Brian Lenihan: facing costs

The state faces huge legal claims stretching to hundreds of millions of euro from some of the world's largest investment groups because of losses they suffered investing in scandal-hit Anglo Irish Bank, market and legal experts warned at the weekend.

Experts say the big US investment groups will be obliged to investigate the circumstances of the 10% contracts for difference (CFD) transaction in July. A spokesman for Invesco in Atlanta said the investment group, which has about €400bn in assets under management around the world, was watching the Anglo revelations.

"I am confident that our managers would have been very closely monitoring it," he said.

Invesco and fellow investment giant Janus separately bought huge 7% shareholdings in Anglo, which at their height last summer were together worth over €550m. The institutions continued to be in the dark that Anglo was lending hundreds of millions of euro to the so-called Golden Circle to facilitate the purchase of its own shares in July.

A spokesman for Janus in London said the firm had no comment to make on Anglo.

It was revealed on Friday that Anglo loaned as much as €451m to the group of 10 unnamed investors to buy its own shares. Experts say the 10 appear to have been preferentially treated.

Dr Deirdre Ahern, law lecturer at Trinity College Dublin, said that a possible breach had taken place of Section 60 of the Companies Act 1963 which, subject to some exceptions, prohibits the giving of financial assistance by a company for the purchase of its own shares unless this has been approved by all shareholders.

"There may also be an issue under the Market Abuse Regulations 2003 and Part 4 of the Investment Funds, Companies and Miscellaneous Provisions Act 2005 which regulate insider dealing and market manipulation and provide for both civil and criminal liability," she added.

Experts say big US investment groups will be obliged to investigate the circumstances of the 10% transaction in July.

"Adding to our concerns are suggestions that the transaction may open the state to further questions," said
Professor Niamh Brennan at the School of Business,
University College Dublin.

"If you are a big investor then, unfortunately, the state has to be the target of any litigation and it will incur costs for the taxpayer just to defend it."

Frank O'Dwyer, chief executive of the Irish Association of Investment Managers, said institutional shareholders were "obliged to seek redress" if they suspected their clients had been wronged.

Alan Brett, an analyst at Manifest which advises institutions on corporate governance said Anglo could face the possibility of a class action lawsuit out of the US.