The Quinn family are trying through the courts to protect their lucrative overseas property assets from Anglo Irish Bank, writes COLM KEENA

THE AFFIDAVIT presented to a court in Nicosia this week by Anglo Irish Bank executive Richard Woodhouse is among the most extraordinary documents to surface to date from the convulsions that have hit the Irish economy over the past four years.

The allegation made in the sworn affidavit could not be more serious: it is that Seán Quinn and his family are engaged in a conspiracy to move assets worth hundreds of millions of euro beyond the reach of State-owned Anglo, which is owed approximately €2.8 billion by the family-owned Quinn Group.

The debt owed by the Quinn family is equal to more than 70 per cent of the tax increases and cutbacks the Government wants to introduce in the December budget. It is about three times the expected cutback in the social welfare bill.

The Quinn Group gave collateral against the massive loans it foolishly ran up with Anglo. This collateral breaks down essentially into the Quinn group’s insurance business; the group’s manufacturing business; and its property portfolio.

The first two are of little value. The third, because so much of the property is outside Ireland, is the jewel in the crown and could allow the family pay back approximately one-sixth of the money it borrowed.

However, the family appears determined that that will not happen. In her affidavit to the Cypriot court, Aoife Quinn said the family disputes the legality of the charges the bank claims it has on the companies that own the property. The family’s position is that the loans the Quinn Group received from Anglo were “tainted with illegality and were for an illegal purpose”, and because of this they cannot be held liable for the money. This argument has not yet been ruled on by any court.

The reference to illegality relates to the loans issued by Anglo after it found out in 2007 that Seán Quinn had built up a secret 28 per cent shareholding in Anglo using high-risk contracts for difference, a position that the bank then set about unwinding, using its own money, in an effort to protect its own share price.

According to the family, it initiated the moves that are being described by Anglo as a conspiracy, in an effort to protect family property assets from the improper attempts of the bank to seize them.

The family’s efforts to stop the bank getting its hands on the assets involves legal actions in Sweden, Cyprus and Ireland. If they are successful, the result will be the bank, and therefore the State, being left out of pocket to the tune of €2.8 billion. The Quinn children could remain the owners of international property with a value of up to €500 million or more.

The Quinn Group website says it has properties in Russia, India, Ukraine and Turkey.

One of the properties is in Kiev, capital of Ukraine. The Leonardo Business Centre was bought by the group in 2006 and is described on the website as having 27,000 square metres of prime class A office and retail space, and boasting a fabulous fitness and leisure suite.

The Indian property is called Q-city and is in the business district of Hyderabad. It is a two-block commercial development connected by a glass panelled connecting walkway. The total amount of office space is approximately 750,000 square feet.

The Quinn Group website says it bought the Prestige Mall, 20 kilometres from Istanbul, Turkey, in May 2007, a few months after the shopping, entertainment and leisure centre opened.

The group also has properties in such places as Bashkortostan and Tatarstan in Russia.

The Russian property that is at issue in the Cypriot court case includes the Kutuzoff Tower in Mostow, which Anglo says is worth up to $180 million. It is owned by way of a Russian company that is owned by a Cypriot company and then a Swedish holding company.

The Swedish holding company, Quinn Investments Sweden AB, was placed into bankruptcy in July by the Swedish courts. A Swedish bankruptcy receiver, Leif Baecklund, was appointed by the courts.

In his affidavit opened in Cyprus this week, Woodhouse said that, almost immediately after he was appointed, Baecklund wrote to the lawyers acting for the Swedish Quinn company in the Cypriot proceedings, telling them to withdraw from the case. A few days later lawyers acting for the Quinn children, Ciara, Colette, Brenda, Aoife and Seán jnr, and for their mother, Patricia Quinn, wrote back to say that the court appointed receiver was acting “exclusively” to promote the interests of Anglo.

The Swedish company remains part of the Cypriot proceedings as do the Quinn children and their mother.

Baecklund was appointed receiver to four Swedish Quinn companies – Quinn Investments Sweden and three subsidiaries. These in turn own Cypriot companies that in turn own Russian companies that own Russian properties.

In the wake of Baecklund’s appointment, which the Quinns had opposed, the bank heard for the first time the claim from the Quinns that the Cypriot companies’ shares were in fact held in trust by the Swedish companies, for the Quinn family.

In his affidavit, Woodhouse quoted a letter Baecklund wrote to the Quinns’ lawyers in August, in which he pointed out that the audited accounts for Quinn Investments Sweden and its subsidiaries show the Cypriot companies shares as assets of the Swedish companies which are in turn owned by the Swedish holding company.

“The accounts are audited by PricewaterhouseCoopers and are signed by the directors including Seán Quinn senior who purportedly signed the trust deeds for .

“If, as you suggest, the shares of the Cypriot companies were merely held on trust , the accounts of those companies would not show any value for the shares of the Swedish companies, whereas, as mentioned, they do.”

Anglo has pointed out to the court that the share pledges signed as collateral against its loans by the Swedish companies were signed by Quinn, who it has now emerged is also a signatory on behalf of the Swedish companies “to the purported trust deeds”.

If the trust deeds are valid, according to the bank, then Quinn gave the bank a warranty over the Swedish companies shares that he knew to be false.

“I am advised that this would be a criminal offence under Swedish law,” said Woodhouse in his affidavit.

Woodhouse outlined the circumstances in which a pledge over its shares was given by one of the Swedish companies, Quinn Building Sweden AB, to Anglo, in February 2008.

The deed of pledge was signed following a board meeting attended by Seán Quinn snr, Dara O’Reilly, Kevin Lunney and Liam McCaffrey. The loan involved was for $242 million (€176 million) to refinance the Kutuzoff Tower, which was owned by Quinn Building Sweden AB by way of Cypriot company Carcer, and Russian company, Finansstroy.

Yet at no stage was Anglo told that the Carcer shares were held in trust by the Swedish company for the Quinn children.

Throughout his affidavit, Woodhouse refers to the trust deeds as “purported”. He says the Quinn children and their mother have been involved in unlawful and hidden actions aimed at stripping the Cypriot companies of their assets.

He also says that some of Aoife Quinn’s sworn averments in her earlier affidavit to the court were untrue and must have been known by her to be untrue.

Anglo is seeking to lift the injunction obtained from the Cypriot court by the family last June which stops the bank seizing control of the properties. A judgment is expected in the next few weeks.

The Quinns say the claims made this week by Anglo were “scandalous”, “irrelevant”, “vexatious” and “frivolous”.

It has been a long fall for Seán Quinn, once hailed as Ireland’s most successful businessman.

If matters go against him in the courts in Cyprus, Sweden, Ireland and elsewhere, his fall might not yet be over.