A group of 16 former Davy executives and employees will be ordered by the High Court to release documents on the timing and income made from the onward sale of junior Anglo Irish Bank bonds they purchased in 2014 from businessman Patrick Kearney in a transaction that led to a Central Bank of Ireland fine last year.
While members of the so-called Davy 16 previously told the court that a €9.3 million profit was made on the bonds, Mr Justice Michael Quinn said in a judgment relating to the discovery of documents connected with the case brought by Mr Kearney that Davy and the 16 will be ordered to provide the dates on which the bonds were sold on, the amount at which they were sold, income and profit made, and how it was distributed.
Mr Justice Quinn also said that he will order the 17 defendants to hand over documents relating to the Central Bank’s investigation into the bond transaction.
However, the judge has also accepted the defendants’ request that Mr Kearney be made release documents relating to his alleged dealings with US investment firm Cerberus which, they claim, has a bearing on the case.
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The final form of the discovery orders has yet to be set, according to the judgment, uploaded on the Courts Service website on Monday.
Mr Kearney and his company, Kilmona Holdings, took legal action last year after the Central Bank fined Davy €4.1 million for various regulatory breaches in relation to the 2014 bond transaction. The regulator found that Davy failed to seek to identify whether there was a conflict of interest in the 16 buying the bonds from a client and also by not notifying its own compliance department about the transaction.
While the Central Bank document did not name the client, Mr Kearney took the case in the knowledge that it was him.
The plaintiffs are seeking to prove a claim of fraud, deceit and breach of fiduciary duty on the part of the Davy defendants. The claims are denied, and the defendants say the firm owed no fiduciary duty to Mr Kearney and Kilmona because they were “execution-only” clients.
The court has heard that Mr Kearney borrowed €18.5 million from Anglo Irish Bank in 2009 to fund the purchase of the bonds. The loans were later sold to a company called Stapleford Limited, an affiliate of US investment firm CarVal.
The Davy 16, also known as the O’Connell Partnership, agreed to lend Mr Kearney €2.36 million in November 2014 to settle his debt with Stapleford. They also paid an additional €3.022 million to Kilmona for the transfer of the bonds. Adding in commission fees, the total outlay came to almost €5.59 million.
Mr Kearney has alleged that the Davy employee he was dealing with, Tony O’Connor, who was part of the group of 16, told him that the €5.59 million was the most he would get for the bonds, even though he claims to have been told by another firm, Cantor Fitzgerald, that the amount being offered was below their market value.
He claims that he was not informed at the time of the transaction that the O’Connell Partnership was made up of Davy employees.
However, the defendants allege that Mr Kearney “unlawfully concealed from and/or misrepresented to Stapleford his intentions regarding the bonds and the price available for them”, according to Mr Justice Quinn.
Mr O’Connor has also claimed that Mr Kearney was offered extra time to see if he could secure a better price, but Mr Kearney insisted that the deal be completed on November 14th, 2014, as he was due to travel to the US two days later to conclude a refinancing of £300 million (€345 million) of debt owed to Cerberus.
Mr O’Connor alleged that the urgency was because the Stapleford debt – in relation to the Anglo Irish Bank bonds – had to be addressed before the Cerberus debt could be settled. Mr Kearney has denied this account of events.
