Ireland’s so-called “bad bank” Nama feared that sacking one of its Northern Ireland advisers would have sparked a backlash from Stormont, a hearing in Dublin has been told.
Frank Daly, chairman of the state agency which was set up in the wake of the financial crash to handle toxic property debts, said that removing prominent Belfast businessman Frank Cushnahan from his role would have provoked cross-border tensions.
It could have been perceived as a slight, he added.
Mr Cushnahan is a key figure in the controversy over Nama’s £1.2 billion sale of Nama’s massive Northern Irish loan book to US investment fund Cerberus in 2014.
Between 2010 and 2013, he served on a Nama committee set up to advise on Northern Ireland issues after being appointed on the recommendation of the DUP.
A probe into the so-called Project Eagle sale by the Republic’s Comptroller and Auditor General found that Nama undervalued loans associated with the 800 properties.
It said that US investment fund Pimco, which pulled out of an earlier bid, alerted Nama to a “success fee” or fixer payment of £15m to £16m for three parties behind the scenes.
Pimco said the money was to be shared equally by Mr Cushnahan, US law firm Brown Rudnick, and a managing partner of Belfast law firm Tughans which was subcontracted to assist in the deal, the report found.
Mr Cushnahan has denied any wrongdoing.
Before a parliamentary committee hearing in Dublin, Mr Daly said it “wasn’t a straightforward or easy decision” to press ahead with the sale after learning about the alleged fixer fees in March 2014.
Nama had to “weigh” the serious costs to itself, state-owned banks in the Republic, and the country’s reputation among international investors if it pulled the deal, he said.
“Key for us was whether we would allow Mr Cushnahan’s alleged manoeuvrings in Belfast to seriously damage the interests of Irish taxpayers,” he told Dublin’s Public Accounts Committee, which is investigating the sale.
Referring to Mr Cushnahan’s declared links with six of the 56 debtors in the property loans portfolio while he was acting as an adviser to Nama, Mr Daly said sacking him would have caused political upset.
“Removing Mr Cushnahan from the committee before his resignation in November 2013 would have been seen as a very significant and controversial move and one that would have caused tensions in the positive cross-border engagement,” he told the hearing.
“Given it would have been represented as a slight to the Northern Ireland interest, we could not have done so without being satisfied that it was justified and proportionate.”
Mr Daly said Nama was satisfied between 2010 and 2013 it managed any conflict of interests appropriately.
Furthermore, he said the Northern Ireland committee had no decision-making powers and no insider knowledge at the agency.
A “concerted effort” by external members to change that in 2011 was flatly rejected by the Nama board, he told the hearing.
However, he added the agency would have ousted Mr Cushnahan from the Nama committee “regardless of intergovernmental difficulties” if it had known about allegations that have since come to light.
Mr Daly said he did not ask Pimco when the alleged fixer fees were agreed.
He added that Mr Cushnahan’s solicitor made it very clear that there was no agreement with Pimco on success fees.
Pressed on how much cross-border diplomatic concerns played on the sale, he said Nama was influenced chiefly by the commercial gain but also the political sensitivities involved at the time and “reconciled the two”.
Also before the hearing, Comptroller and Auditor General Seamus McCarthy robustly defended his recent findings in the face of an unprecedented attack from Nama.
“My concern was that Nama took quite a narrow view of what they were obliged to do by law and were not necessarily probing deeper and taking more positive action,” he said.
“They didn’t write to Mr Cushnahan at the time to seek an explanation.”
He added: “I am happy with the report. I have presented the report I wanted to present.”
The Project Eagle deal with Cerberus has been dogged by scandal for more than a year, including £7 million linked to it being found in an Isle of Man bank account.
Former managing partner of Tughans, Ian Coulter, resigned after it was unearthed.