FORTY SEVEN clients of failed Irish investment firm Custom House Capital are opposing fees and legal costs of more than €225,0000 being sought by the company’s liquidator, the High Court heard yesterday.
Kieran Wallace, of accountancy firm KPMG, was appointed liquidator to CHC last October after Central Bank inspectors found “systemic and deliberate misuse” of more than €56 million of client funds.
A report by two inspectors into the company delivered to the High Court revealed what Mr Justice Gerard Hogan described as “a sort of Irish Ponzi scheme”.
The judge directed the report to be referred to the Garda Síochána, Minister for Justice, Director of Public Prosecutions, Revenue Commissioners and the Director of Corporate Enforcement.
Yesterday, Ms Justice Mary Finlay Geoghegan was told Mr Wallace intends to apply for orders permitting payment from the client accounts of his legal costs and remuneration in connection with the administration of the company’s equity and segregated cash accounts. The liquidator is seeking remuneration of €141,000 and legal fees of €86,000. He wants 0.5 per cent of what is held in each of the relevant client accounts to cover his fees.
Bernard Dunleavy, counsel for Mr Wallace, said the application was relevant to 349 CHC client accounts. Of those, 112 had consented to the liquidator’s application (accounting for €115,000 of the fees at issue); 190 had neither objected nor consented; and 47 opposed Mr Wallace’s move.
The objectors, some of whom represented themselves, are opposing Mr Wallace’s application on grounds including that the fees sought are excessive and unfair.
The judge provisionally listed the week of May 15th for the hearing of the application, which is expected to last two days.
Mr Wallace yesterday took the unusual step of issuing a statement to clarify the issue around his fees. “While we totally understand the frustration felt by the investors in CHC we have no option but to charge these fees,” he said. “Those clients who have paid their fee will be receiving transfer packs and the return of their funds starting next week.
“In fact, we are charging a lower fee than the investors would have had to pay to Custom House Capital if they were still administering their funds – 0.5 per cent as compared with 0.75 per cent to 1.5 per cent.”
Set up in 1997, CHC managed €1.15 billion in assets for 1,500 individuals. CHC began promoting property investments to clients in 2004 and later placed deposits without the required cash from clients. As the property market turned in 2007, CHC was unable to secure expected investments from investors and covered the shortfall by creating a mezzanine bond and eventually by misusing client funds, the inspectors said in their report.
They said the misuse of funds was deliberately disguised through false accounting and false statements to clients.
