Former chief executive of Quinn Group Liam McCaffrey signed dozens of documents giving rise to guarantees more than a decade ago that would threaten the financial standing of its insurance unit, an inquiry heard into alleged regulatory breaches at Quinn Insurance Limited (QIL) heard on Wednesday.
However, Mr McCaffrey insisted he did not appreciate at the time that the guarantees – offered by eight subsidiaries of QIL to support €1.2 billion of Quinn Group loans between 2005 and 2007– would affect the financial position of the insurer.
The assets of the subsidiaries formed part of QIL’s important technical reserves, which were to be drawn upon if the company ran into trouble.
The inquiry, which has been hearing evidence for more than a week, is looking into allegations that Mr McCaffrey, who was also a director of QIL, and Kevin Lunney, another one-time Quinn Group executive and QIL director, were involved the insurer's subsidiaries providing the guarantees without the knowledge of its full board or investment committee.
“This is a mass of documents that have been signed, apparently without reading them,” Eoin McCullagh SC, of the legal team assisting the inquiry, said to Mr McCaffrey, adding that these included signed minutes of board meetings to approve the guarantees that did not take place.
‘To flag’
Mr McCaffrey said that he had taken comfort that Quinn Group was being advised by law firm A&L Goodbody on the €1.2 billion refinancing, which led to most of the group’s subsidiaries, including the QIL units, providing guarantees. He said that he “would have expected” the law firm “to flag” any potential impact the guarantees would have on QIL’s reserves.
The existence of the guarantees contributed to the insurance company being placed into administration in March 2010, at the request of the Central Bank.
A&L Goodbody partner Adrian Burke told the inquiry last week that his firm did not act for QIL at the time.
Paul Anthony McDermott SC, representing the Central Bank’s enforcement division, reminded the inquiry of Quinn Group founder Sean Quinn’s testimony last Friday that did not become aware of the guarantees until March 2010 and that he relied heavily his then top executives Mr McCaffrey, Mr Lunney and Dara O’Reilly.
Mr McDermott put it to Mr McCaffrey that if Sean Quinn relied on his most-senior executives to read the important documents, and the former group CEO was putting that expectation on lawyers, "were A&L Goodbody running the show?"
‘Gross exaggeration’
Mr McCaffrey responded that it was a “gross exaggeration” to say “nobody was reading anything”.
The inquiry also heard Mr McCaffrey received emails in September 2005, ahead of the initial refinancing transaction the following month, that clearly identified that the QIL subsidiaries were to guarantee group loans.
“This is a very deliberate decision, there is no mistake here – a clear decision is being made to include the QIL subsidiaries,” Mr McCullough said.
Mr McCaffrey said he “wouldn’t have placed a relevance on them giving the guarantees”, as he didn’t make the connection with the pledges and QIL’s reserves.
