ANGLO IRISH Bank is contending it relied on the expertise in hotels of a US businessman when entering into a $50 million deal to fund the purchase and development of two hotels in New York, the Commercial Court has heard.
Timothy Haskin, general partner with Anglo in the Anglo Irish Hotels Fund, said yesterday he and Anglo “collectively” decided in 2006 to buy the hotels “with our eyes wide open”, knew there were risks, decided to take them and to “jump off the cliff together”.
Under cross-examination by Eoin McCullough SC, for Anglo, in a test case by investor Gerard McCaughey, Mr Haskin said he believed original renovation cost projections of $31 million for both hotels were reasonable and adequate. Those costs later increased to $103 million, beyond the capacity of the hotels investment fund, and neither of the hotels — the Beekman Tower and Eastgate Tower in Manhattan — has been renovated, the court has heard.
Mr Haskin agreed Anglo was “furious” about the increase but disagreed the bank had regarded as final the $31 million figure provided at the outset by Mr Haskin or his agents. He agreed the figures were provided to an Anglo committee, whose task was to approve the deal, and he recomended it to the committee.
Anglo was “a sophisticated lender” involved in projects in New York and Boston, knew the figures were preliminary, had discussed the matter and had agreed the figures were reasonable, he said. He and Anglo were partners and the bank knew “exactly what I knew”, he added. Anglo knew how the renovation figures came about before the partnership agreement was signed in July 2006, he said.
He agreed there was no letter from him to Anglo asking it not to proceed with the project until the budget was finalised.
Mr McCullough said Anglo was not a hotel owner and the Anglo personnel involved in this deal did not have the expertise of Mr Haskin, a former managing director of the Tishman Hotel Corporation, and another US businessman, John Livingston, in relation to hotels, and had relied on them. Mr Livingston pulled out of the deal in June 2006.
When counsel said the worth of the deal depended on renovation costs, Mr Haskin said they were also other issues, including securing certificates of occupancy. When Mr McCullough said Anglo official Paul Brophy would say he was certain Mr Haskin had not told him the certificates of occupancy were a serious issue, Mr Haskin said that was a “total lie”.
Mr Haskin also denied counsel’s suggestion there was no agreement between him and Anglo to seek a price reduction of $8 million from the seller of the hotels at a meeting in April 2006.
Yesterday was the fourth day of the action by Mr McCaughey over the hotels fund in which 50 people invested an average $1 million each in 2006. The action, against Anglo and the Anglo-owned Delaware-based Mainland Ventures Corporation (MVC), is a test case for 23 other investors in the fund.
Anglo has denied claims of fraudulent and/or reckless concealment and/or misprepresentation concerning the fund. It has also denied failure to disclose issues relating to zoning of the hotels and renovation costs.
The case resumes on Tuesday.
