Banking inquiry should start with the Dublin docklands

In the same week that the Government conceded that it would, after all, convene some sort of official inquiry into the banking bust, the business affairs of another large property developers were laid bare. In the months before Christmas, the Dublin High Court heard about the debts and loans of Liam Carroll, the developer, who, 15 years ago, was best known for his Zoe Developments offshoot that built Dublin inner-city apartments blocks. Carroll went on to buy a chunk of Dublin docklands and to acquire, after tense stockmarket duels, the property firm Dunloe Ewart and high-profile stakes in ICG, the Irish Ferries company. He owed the banks hundreds of millions of euro. Carroll, though, secured the support of most of his bankers except one, ACC, the offshoot of Rabo International. ACC wanted its money back. A High Court judge ruled that the business survival plan presented by Carroll's advisers was unlikely to succeed. The public only learned about the inner workings of a property empire because Carroll had sought protection in the courts from a banking creditor. Last week, the unwinding of another legal dispute laid bare the business plan of another mega property developer. On the day of his 60th birthday, Bernard McNamara admitted that he was bust, owing the banks over €1bn. Because of his separate contracting operations which continue in business, McNamara was probably one of the best-known builders and developers. His building sites were secured by hoardings in the saffron and blue colours of his native Co Clare. But he was also known for dealmaking in buying into hotels, including injecting millions of euro in refurbishing Dublin's Shelbourne Hotel on St Stephen's Green. But it was his development of the 25-acre Irish Glass Bottle site in the Dublin docklands and a dispute with some of his investors that led last week to McNamara acknowledging publicly the scale of his bank debts. The inner workings of another insolvent property empire were laid bare because the dispute had got into the courts. Without the legal dispute, McNamara would have slipped much more quietly into the National Asset Management Agency (Nama) when the bad bank agency started next month taking control, on behalf of the taxpayer, of the unpaid loans to property developers by the banks. The legal disputes surrounding McNamara and Carroll have helped taxpayers to understand more clearly the reckless amounts of lending advanced to a small group of property developers. Taxpayers will have to pick up the cost of the loans for a generation to a come. Any banking inquiry trying to understand what went on in recent years could profitably start with the Irish Glass Bottle site. The site attracted controversy from the start. Years earlier, previous owners had exercised the right of its lease to acquire the land from the State. McNamara's purchase of the site, in 2006, for a costly €412m, with the State-owned Dublin Docklands Development Authority (DDDA), the master planner for the swathes of lands stretching down the Liffey to Dublin Bay, attracted criticism. By paying over €100m for a stake in the development of the site, the DDDA had got involved in a serious piece of property speculation, mixing and matching what should be conflicting roles as a planning authority and now property co-developer. Derek Quinlan, another major property deal-maker in Dublin and London, also got involved. McNamara raised some money from the banks and over €62m from private clients of Davy Stockbrokers, paying leading business figures a huge interest payment of 17 per cent for their money. The site - tucked away far to the south-east on the Poolbeg peninsula - also raised questions about what the DDDA was doing straying away from its core area. Remarkably, two Anglo Irish Bank directors, who were already major lenders to property developers in the docklands, were allowed to join the DDDA board. A planning authority looking after State-owned lands became increasingly influenced by the culture of property speculation. Any proper assessment of the risk of taking on a site by the State body would have shown that the purchase of the Irish Glass Bottle site was highly questionable. The private investors evidently got involved because they were promised fast-tracked planning and development. But the purchase of the site throws up a myriad of questions about advisers and the culture of speculation involving a small group playing with hundreds of million of euro of borrowed money. The site needed cleaning of the soils polluted by the chemicals used in making glass. Files in the Environmental Protection Agency (EPA) show that, by the summer of 2008, soils from the site were successfully shipped from Dublin Port to decontamination facilities in Germany. The clean-up of industrial contamination at the Irish Glass Bottle site was costly but the process was little different than what happens at many former industrial sites across Ireland. However, the remarkable feature of the site was its previous use, over several decades, as one of the main tip-heads for Dublin's municipal waste. The implications for the costly management of a site emitting methane gas appear to have been ignored by the DDDA and its co-developers when they bought the site. A leading waste expert, who has studied the site, says that even the cut-price valuation of just €60m put on the site is overly generous. The methane will rule out all but low-value development on the site, and many residents in Poolbeg overlooking the wooden hoardings reportedly believe that the 25-acre site will remain vacant for many years to come. There is indeed plenty of issues for any banking inquiry to get through in investigating a mess for taxpayers created by banks and the DDDA down in the docklands.