A High Court judge has strongly criticised the continuing failure over months to make a decision whether accountancy firm KPMG should, in its capacity as former auditors to Irish Nationwide Building Society, be sued as a co-defendant in separate actions by State-owned IBRC against Michael Fingleton and other former directors of the society over €6 billion losses there.
Mr Justice Brian McGovern noted the special liquidators of IBRC, Kieran Wallace and Eamonn Richardson, are partners in KPMG.
While it was not for him to advise anyone “as to what Chinese walls have to be created”, it was “a matter of concern” there was still no decision on the procedural matter of whether or not KPMG, now a third party in one action, should be a defendant, he said.
“How long is it going to take to make a decision?” the judge asked, warning he would not permit the matter “drift” much longer and a decision “cannot be put off for ever”.
“I cannot for the life of me understand why someone can’t decide if they (KPMG) are to be a defendant rather than a notice party,” he said.
If there was an issue of potential conflict of interest, how much longer does it take for someone to make a decision about that, he also asked.
KPMG was last February joined, on the application by former INBS director Terence Cooney, as a notice party to the action against him and three other former directors — John S. Purcell, David Brophy and Michael P Walsh — over losses of €6 billion at the society between 2008 and 2010. Mr Cooney said he was seeking a contribution and indemnity from the firm, who acted as auditors of INBS for 20 years, should any damages be awarded against him.
Mr Fingelton is being separately sued.
Last July, the Commercial Court heard law firm Eugene F Collins had been appointed last April to review legal advice on the issue of joining KPMG as a co-defendant to the case against the four directors.
Today, Mr Justice McGovern was told by Maurice Collins SC, for IBRC, aspects of the review exercise had been compleed but the review was “not all done” and he could not say when a decision would be made on the KPMG joinder issue.
In those circumstances, Mr Collins said he was instructed to consent to an application by Edward Farrelly BL, for Mr Cooney, seeking a stay on any further steps in the proceedings involving Mr Cooney until a decision was made.
There should be a similar stay on the proceedings against Mr Fingleton, Mr Collins said.
John Rogers SC, for Mr Purcell, objected to any stay, saying IBRC’s reasons for ts consent to that should be put in an affidavit. Mr Collins was effectively being instructed by the State and this matter continued to hang over his client, counsel added.
Rossa Fanning BL, for Mr Brophy, said his side was told last April of the review as to whether KPMG should be joined as a defendant and there was no explanation why there was still no decision in October. Mr Brophy had been told long ago a Central Bank probe into the affairs of INBS was not considering any participation by him in that, counsel added.
Bill Shipsey SC, for Mr Fingleton, said it would be undesirable discovery motions should proceed next month if there was to be a stay.
Having heard the judge’s comments, Mr Collins said the stay applicaiton was not made at the instance of the Central Bank and there was no basis for suggesitons a stay would delay any Central Bank investigation into INBS. He was instructed significant legal advice had been obtained, the legal advice aspect of the review was complete and what is now underway is a comprehensive accounting review exercise. The decision was ultimately for the joint special liquidators and this matter was being done as quickly as possible, he added.
The judge said the joinder issue was a procedural and tactical decision and the party who may be joined was not required to go into the “minutiae” at this stage. In all the circumstances, he would refuse the stay applicaiton, the judge said.
