John McManus: Why Nama is in such trouble over Project Eagle

Here is a question that might help you understand why Nama is in such a lot of trouble.

Imagine you are selling your house and have agreed a deal with someone. They then come along to you and say they are pulling out of the sale because they don’t like the way their solicitor is behaving. They suspect that things are not being done properly. They tell you their conscience will not let them be a party to what is going on.

A week later another buyer comes along and offers you much the same price but crucially they are using the same solicitor as the previous bidder.

You have two options:

A. Ask the solicitor if something dodgy is going on and when he tells you he is as pure as the driven snow, you proceed to sell your house, get your money and move on. Your behaviour is legal and commercially sound.

B . Decide that you too cannot be party to something potentially dodgy. You pull out of the sale. You ring the gardaí and end up being involved in a long investigation. Other buyers start to think you are messing and that something is wrong with your house. The price falls.

Which option would you take? A? If so, then you are Nama.

Only it is not your house you are selling, it is a portfolio of properties in Northern Ireland that is worth €1.5 billion. It is Project Eagle.

The first buyer is the US investment fund Pimco and the second is one of their peers, Cerberus.

Replace the first buyer’s conscience with Pimco’s compliance department – the people that make sure they don’t inadvertently break the law.

Replace the anonymous solicitor with law firms Brown Rudnick and Tughan and a number of prominent Northern Irish figures.

Moral dilemma

Now. Change the question to: which option should you take? And you start to see Nama’s problem. It’s more than likely that you would say B. You know you have a duty as citizen to help uphold the law and all that even if it comes at a personal cost.

And this is the problem Nama now faces. It chose A when it should have chosen B.

An individual that takes option A has only to answer to their conscience. Nama, however, is answerable to us all.

It is a State agency. It may have a commercial mandate and a very, very difficult job to do but it is ultimately an arm of the State. And the Government must be held to the highest standard. It must aspire to do what it should do in any situation, not what makes commercial sense. It’s simplistic and it’s naive but it is true none the less.

When Nama chose to sell Project Eagle to Cerberus after Pimco pulled out it lost sight of this simple fact.

It chose to overlook the obvious possibility that something suspicious was going on in the background in Northern Ireland that it should really have blown the whistle on. Right now it probably wishes it had.

For the last week, we have been subjected to the unedifying sight of two State agencies having a public squabble.

Nama and the Comptroller and Auditor General have been arguing about what the Project Eagle portfolio was really worth.

It is essentially an argument about the length of a piece of string. The price is irrelevant.

What really matters is that Nama chose to ignore the big red flag raised by Pimco and proceeded to sell the portfolio to Cerberus.

We know that it shouldn’t have and we now need to know why it did.

Temporary blindness

Was it simply a case of Nama’s commercial imperative blinding it to the bigger picture?

Nama has succeeded on its own terms and will return a profit of €2 billion to the State that will offset some of the billions poured into the banks following the crash and bailout.

But it is easy to forget that this was not a certainty in 2013 and 2014.

It also has to be remembered that there was a great deal of political pressure on the agency to sell its assets and disappear.

And this raises perhaps the most interesting question of all.

To what extent did this pressure on Nama from the government of the day drive the agency on – directly or indirectly – to do something that no government could really stand over? Turning a blind eye to possible criminal activity.

Actually, that is not the most interesting question when you think about it.

The most interesting question is: to what extent was the Irish government influenced by Northern politicians whose links to the intermediaries advising Cerberus are the focus of several investigations?