But the Sydney-based investment bank is unlikely to be troubled by such anger. The world of corporate finance is not for the meek and Babcock & Brown is used to dealing with discontent, in the process turning into an Australian financial powerhouse.

The institution that began life in 1977 as a small San Francisco-based operation employing just four people when it was established by Jim Babcock and George Brown has extended its tentacles worldwide, enveloping sectors from property to aircraft leasing, and wind energy to railroads. It's been nothing short of a spectacular transformation that has catapulted the firm from one worth just A$600m seven years ago, to Australia's second largest investment bank now valued at over A$4bn (2.4bn).

In the 1990s the seeds of growth were laid. Babcock & Brown stuffed its investors' money into highly leveraged property deals that saw them generate massive returns for little risk.

?We did it by selling quickly with highquality long-term tenants, " said Australian managing director Phillip Green in 1999 after German bank HypoVereinsbank acquired a 20% stake in Babcock & Brown for A$120m. ?There were situations where we were able to broker deals borrowing 98%, secure long-term tenants and on-sell the property in the short term with handsome profits." In one deal Green admitted to generating a 1,000% return within a year.

Green formerly worked with Arthur Andersen, and became involved in one of Babcock & Brown's first Australian deals, in 1983. Impressed, he agreed to join up as a partner the following year, establishing the firm's Australian office.

Green has a reputation for being a clever financial engineer. But there has been tragedy too. His elder brother, Max, was found murdered in a Cambodia hotel room in 1998 and a string of investment vehicles he had established quickly unravelled, leaving many wealthy Australian investors heavily out of pocket.

Unlike his brother, Phil Green doesn't want his investors drawing swords with the tax inspector.

?We have experience in putting deals together, but we don't want clients in a long-term fight with the tax office, " he said a number of years ago.

Among Green's wealthy clients is Melbourne's Lieberman family, which was an investor in the Australian dating website RSVP. com. au established by the Dublinbased businessman Stephen Mulcahy and sold last year to the Fairfax media group for 24m.

But while Babcock & Brown snaps up assets in Europe, Asia and the US, some observers fear that its investors could be in for a shock.

Green's financial wizardry, entering highly leveraged deals, has generated huge returns, but questions are being raised about the sustainability of such deal-making, both at Babcock & Brown and at its arch rival, Macquarie Bank.

?I have not touched a lot of them [financially engineered investments], ", Peter Morgan of fund management firm Capital 452 told the Australian Financial Review last month. ?You have all of the ingredients for not so much a bubble, but problems."

Babcock & Brown and its rivals typically structure deals such as the takeover of Eircom so that they appear more attractive to investors than they might otherwise. That means making highly geared acquisitions that pay a high initial dividend and healthy performance fees to third parties.

When the Valentia consortium that acquired Eircom in 2001 restructured 2.4bn of borrowings in 2003, a dividend of 446m was paid to shareholders including employees. Chairman Anthony O'Reilly stood to receive 20m. Eircom had reduced its debt to 1.8bn, but the refinancing in 2003 boosted that figure back to 2.4bn. Eircom said at the time that the restructuring had been undertaken to avail of low interest rates, rather than to pay a dividend.

?We will all duck for cover, " added Morgan. ?The way these things are being sold on yield with a lot of gearing, it's just not right. It will get pushed to the limit and the pressure will be felt at the retail end of the market."

For now at least, there seems little to put the brakes on Green's deal-making.

But Babcock & Brown's long-term involvement in aircraft leasing is now coming back to haunt the firm in the unlikely guise of California governor Arnold Schwarzenegger.

Babcock & Brown, which was headquartered in San Francisco prior to its 2004 Australian flotation, assisted Schwarzenegger's financial advisor, Paul Wachter, in establishing an investment vehicle that has seen the former actionmovie actor defer the payment of millions of dollars in taxes. A company owned by Schwarzenegger bought a four-year-old Boeing 747 jet from Singapore Airlines for $133m, and then leased it back to the carrier. Schwarzenegger's company . . . Legend International Air . . . made losses which enable the Republican governor to defer his tax bill.

The US Internal Revenue Service (IRS) is currently reviewing leasing deals set up by Babcock & Brown over a seven-year period, from 1993 to 1999.

The IRS is examining whether Babcock & Brown failed to register lease investments as corporate tax shelters with the US government, as is required under that country's tax laws. The investigation could take some time, and for the Australian firm it means an unwelcome appearance in the spotlight.

The investment bank stressed that while its clients are the targets of legal action, rather than the firm itself, the company may have to shoulder significant legal expenses and ?significant reputational and financial harm if litigation is successful".

Even if the consequences are as dire as that, Babcock & Brown is certainly strong enough now to weather such a storm.

The forecast for Eircom still remains somewhat unclear, although Babcock & Brown has said that it hopes to build on the operator's broadband and mobile business should its takeover, as expected, succeed.

Rob Topfer, Babcock & Brown's head of global corporate finance, maintains that the 2.36bn acquisition represents good value because it one of the few phone companies that still dominates the market.

The Irish economy is relatively small and the telecoms sector is unlikely to get competition at the network level, " he told the Financial Times recently. A sad indictment of Comreg, perhaps, but true nonetheless despite upstarts such as Smart Telecom attempting to crack the market. The honchos at Babcock & Brown will be unafraid to crack heads, meanwhile, to get the kind of result they want.

A tense takeover battle in 2001 for document storage and freight firm Ausdoc almost spiralled out of control. Babcock & Brown had built a 5% stake and wanted to dump four of the board's six directors and install its own nominees.

The move was strongly resisted, with the Ausdoc chairman and other directors attempting to rally shareholder support to beat off the invader. Babcock & Brown responded in kind, taking legal action to restrain the directors from recommending shareholders vote against Babcock & Brown's resolution to oust Ausdoc directors.

An entente cordial was eventually agreed, with Babcock & Brown taking two seats on the Ausdoc board. A few months later, the company was sold off.

Sealing the Eircom deal will represent one of Babcock & Brown's biggest to date. The achievement, however, and the real test of the bank's management, will be in ultimately offloading the incumbent at a profit. Now that will be financial wizardry.