apparently unsigned) which was never sent? Like so much of this story the letter’s precise provenance is both odd and vague.

It could repay the NCA to look for an electronic copy of said letter to get a precise fix on exactly when it was written. But since it wasn’t actually sent, what exactly are we being invited to draw from it by whomever it was that released to the BBC?

Update (via Pete): It’s worth carrying Daly’s statement at some length…

We have explained that we ran a robust, competitive sales process that delivered £1.3 billion for the Irish taxpayer, the amount of the highest bid submitted from the nine global investment groups who entered the bid process.

The sale was conducted in line with international best practice, independently overseen by Lazard, a major international investment bank. The integrity of the sales process was fully protected.

No external members of the Northern Ireland Advisory Committee had access to confidential information on the sale.

No third parties, political or otherwise, had influence over the Nama board’s decision to sell the portfolio. None were in a position to confer an unfair competitive advantage on any bidder.

The UK National Crime Agency has made it clear to us that it is in no way concerned about Nama’s role in the sale.

Yet, in some quarters, the response to Nama demonstrating that it has nothing to hide reflects poorly on people who should know better. We have seen people clutching at every conceivable straw to allege malfeasance by Nama.

Some claim we should have got a better price, but they know there was no bidder willing to pay more.

Some claim we should have abandoned the sale process, but they know this would have made it much harder to get a return from this portfolio and that it would have threatened the sale of every other portfolio Nama has successfully brought to market since.

Some claim we should have retained the portfolio and worked it out over a period of many years, but knowing what we know about this portfolio, this would have been a costly mistake.

Some claim we should have raised red flags about the role of advisers to Pimco (the bidder we excluded from consideration) who went on to advise the successful bidder. The logic of this is that we should have accepted £1.1 billion from the runner-up bidder instead of the £1.3 billion that we achieved for the taxpayer.

Amid all the noise that has been generated on this transaction, no one has produced a bidder who would have paid more for Project Eagle.

No one has shown how Nama could have got more from retaining and working out a heavily distressed portfolio in a peripheral market with limited growth potential, which six of the world’s biggest investment groups did not want to bid for.

And, tellingly, no one who has made allegations about Nama’s conduct has revealed anything resembling evidence to back up their claims.

By contrast, Nama can stand over the actions it has taken; Nama can back up all it has said with concrete proof.

Politicians, media and individuals are free not to take us at our word. That is their right.

But ignoring the evidence serves no one. Falling for unsubstantiated, false claims is a very poor substitute for demanding proof.

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  • anon

    They won’t have to look too far for an electronic copy – a quick search for Julian O’Neill’s twitter account will do the trick.

  • Mick

    “Like so much of this story the letter’s precise provenance is both odd and vague.”

    And has no apparent direct connection to Nama’s actual sale of the Northern loans.

    It’s probably worth quoting Frank Daly at length at this point

    We have explained that we ran a robust, competitive sales process that delivered £1.3 billion for the Irish taxpayer, the amount of the highest bid submitted from the nine global investment groups who entered the bid process.

    The sale was conducted in line with international best practice, independently overseen by Lazard, a major international investment bank. The integrity of the sales process was fully protected.

    No external members of the Northern Ireland Advisory Committee had access to confidential information on the sale.

    No third parties, political or otherwise, had influence over the Nama board’s decision to sell the portfolio. None were in a position to confer an unfair competitive advantage on any bidder.

    The UK National Crime Agency has made it clear to us that it is in no way concerned about Nama’s role in the sale.

    Yet, in some quarters, the response to Nama demonstrating that it has nothing to hide reflects poorly on people who should know better. We have seen people clutching at every conceivable straw to allege malfeasance by Nama.

    Some claim we should have got a better price, but they know there was no bidder willing to pay more.

    Some claim we should have abandoned the sale process, but they know this would have made it much harder to get a return from this portfolio and that it would have threatened the sale of every other portfolio Nama has successfully brought to market since.

    Some claim we should have retained the portfolio and worked it out over a period of many years, but knowing what we know about this portfolio, this would have been a costly mistake.

    Some claim we should have raised red flags about the role of advisers to Pimco (the bidder we excluded from consideration) who went on to advise the successful bidder. The logic of this is that we should have accepted £1.1 billion from the runner-up bidder instead of the £1.3 billion that we achieved for the taxpayer.

    Amid all the noise that has been generated on this transaction, no one has produced a bidder who would have paid more for Project Eagle.

    No one has shown how Nama could have got more from retaining and working out a heavily distressed portfolio in a peripheral market with limited growth potential, which six of the world’s biggest investment groups did not want to bid for.

    And, tellingly, no one who has made allegations about Nama’s conduct has revealed anything resembling evidence to back up their claims.

    By contrast, Nama can stand over the actions it has taken; Nama can back up all it has said with concrete proof.

    Politicians, media and individuals are free not to take us at our word. That is their right.

    But ignoring the evidence serves no one. Falling for unsubstantiated, false claims is a very poor substitute for demanding proof.

  • mickfealty

    Not if, as it looks, it’s a photocopy. But if there’s a Word file associated with the draft then it should be possible to figure from the background data just when it was written and on which computer. https://goo.gl/yAexE0

  • Nevin

    Have you checked the figures, Pete?

    In January 2014, the Board approved the sale of the portfolio by reference to a minimum sale price of £1.3 billion. This reflected our valuation of the underlying assets. For a range of reasons which I will outline later, the Board’s view was that NAMA could struggle to achieve this amount if we were to manage the loans out over a seven-year horizon to 2020, bearing in mind the size of the NI economy. The minimum sale price was adjusted to £1.24 billion by early April 2014 to reflect asset disposals which had taken place in the intervening period – the associated cash proceeds from these sales had been received by NAMA during the period. .. Brendan McDonagh [pdf file]

    This £1.24 billion reduced reserve is somewhat adjacent to the £1.241 billion reportedly paid by Cereberus.

  • mickfealty

    And?

  • New Yorker

    Was the option of spitting the portfolio into parcels and selling to different bidders considered? Sometimes the parts are worth more than the whole. Also, it seems like a very small number of bidders for this relatively small amount in the world of international real estate. They contacted nine potential buyers. It is hard to believe that in the world of international real estate there are only nine companies or individuals who would be interested.

  • mickfealty

    I don’t know NY. There was pressure from early on from Sammy Wilson (in the public domain) to treat the NI portfolio strategically. That’s why the advisory panel was appointed in the first place.

    But Eagle appears to be part of a wider strategy adopted by Nama in bundling lots of smaller packets into one large one to expedite sales (and, presumably, to mediate costs to the Irish taxpayers).

  • Gopher

    An unsigned printed letter on headed note paper and which seems undated, at least the Ems Dispatch had some provenance. Not only that but the Law Society turn the letter up (no conflict of interest here). So to paraphrase “We’re in the middle of a massive sensitive fraud of whoever, I’ll put a few facts down on paper and we can meet for “private” discussion but its about 7.5 million not that I want to embelish that private discussion”

    Has any other notes from the law society investigation come into the public domain or would that upset their golf partner?

  • Pigeon Toes

    Maybe he wrote to a “chum” asking for some help with the drafting of the letter, and that was how it was then allegedly turned up by the Law Society? Otherwise, I can see no reason how this almost miraculously appeared.

  • Gingray

    Mick
    My understanding is that all the relevant information has been handed over to the NCA, including computers and hard copies of letters that did issue.

    I am still curious as to why you are so aggressively trying to dismiss this as a story?

    There is some recent history in Ireland, North and South, of money, property and politicos all going hand in hand. This is something they are very very good at.

    I wouldn’t be surprised if, similar to the Mairia Cahill case, this collapsed, but that does not mean there is nothing behind it all.

  • Bert and Ernier

    Perhaps this letter was circulating in draft form, as draft correspondence is not subject to FOI requests and as such this may have provided some sort of hidden written deal memo with built in plausible deniability?

  • chrisjones2

    “No external members of the Northern Ireland Advisory Committee had access to confidential information on the sale. etc etc”

    What a statement so carefully delineated to protect what NAMA didn’t do but swerving around some gaps eg ‘no external members’

    And incidentally I say that as someone who thinks NAMA didn’t do anything wrong ….the wrong (if any) happened further along the chain

  • Pigeon Toes

    Actually, even if this was turned up during the Law Society Investigations, there is still no reason for it to have appeared, as their investigation has not concluded. This document looks like it was deliberately leaked … The question is by whom, and for what purpose?

  • Nevin

    Perhaps this curious document/scan just happened to fall into the laps of both the Law Society and the BBC – as well as some other media outlets. Was the intent to cause damage, to limit damage or to divert attention?

  • Pigeon Toes

    Don’t know Nevin, but as Mick has quite correctly asked “what exactly are we being invited to draw from it by whomever it was that released to the BBC?”
    The Irish News copy appears to have more detail, including a date and addressee…. (unlike the image lower down this page 🙂

    http://www.irishnews.com/news/2015/10/05/news/letter-shows-accountant-demanded-7-5m-nama-payment-282837

  • Nevin

    PT, if you click on that O’Neill image you’ll see the date and most of the addressee detail.

  • Pigeon Toes

    “The letter is addressed to Patrick Brown, the managing partner of Tughans, although it was actually sent to businessman Frank Cushnahan, another key figure in the Nama sale process.

    Marked ‘draft’ and written on headed notepaper from Mr Watters’ home address in Belfast, it is not known if it was ever received byTughans.
    “http://www.irishnews.com/news/2015/10/05/news/letter-shows-accountant-demanded-7-5m-nama-payment-282837/

    So how the hell did that letter end up where it did?

  • mickfealty

    Gingray,

    “I am still curious as to why you are so aggressively trying to dismiss this as a story?”

    I’m seriously not. I’m very distrustful of some of the lines that have been pushed here, but this it seems to me is much much closer to the business end of the story, in more than one sense of that word.

  • Gingray

    Mick
    Maybe so – just that this was the largest property deal in the history of Northern Ireland, possibly the biggest financial deal that has ever taken place here, and it feels you have been trying to downplay the backhanders that appear to have taken place.

    For example, this blog headlines about a letter that implies a local accountant thought he was inline for a discreet fee, but actually leads with NAMA claiming they did nothing wrong, and providing more detail around this.

    Perhaps its just the people I know and work with, but very few seem to care if NAMA sold the portfolio on the cheap, more they are interested to see if a fixers fee was paid, and if so, who was it paid to.

    We had at least two firms interested in the NAMA portfolio for Northern Ireland. One, Pimco, claims it withdrew due to third parties seeking payment. Nama on the other hand claim it asked Pimco to withdraw after discovering a proposed fee between Tughans and Frank Cushnahan.

    Frank Cushanan, formerly of Red Sky, had been appointed to the NAMA board at the behest of Sammy Wilson of the DUP, and worked out of the same office as Tughans. We then have our First Minister and Finance Minister holding secret meetings with a former vice president of the USA representing Cerberus.

    When Cerberus successfully bought the portfolio, some £7.5m was moved by Ian Coulter, the former managing partner of Tughans, to an IoM bank account. We now have David Watters, an accountant, drafting a letter than claims he was due a fee that would be paid discretely.

    This stinks – NAMA have already implicated the DUP appointee Cushnahan as seeking a fee for Pimco, and for some reason Cerberus paid £7.5m to Tughans in fees.

    I have no idea if what happened is illegal or not, but if people intended to line their pockets from the sale of the NAMA portfolio, then thanks to Mick Wallace, this is now out in the open and if anything illegal did happen hopefully it will be uncovered.

  • Daragh

    Mick,
    I think even the most casual readers of the site would know that you have been ‘aggressively trying to dismiss this as a story’. For instance, you have had several blogs about what Martin McGuinness knew about it and his attendance at one of these meetings. I am sure there were several meeting over this transaction and only some may have included chat about a ‘finders fee’. So to start talking about people not subject to any allegations come across as the same tree pointing and obfuscation that the DUP have indulged in.
    The central plank to this, and only thing that people are really interested in, is whether any politicians have misused their position of power to influence a transaction that they stood to privately profited from, as this is a abuse of their power.
    All of the sources around this story seem to point that a particular person within a certain party was to benefit so when you appear to distract people from that ‘ball’ people will naturally begin to question the motivation to do so.

  • mickfealty

    No. In fact I disagree completely. ‘Seems to point’ is what we can say we we don’t quite know wtf is going on. There is and always has been a story here. My first view was that the weak governance around public appointments is the issue here (if you look back in the archives you’ll see what I mean).

    As for McGuinness, what exactly did I get wrong there? We have given the guy a veto on anything and everything the FM does. And yet we have a clear cut case of political cowardice or a posteriori cold feet, or an attempt to mislead the committee and you don’t think that’s worth reporting on?

    I was sceptical about those reportedly ‘secret meetings’ when they were first reported. Why? Because I don’t trust anyone inside in OFMdFM to give me a full picture of what’s going on in there. A briefing from one side without paper evidence of an attempt to blindside is never sufficient in my book.

    Now I can see why some people might think that reporting on McG’s instructions to his spad not to tell him about things he should not be associated with is a tad inconvenient. But I take the view that it is news and therefore worth reporting.

  • Catcher in the Rye

    I am still curious as to why you are so aggressively trying to dismiss this as a story?

    Because it is, in fact, probably not a story. Bear in mind, as the letter above points out, there isn’t a shred of evidence for any of the accusations being made.

    I wouldn’t be surprised if, similar to the Mairia Cahill case, this collapsed, but that does not mean there is nothing behind it all.

    The Mairia Cahill case collapsed when she withdrew her evidence due to the incompetence of the Public Prosecution Service. There was case, which ceased to be a case when she as the primary witness withdrew.

    The NAMA case is not likely to be the same. I’d bet money that, like you said, it will collapse with no case to answer. The single biggest factor to me is the point made by the author of the above letter – that so far, no alternative bidder has come forward to say they bid a higher price than Cerberus did.

  • Catcher in the Rye

    Maybe so – just that this was the largest property deal in the history of Northern Ireland, possibly the biggest financial deal that has ever taken place here, and it feels you have been trying to downplay the backhanders that appear to have taken place.

    A lot of this is hyperbole (” biggest financial deal” etc) and inaccurate. Backhanders do not “appear” to have taken place. We know what happened to the money – Tughan’s have it, and they say it is theirs. It self-evidently does not belong to Ian Coulter.

    For example, this blog headlines about a letter that implies a local accountant thought he was inline for a discreet fee, but actually leads with NAMA claiming they did nothing wrong, and providing more detail around this.

    Why would someone in line for a £7.5m payoff sit there and say nothing while a law firm pocketed all the cash ? Isn’t this a bit less likely than the obvious alternative possibility, namely that the draft letter uncovered by the BBC is a fabrication ?

    Isn’t there an obvious inconsistency in how the claimed draft letter says the accountant was due the entirely of the £7.5m which would have left no money for Tughans, Cushnahan, or the politician alleged to have been involved ?

    We then have our First Minister and Finance Minister holding secret meetings with a former vice president of the USA representing Cerberus.

    This is more hyperbole. “secret meetings” are held on a regular basis. Furthermore, the “First Minister” cannot attend meetings of any kind by himself (more inaccuracy).

    When Cerberus successfully bought the portfolio, some £7.5m was moved by Ian Coulter, the former managing partner of Tughans, to an IoM bank account.

    This stinks – NAMA have already implicated the DUP appointee

    More innuendo. Frank Cushnahan was the appointee of the Northern Ireland Executive, via the Finance Minister – not the DUP.

    Cushnahan as seeking a fee for Pimco, and for some reason Cerberus paid £7.5m to Tughans in fees.

    If Cushnahan was seeking a fee, why did Watters think the money was his ?

    As I said above, for me the key to this is NAMA publishing a statement saying that nobody has come forward to say they were prepared to pay a higher price than the £1.3bn offered by Cerberus. Given this factual assertion by NAMA – which could be gainsayed instantaneously by the alternative bidder coming forward in public (or launching a court case) any “fixer fees” paid by Cerberus to anyone for any reason will have been unrelated to any attempt to shortchange the Irish exchequer.

    I suspect the NCA investigation will uncover nothing beyond technical breaches of the law by solicitors and/or accountants under money laundering regulations.