Seven years and 700,000 documents later it is tempting to dismiss the commission of investigation into Project Eagle as much ado about nothing. The Government certainly seems on board for this narrative as the National Asset Management Agency (Nama) enters its twilight years and looks set to return a significant surplus to the State.
It is not really that simple. The issue at the heart of the Project Eagle “scandal” was the circumstances of the decision by Nama to proceed with the sale of its Northern Irish portfolio in early 2014 after the leading bidder pulled out.
Pimco, a US investment fund withdrew when its advisers – law firm Brown Rudnick – sought a success fee that would be split three ways between itself, the Belfast law firm Tughans and Frank Cushnahan, a Northern Irish businessman.
Cushnahan had been a member of the Northern Irish advisory committee of Nama until late 2013 and received confidential information about the sale of the portfolio. Cushnahan’s links to Tughans, including shared office space, were a concern to Nama.
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The problem for Nama was that it then went ahead and did a deal with one of the other bidders – another US investment firm called Cerberus – even though it knew that Brown Rudnick and Tughans had jumped ship and were now advising them.
To understand why this was such a big deal you would have to put yourself in the Ireland of 2014, which is not a place that anyone would really want to go. The IMF, EU, ECB troika has just left town, the credibility of the Irish State as a functional economic entity was on the line and Nama was trying to do its first big deal with high-profile international investors. Faith in politics and public trust in the institution of the State was at an all-time low.
You can get a sense of how this febrile atmosphere may have played into Nama’s decision from the blow-by-blow account contained in the report of the commission of investigation.
Things started to go wrong on March 10th when Pimco disclosed the success fee arrangement. Nama’s solicitor described it as “a bit of a bombshell to say the least”.
Brendan McDonagh, the Nama chief executive, gave evidence to the commission that the State bad bank was in the very early stages of engagement in the European loan sale market and that had it aborted the sale, this would have had ‘significant ramifications for Nama’s ability to establish itself as a significant, credible and key player’ in that market
A special board meeting was called for the next day and again “the overall reaction of the board to the revelation of the proposed payment of a success fee to Mr Cushnahan was one of shock,” the commission was told.
The next day Pimco confirmed they were pulling out because they did not feel comfortable proceeding because Nama “had not been in the loop on some disclosures it expected would be made to Nama”. It had lost faith in the process, which would be bad news if the markets got wind of it.
At that stage Nama had a choice. Abandon the sale process or proceed with the remaining bidders: Cerberus and a third US fund, Fortress.
John Corrigan – the head of National Treasury Management Agency and Nama board member who died in 2023 – told the commission “the consequences of a failed transaction were considered as part of the deliberations around continuing with the sale ... a failed transaction would have possibly ... might have sent the wrong signals to the capital markets at that stage ... in February 2014 we had come out of the Troika programme, so we were standing on our own feet. It would have been a consideration.”
Brendan McDonagh, the Nama chief executive, gave evidence to the commission that the State bad bank was in the very early stages of engagement in the European loan sale market and that had it aborted the sale, this would have had “significant ramifications for Nama’s ability to establish itself as a significant, credible and key player” in that market.
This was the context in which Nama asked its advisers – Lazard – whether they thought the sale process could continue. It was also the context in which Nama decided not to tell Lazard of the reason for Pimco’s withdrawal. “That’s not the way the world works,” McDonagh told the commission.
Lazard told the commission that had they known the reason for Pimco withdrawal their advice that the sale process could continue would have been different although they could not “precisely say in what way or how much” it would have differed. Given the binary nature of the issue, it is hard on this basis to see how the sale process would have continued as planned with all that entailed for Nama and Ireland’s ability to service its close to unsustainable debts.
Nama continued to keep Lazard in the dark even after they became aware in early April that Brown Rudnick and Tughans had jumped ship to Cerberus. The portfolio was sold to Cerberus in June.
The commission seemed willing to cut Nama some slack over not telling Lazard back in March why Pimco pulled out but was clear in its view that they should have done so when Brown Rudnick and Tughans turned up as advisers to Cerberus. The commission also criticised Nama for not making more of an effort to establish what Cushnahan knew and when. Nama should also have considered a referral to the Standards in Public Office Commission.
But ultimately the commission was of the view that “the decision to continue the sales process following the disclosure by Pimco of the proposed success fee was appropriate in the circumstances”. It was not Nama’s finest hour by any means but if you were not there you should be slow to judge.
