McKillen’s US action over ‘Maple 10’ loan should be fought in Ireland – IBRC

The liquidators of the former Anglo Irish Bank claim a US legal action by businessman Paddy McKillen over his "Maple 10" loan is an attempt to frustrate their work.

Kieran Wallace and Eamonn Richardson, the liquidators of Irish Bank Resolution Corporation, claim the action taken by Mr McKillen and his partner Tony Leonard in July is an attempt to "end-run IBRC's properly commenced recovery action in Ireland" through a "poorly disguised" adversary proceeding.

IBRC sued Mr McKillen in the Irish courts in July 2014 to recover 25 per cent of the €45 million loan extended by the bank to the businessman who, with nine other long-standing borrowers of Anglo, took a 10 per cent stake in the bank helping Anglo unwind Seán Quinn’s investment in July 2008.

Wound up

Mr McKillen, Mr Leonard and their firm, Clarendon Properties, brought a legal challenge against IBRC's liquidators in the Delaware bankruptcy court, where the former bank's US subsidiary is being wound up, alleging fraud, misrepresentation and breach of duties of care to Mr McKillen over the loan.

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They argued that the Maple 10 loans, aimed at propping up Anglo's share price in the 2008 deepening financial crisis, were "illegal" when made and referred to the guilty plea of former Anglo Irish Bank chief executive David Drumm two weeks earlier to criminal charges of authorising the illegal loans.

In an objection filed on Friday, Mr Wallace and Mr Richardson, KPMG accountants, claimed that the Irish courts, not the American courts, were the "proper forum" where their legal action should be fought.

‘Frustrate’

The liquidators argued that Mr Killen and Mr Leonard sought to “frustrate” their efforts to fulfil their duties to maximise the value of IBRC’s remaining assets to the detriment of IBRC’s legitimate creditors.

Asked about the responding filing from IBRC’s liquidators to his legal action, a spokeswoman for Mr McKillen said: “After paying off €2.3 billion of performing loans in full at no cost to the State, the liquidators issued proceedings against a loan related to the Maple 10 which has been declared illegal, and for which Mr McKillen has no recourse to and has never benefited from”.

The liquidators cited the US judge's ruling last month in a similar action by businessman Micheál Breslin that IBRC's US bankruptcy was "not an invitation" for US citizens who did business in Ireland to use the court as "their forums" for disputes with the liquidators unless it is related to something in the US.

‘Reignited the ‘vitriol’

Mr McKillen and Mr Leonard had argued in their July filing that IBRC’s Irish legal action against Mr McKillen focused public and media attention again on the “notorious” Maple 10 transaction and reignited the “vitriol, opprobrium and negative commercial impact” against them.

They claimed that IBRC’s attempt to collect the debt had a “chilling effect” on their ability to refinance major commercial property they owned in the US.

Their complaint states that Mr McKillen and firms associated with him had debts of about €2 billion with Anglo in 2008 covering a portfolio of interests, including privately held property in California and his half-share in Clarendon Properties, which owned US property worth more than $350 million.

Mr McKillen’s lawyers told the court he resolved his outstanding indebtedness to Anglo in April 2014 and that no reference was made at that time to his potential indebtedness relating to the Maple 10 loan.