A Garda investigation into a bond deal by Davy stockbrokers, which resulted in a scandal for the firm and a record fine of €4.1 million from the Central Bank of Ireland, has concluded with no criminal charges being pursued over a decade after the deal was done.
It was claimed in civil litigation that then staff of J&E Davy made a windfall profit of €25 million from the sale of the bonds, though the High Court was later told the profit was actually €9.3 million.
The Anglo Irish Bank bonds were bought by 16 Davy staff from a Belfast businessman who claimed he was not informed some of the company’s employees were buying the bonds.
A criminal investigation, by the Garda National Economic Crime Bureau, into the bond deal dating back to 2014, resulted in a file being send to the Director of Public Prosecutions. The Irish Times has learned the DPP directed just before Christmas that no charges should be pursued against anyone who came under investigation.
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The fine imposed by the Central Bank on Davy in 2021 was a record regulatory financial sanction against a stockbroking firm. The fine related to how Davy sold bonds held by Belfast businessman and property developer, Paddy Kearney.
The bonds were bought by a consortium of 16 Davy staff members, including a number of then senior executives. However, Mr Kearney said the fact a consortium formed by Davy staff was buying the bonds, while the company acted as his agent, was never disclosed to him.
The Central Bank concluded Davy breached market rules. It did so by failing to identify whether a conflict of interest existed because the then 16 employees bought the Anglo Irish Bank bonds. Davy was also found to have kept its own compliance officials in the dark on the deal.
When claims around the bond deal emerged, it created serious issues for Davy, with several resignations from the business, which was eventually sold for €600 million to Bank of Ireland in 2021.
Mr Kearney began separate civil legal actions in the High Court. Mr Justice Michael Twomey, in a ruling on a pre-trial application in 2022, said a prima facie case of fraud against the stockbroking firm had been established.
The claim that a €25 million profit had been generated after his bonds were resold by the Davy staff consortium was made by Mr Kearney as part of his litigation. That case was then settled, with two agreements believed to involve the payment of just over €3 million to Mr Kearney, with his legal costs also paid by 15 of the 16-strong consortium.
However, the High Court was told the profit from the bond purchase and resale was €9.3 million, and not €25 million. The consortium also strongly denied Mr Kearney’s claim he was not aware who was purchasing the bonds.
Four years ago the Central Bank director general of financial conduct, Derville Rowland, said its long investigation found nothing to suspect any criminal activity that would have obliged it by law to make reports to the Garda and the Office of the Director of Corporate Enforcement (ODCE).
However, the Garda began examining the case in 2021 and by spring 2022 that examination had been effectively upgraded to a criminal investigation. It is understood Mr Kearney gave a detailed statement to the Garda outlining his concerns and allegations.
