THE JOINT SPECIAL liquidator of Irish Banking Resolution Corporation has appeared before a court in the US over bankruptcy protection for IBRC – and detailed how it overcharged customers for a period of 14 years.
IBRC filed for Chapter 15 bankruptcy protection in August, which would allow it to protect itself from US lawsuits while insolvency proceedings are under way abroad.
Following the hearing before the United States District Court of Delaware, it emerged that one of the special liquidators admitted overcharging had taken place, and customers had been repaid and compensated.
A spokesperson for the Special Liquidators of IBRC, Kieran Wallace and Eamonn Richardson of KPMG Dublin, said that two matters were being contested today before the United States District Court of Delaware. They concerned the Special Liquidators’ application for Chapter 15 bankruptcy protection for IBRC and approximately €1 billion in assets located in the United States.
The first concerned an application for wide ranging discovery taken by the Burlington 1 Hedge Fund in their objection to the Chapter 15 application being taken by the Special Liquidators. This has been refused.
The second concerned the application by John Flynn and others to lift the provisional stay which is in place pending the IBRC bankruptcy recognition hearing to allow the Flynns to proceed with the legal action brought by them in New York.
“The judge refused the application of the Flynns and the stay will remain in place pending the outcome of the recognition hearing under Chapter 15 of the US Bankruptcy Code,” said the spokesperson.
Joint Special Liquidator, Kieran Wallace of KPMG Dublin, gave evidence this afternoon before the United States District Court of Delaware.
In court, responding to objections based on alleged overcharging of interest to customer accounts at Anglo Irish Bank, Wallace confirmed that the bank had identified in June 2010 that it had a customer overcharging issue.
There had been a difference between the interest rate charged to customers and the interest rate documented in the corresponding loan facility agreements on customer loan accounts in the Republic of Ireland, US, Isle of Man and UK jurisdictions.
In July 2010 an internal steering committee was set up to oversee a forensic investigation into the circumstances surrounding this overcharging. The committee was also to ensure that the affected customers were fully refunded the overcharge amount along with compensation.
The steering committee informed the appropriate Regulatory Authorities of the issue.
A report was delivered to the board of the bank, and the regulatory authorities in December 2010. It identified overcharging affecting the majority of variable rate customer loan accounts in ROI, the Isle of Man and the US from 1 January 1990 to 31 July 2004.
It also identified that approximately 25 per cent of variable rate customer loan accounts in the UK were overcharged from 1 September 1991 to 30 June 2005.
Refunds and compensation was paid to affected customers in ROI, the US, the Isle of Man and the UK by the end of Q1, 2012.
Wallace also told the court that allegations of overcharging of interest to customer loan accounts for subsequent periods have been examined by IBRC internally prior to the special liquidation of the bank. They were also examined by the Special Liquidators.
The Special Liquidators, said Wallace, are satisfied that there is no evidence of deliberate, systematic overcharging of interest to customer loan accounts in subsequent periods (ie: post 2004/2005).