29 Sep - NAMA statement on Public Accounts Committee hearing
“Extraordinary” that C&AG did not use external expert advice for Project Eagle investigation, NAMA tells PAC
- C&AG “alone in its view” on portfolio valuation and at odds with NAMA and market participants
- NAMA sets out why proceeding with the sale was the right decision
- Alleged wrongdoing in Northern Ireland should not be conflated with the outcome of the sale process
Thursday 29th September 2016
The National Asset Management Agency (NAMA) has said the failure by the Comptroller & Auditor General (C&AG) to use external expert advice in its Project Eagle investigation was “extraordinary”.
Addressing the Oireachtas Public Accounts Committee (PAC), NAMA Chief Executive Brendan McDonagh said the Agency “emphatically rejects” the C&AG’s key conclusion that the sale of the Project Eagle portfolio involved a “significant probable loss of value to the State”.
He added that the C&AG used the wrong discount rate to value the portfolio and that the examination process was “inadequate” and lacking in evidence that would be acceptable to market experts.
Mr McDonagh said:
“The positions on this issue are very stark: NAMA and the loan sales market have one view on the appropriate discount rate; the C&AG report appears to be alone in its view.
It would not have been difficult for the report’s authors to have consulted market experts on this crucial point – something the NAMA Board requested them to do. For some reason, however, this was not done.”
Mr McDonagh also said:
- Acceptance of the C&AG’s “unrealistic and uncommercial” position would make commercial decision-making impossible and that NAMA has no alternative but to contest the C&AG report
- It would be “clearly absurd” if NAMA’s commercial activity was driven by accounting values instead of real-world values – this would result in NAMA never selling any portfolio if the market value was lower than NAMA’s accounting value
- It is difficult to understand why the well-established C&AG precedent of using external expertise on specialist matters was not used in the case of NAMA’s sale of Project Eagle
- Both the current C&AG and his predecessor have publicly acknowledged the requirement for specialist external advice for significant, complex work
NAMA’s management of the sales process
The NAMA Chairman, Frank Daly, told the Committee that the Project Eagle sales process was designed to take into account the views of the Minister for Finance and the Northern Ireland Executive, which are in the public domain, over the potential impact on the Northern Ireland economy of a high-profile, public sales process over an extended period of 9 to 12 months.
He added that allegations relating to Northern Ireland should not be conflated with the outcome of the sales process, which raised £1.322 billion in proceeds.
Mr Daly said:
“We did not believe that a fully open sales process would yield any additional benefit in terms of identifying other credible bidders or of getting a higher price.
And we were very cognisant of the potential damage that a fully open process could cause to the Northern Ireland property market and the wider Northern Ireland economy.
We are a commercial state body but we do not operate in a bubble that ignores the bigger issues on the island of Ireland.
That might apply to entities that are not affiliated to the State but it does not apply to us”.
Allegations relating to Frank Cushnahan
Mr Daly also set out NAMA’s decision to proceed with the sale after learning of a proposed fee arrangement involving Mr Cushnahan and a group that withdrew from the bidding process.
“The net issue for us was whether we were going to allow Mr Cushnahan’s alleged manoeuvrings in Belfast to seriously damage the interests of Irish taxpayers,” said Mr Daly.
“Our judgement then, and one that we stand over, was that the interests of Irish taxpayers took precedence.Commercially, we considered that there was a compelling case for selling this portfolio.”
Mr Daly also reiterated that the C&AG report found that no external member of NAMA’s Northern Ireland Advisory Committee, including Frank Cusnahan, had access to confidential NAMA information.
Mr Daly said:
“He had no influence with NAMA. And if he managed to persuade some people that he had an influence on NAMA, they were blatantly misled.
To some in Northern Ireland and perhaps to himself, Mr Cushnahan was a NAMA insider; as far as NAMA was concerned, he was peripheral.”
Mr Daly also noted that a recent BBC Northern Ireland TV programme included references to a document which purportedly included NAMA’s confidential valuations of properties owned by a NAMA debtor – but that the valuations in the document were not genuine.
“It is clear to us that the allegedly confidential NAMA valuations were not our valuations at all – they were, in fact, significantly lower than NAMA’s actual valuations (by up to 80% in one case)”, he said.