Inside the world of business
A lot can happen in a year - unless you're Breifne O'Brien
IT’S A year now since the Commercial Court granted an application that Breifne O’Brien not reduce his assets below €20 million.
The court was told that the Glenageary, Co Dublin-based alleged operator of an classic ponzi scheme, had told Brian Quigley, a solicitor for several investors, that he (O’Brien) had been “living a lie” for up to 15 years in relation to investments made for others, including long-time friends.
In all of the court hearings and newspaper reports that have been made since then, there has been no claim that the court was misinformed when it granted the order. O’Brien agreed with the court move.
The court was told O’Brien made admissions in relation to at least 12 individuals in respect of which “he calculated a total liability of between €16 million and approximately €19 million”.
O’Brien told Quigley he’d spent approximately €4 million of the money he’d been given on his personal and family lifestyle; the same amount again to pay fictitious profits to investors; and the same again to keep his business interests afloat. A final figure of approximately €4 million had been spent on property.
In January of this year Mr Justice Kelly said he was forwarding papers in the case for consideration by the National Bureau of Fraud Investigation because he believed they disclosed prima facie evidence relating to the commission of a series of criminal offences.
Since then? Further Commercial Court hearings and applications, but not a squeak from the boys in blue or the Director of Public Prosecutions.
Contrast this with the Bernie Madoff case in the US. That scandal also erupted a year ago, when Madoff was arrested at his New York apartment. Madoff said his supposedly hugely successful investment business was in fact a giant, multi-billion ponzi scheme.
By July Madoff was in jail, having pleaded guilty to a range of charges and been sentenced to a total of 150 years. The two cases are obviously hugely different, in terms of scale for a start, but the contrast in terms of official action is worryingly familiar.
With friends like these, Nama
The critics of the National Asset Management Agency will have a field day with the comments of Steven Seelig, one of the International Monetary Fund’s resident experts on bad banks.
Mr Seelig’s comments on the draft Nama legislation – released under the Freedom of Information Act – will only further support the argument that Nama’s plan to pay the “long-term economic value” of assets rather than the market price is nothing more than a dodge to avoid nationalising the banks in deference to IMF-inspired ideological dogma.
Certainly the tenor of Mr Seelig’s comments leaves them open to this interpretation, in particular his fulsome congratulations to the authors of the legislation for their apparent obfuscation on the issue of how long-term economic value should be determined. The reason for Mr Seelig’s admiration is the flexibility that this then confers on Nama in this regard.
The presumption is that this flexibility was built into the legislation in order to ensure that Nama can tweak things to arrive at whatever figure it needs in order to avoid forcing nationalisation.
It is of course open to many less malign alternative interpretations. It’s worth noting in this regard that Mr Seelig’s commentary also points out that another section of the proposed Bill opens the door for political interference in Nama’s workings. Unfortunately, this is also the bit that allows the Oireachtas challenge the way long-term economic value is worked out.
Can O’Leary be believed?
Ryanair’s failure to agree a deal with Boeing on $14 billion (€9.7 billion) worth of new aircraft appears to have opened the door to the airline returning spare cash to shareholders in the 2013-2016 period.
Ryanair said that while it had agreed a price with Boeing on the 200 aircraft, costs included in the small print meant it was unwilling to sign the deal. Michael O’Leary said he would outline Ryanair’s new strategy in the first quarter of next year.
But does anyone believe him?
Ryanair’s business model is built on aggressive growth, doubling its key financial metrics every five years and adding new bases across Europe. This will be impossible to achieve if it can’t bring new aircraft into its fleet on an annual basis.
The idea that Ryanair will just hunker down and optimise its fleet and schedule as best it can while returning cash to shareholders just doesn’t ring true.
O’Leary’s motivation has always surely been the thrill of the chase and giving a bloody nose to the big flag-carriers.
Sure, Ryanair will take delivery of 112 B737s over the next three years, but its fast-paced growth will skid to a halt from 2013 without a new plane deal.
For now, Boeing is sticking to its guns while Airbus seems unwilling to negotiate with Ryanair having been gazumped on a deal in 2001.
Both seem to believe that the market for new aircraft is stabilising. A record number of aircraft are currently on order, but it remains to be seen if the finance for them can be secured by the end users.
Don’t be surprised if this opens the door to a deal in 2010.
Next Week
The Economic and Social research Institute will publish its latest assessment of the state of the Irish economy, the first independent assessment since the Budget, in the winter Quarterly Economic Commentary on Tuesday
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