Much at stake in Dunne’s US bankruptcy case

The appearance of nine lawyers along with the court official managing Seán Dunne’s US bankruptcy case showed just how much was at stake in a court hearing before a judge in Bridgeport, Connecticut.

This was Ulster Bank’s hearing to ask the Connecticut court - where Dunne filed for bankruptcy in March - to allow the bank to continue with legal proceedings to make Dunne bankrupt in Ireland as well.

Ulster Bank had two lawyers, sitting next to three representing the National Asset Management Agency, which supported the bank’s motion. Alongside them were Dunne’s bankruptcy trustee Richard Coan and his attorney.

On the other side two lawyers were in court to represent the Co Carlow property developer while Dunne's wife Gayle Killilea had one attorney.

“Mr Dunne is, to say the least, a prodigious borrower,” said attorney Hank Baer, opening Ulster Bank’s application before Judge Alan Shiff, one of the most senior judges in the US bankruptcy courts.

Dunne’s lawyer James Berman returned the dig later when he said that the “prodigious” lenders who were owed 99 per cent of the developer’s total debts (Ulster Bank and Nama) were in court.

After hearing more than two hours of opposing arguments, Judge Shiff granted the motion allowing Ulster Bank to continue with its legal bid to make Dunne bankrupt in Ireland.

Despite imminent changes to the bankruptcy laws, the developer may still face a longer period in bankruptcy than he would in the US before he could be discharged and given a fresh financial start.

This throws a spanner in the works for Dunne. Ulster Bank has a € 164 million judgment against him, though he owes the bank more than € 300 million mostly as a result of its financing of his ill-fated plan to redevelop the Jury’s hotel sites in Ballsbridge, Dublin 4.

This is money he cannot afford to repay. If the High Court in Dublin accedes to the bank’s request, then Dunne will end up legally bankrupt in both Ireland and the US.

Ulster Bank had argued that it had initiated bankruptcy proceedings against Dunne in Ireland on February 12th, six weeks before he filed for bankruptcy in the US.

“The Irish case is the pre-existing case; this is the second case,” said Baer, referring to Dunne’s bankruptcy in the US, which he said was a “concerted effort” to evade the bank’s legal action in Dublin.

He outlined to the court how almost all of Dunne’s creditors were in Ireland, all of his properties were in Ireland and that his interests also spread to Switzerland, South Africa and potentially England.

The sum total of Dunne’s US assets were $15 in a bank account and $960 in cash, while there were claims against him of almost $1 billion, nearly all of which were from Irish creditors, he said.

Baer said that the US court could not ignore the Irish court and that it had to treat the Irish court with the same respect it would expect to be treated on grounds of “comity.”

Timothy Miltenberger, representing Mr Coan, said he didn’t believe it was in the best interests of creditors to have them travel across the Atlantic and that he needed the Irish court to administer Mr Dunne’s estate.

The proceeds of fraudulent transfers of assets by Dunne to his wife – as claimed by Nama in a separate case in Connecticut – may be in the US and this required a US bankruptcy case, he said.

A dual bankruptcy would not create conflict but would allow greater cooperation and that two bankruptcy cases would be more efficient and would maximise the return for Dunne’s creditors.

Berman, Dunne’s lawyer, argued that the sole bankruptcy case in the US was the “easiest way” to administer the developer’s estate and that there was nothing unfair about it proceeding.

“All this promises is potential fees and endless litigation with no resolution,” he said.

He said that there was “nothing automatic” about the Ulster Bank’s bankruptcy proceedings in Ireland, saying that the Irish court still had to rule on the bank’s application and that could take some time.

Ultimately, the support shown by the trustee appears to have been played a crucial role in swaying the judge, though he was concerned about ceding control over Dunne’s property away from the US court.

The judge allowed Ulster Bank to serve the Irish bankruptcy papers on Dunne, to ask the Irish court to adjudicate him bankrupt and to seek the appointment of an Irish representative over the estate.

The judge directed that his order should not be used to affect the property of the bankruptcy estate and that no such measure should be taken without first petitioning the Irish and the US courts.

As for the status Dunne’s scheduled meeting with his creditors, the trustee has asked the court to complete Dunne to attend on June 19th in the face of objections from Killilea’s lawyer yesterday.

Judge Shiff said the case was “like a Pandora’s box” following his ruling and that he would deal with each motion from the parties individually as they arose.

All eyes, Irish and American, in this complex case will be on the next scheduled hearing in the Irish High Court on July 1st when Ulster Bank will seek to make Dunne bankrupt in a second jurisdiction.

GREEN CARD

Seán Dunne told the court that he is eligible for a US green card and that he intends to apply for it.

In a court filing objecting to Ulster Bank’s motion to the court to continue its Irish bankruptcy proceedings against him, Mr Dunne said that he is currently living in the US under a five-year visa.

Mr Dunne’s bankruptcy trustee Richard Coan said in a separate court filing that he believed that the Co Carlow developer’s wife, Gayle Killilea, was living in Connecticut on a three-year visa.

The couple have been living in the US for the past three years.