This story was first published in the Irish Mail on Sunday on 29/04/2012
By: Michael O’Farrell
Investigations Editor
A GARDA fraud squad investigation into rogue financier Harry Cassidy has ‘concerns’ that trust funds set up for disabled children were plundered in an effort to pay off struggling property investments.
Mr Cassidy hit the headlines last year when his investment management fund Custom House Capital, which had a number of Ireland rugby stars as clients, was described as a ‘sort of Ponzi scheme’ by a judge.
Now, the Irish Mail on Sunday has discovered that the fraud squad is investigating whether funds left in bequests by parents of disabled and sick children, though managed by ARF Management, another company he ran, were used to pay Custom House’s debts.
Judge Gerard Hogan put the firm into receivership last year. It also had its accounts and investments frozen by the High Court as gardaà and the Director of Corporate Enforcement investigate unauthorised transfers from client accounts.
All the parents and clients set the trusts up with Bank of Ireland, which sold them on to Cassidy.
Custom House was regulated by the Central Bank, though the provision of trust services is regulated by the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010.
This, coupled with the fact that investigations into Custom House will be delayed by the lengthy liquidation process, means that gardaà are focusing primarily on ARF Management at the moment.
Mr Cassidy hit the headlines in October when Custom House, whose clients included rugby stars Brian O’Driscoll and Ronan O’Gara, was put into liquidation.
A report by Central Bank investigators found that Mr Cassidy had taken up to €66m of pensioners’ and investors’ money without their knowledge or permission and used it to plug losses in property investments that his firm was incurring.
ARF Management controls 23 trust funds, some of which were set up by parents who wanted to ensure that their disabled and sick children would be taken care of after their death.
Such trust funds are typically willed to children upon the death of their parents and controlled by a trust management company, which manages and invests the money for the beneficiary.
Mr Cassidy, a former trust manager for Bank of Ireland, acquired the trust business for his company from the bank several years ago when it decided to exit the market.
ARF Management was not the focus of the Central Bank investigation into irregularities at Custom House but investigators did notice that transfers had been made from ARF trusts to meet spiralling debts at Custom House.
Inspectors found evidence that approximately €4.9m of equity and bond assets, representing virtually the entire holdings of two ARF trusts, was ‘used to meet the liabilities of various property-related developments promoted by CHC’.
It is not known whether these two trusts related to funds set aside by the parents of disabled children.
Mr Cassidy and his wife, Elena, remain the sole shareholders of ARF, which was run from the same office as Custom House.
Mr Cassidy declined to comment when contacted by the MoS.
An insight into how he ran the trusts in ARF Management is provided in the Central Bank’s report.
‘These are trusts established under wills and they go on in perpetuity,’ Mr Cassidy told inspectors. ‘So they only wind up on the death of the last surviving spouse of King George V blah blah, so it means they never end. So they have certain beneficiaries and we’ve got to make payments to them, which we do.’
Mr Cassidy told inspectors that he and another trustee had complete control of the trusts and how they were invested.
He said: ‘The only people we consult with is us because most of the beneficiaries are probably in some way indisposed.’
In at least one case, the MoS understands that a Custom House Capital investor who demanded his funds back has become an inadvertent victim of the scandal despite receiving the money.
That’s because gardaà have told him that they consider the funds that Mr Cassidy used to pay him were taken from an ARF trust belonging to someone else and will have to be returned.
In January, the MoS revealed that three top Irish rugby internationals were among the investors who ploughed €1.1bn into Custom House. Brian O’Driscoll, Ronan O’Gara and Paul O’Connell all gave the firm their money to invest before it was shut down.
O’Driscoll handed over at least €400,000 several years ago. The money was used to purchase an apartment in London, which is registered to a Custom House-controlled fund for the benefit of O’Driscoll.
O’Gara and O’Connell joined a Custom House syndicate, which owns a different British-based property investment controlled by the stricken company.
None of the investments made by the trio have been affected by the improper transfers of client funds at Custom House.
The firm controlled investments worth more than €1bn on behalf of 1,500 investors who had trusted Mr Cassidy with their money.
Kieran Wallace, the KMPG liquidator appointed to wind down Custom House, is due to give an update on progress to the High Court next week. He has said it will be a long time before he can establish how much client money was misused.
