Mr Gerry Purcell ran Purcell Brothers Ltd, the Waterford-based cattletrading business established by his father Seamus, from a suite of offices in Dublin. It boasted the type of technology normally seen in a bank trading room, the High Court was told.
Dealing in foreign currencies is an integral part of the international live-stock business, but the type of speculative trading carried out from the office - which led to losses of £10 million (€12.7 million) - were not part of the company's normal business. It should not have been allowed and fostered by National Irish Bank, Mr Purcell said in his affidavit.
The businessman claimed that National Irish Bank encouraged him to get involved in risky foreign exchange transactions, despite knowing that the articles of association of the company did not permit it. He also claimed that dealers at the bank talked him into taking bigger and bigger risks. They rang him on a daily basis "promoting trade which they knew were purely speculative and unrelated to the plaintiff's [Purcell's] business".
He gave an example of the sort of transaction he was invited to get involved in: "I would agree to buy €10 million against US dollars at 1.10. It takes $11 million to buy €10 million. Six months later the euro has weakened to 0.95. The €10 million are now only worth $9.5 million. If loss was crystallised here it would be $1.5 million together with the cost of funding". The bank would make substantial fees on such deals, he alleged.
Mr Purcell claims that the bank allowed him wager up to £50 million - more than twice the company's 1999 turnover of £21 million - in this way. The transactions were profitable to begin with and in April 1999 he was in the happy position that his possible losses on some deals equalled his possible gains on others. On the advice of NIB he closed some of his positions and the situation changed for the worse leaving him facing serious losses. Following the bank's advice got him into further trouble in January this year. He was on holidays - the company has a £334,000 holiday home in Marbella - when he had an idea that he thought might reduce his exposure. The idea involved selling Australian dollars, but he claimed he was talked out of this course of action by the bank. As a result of following the bank's advice his losses grew by £1.5 million, he said.
By July this year the situation had become unsustainable and Mr Purcell and his advisers started to negotiate a settlement with the bank. Mr Purcell only made his brother and fellow director Patrick aware of the situation on September 15th by which time the losses had hit £6 million. Their mother, Philomena, who is also a shareholder, was told on October 4th.
Mr Purcell stepped down as managing director shortly afterwards. The court was not told when Mr Purcell told his father Seamus, but the 78 year old is now back in charge of the company he founded 50 years ago. Negotiations with NIB broke down two weeks ago after the bank told Mr Tadgh Lombard, an adviser to the company, it "had their man in place, a receiver, and were ready to move". Mr Purcell had previously offered to sell assets and pay the bank back over nine years.
The company got a temporary injunction the following Monday to prevent NIB putting in a receiver. This week it sought to have it continued pending the hearing of a case against NIB. It alleged NIB was partially responsible for the losses because it encouraged and facilitated Mr Purcell's unauthorised trading.
The bank has maintained there was no substance to the argument as all the transactions ultimately related to live-stock transactions and were permitted by the company's rules. Such transactions could not be considered speculative, the bank said. According to the NIB affidavit the bulk of the losses related to transactions with Libya that ran into difficulties. They said Mr Purcell "has a detailed knowledge of financial markets and has a very sophisticated financial information system".
According to NIB Mr Purcell dealt with three other institutions: Barclays Bank, Anglo Irish Bank and Gandon. The bank said that in June 1999 the company had outstanding foreign exchange transactions totalling £77 million of which only £21 million related to NIB.
The bank listed the assets of the company which it had a charge over. They included a 285-acre farm at Newrath, Co Kilkenny worth £3.6 million and a 202-acre farm at Gracedieu, Co Waterford, which was worth £2 million. Both are near Waterford City and have development potential, the bank contends. Other assets include an apartment at Sloane Square in London valued at £300,000 sterling (€514,845) and another apartment at Herbert Crescent in London worth £700,000.
There are also investments totalling £1.3 million and a the Marbella holiday home.
The bank accused the firm of using the injunction to liquidate assets to meet trade creditors.
