And we now commence with our second session of today which is public hearing with Mr. Derek Quinlan, former executive chairman and founder of Quinlan Private. The Committee of Inquiry into the Banking Crisis is now resuming in public session. Can I ask members and those in the public Gallery to ensure that their mobile devices are switched off. At our next session we will hear from Mr. Derek Quinlan, former executive chairman and founder of Quinlan Private. This is the first of several sessions at which the inquiry will focus upon the relationships of the property development companies and their principal financial institutions.

Derek Quinlan founded the business which was to become known as Quinlan Private in May 1989. He has been involved in significant investment and development in the United Kingdom, Ireland and several other European locations over a 25-year period. He acted as both principal and adviser in some of the most significant real estate investments of the last 14 years. Mr. Quinlan retired as chairman and founding partner of Quinlan Private in May 2009. Mr. Quinlan, you're welcome before the committee this afternoon.

Before hearing from the witness, I wish to advise the witness that by virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to this committee. If you are directed by the Chairman to cease giving evidence in relation to a particular matter and you continue to so do, you are entitled thereafter only to a qualified privilege in respect of your evidence. You are directed that only evidence connected with the subject matter of these proceedings is to be given. I would remind members and those present that there are currently criminal proceedings ongoing and further criminal proceedings are scheduled during the lifetime of the inquiry which overlap with the subject matter of the inquiry. Therefore, the utmost caution should be taken not to prejudice those proceedings.

Members of the public are reminded that photography is prohibited in the committee room. To assist the smooth running of the inquiry, we will display certain documents on the screens here in the committee room. For those sitting in the Gallery, these documents will be displayed on the screens to your left and right. Members of the public and journalists are reminded that these documents are confidential and they should not publish any of the documents so displayed.

The witness has been directed to attend this meeting of the Joint Committee of Inquiry into the Banking Crisis. You have been furnished with booklets and core documents. These are before the committee, will be relied upon in questioning and form part of the evidence of the inquiry. So with that said, if I can now ask the clerk to administer the oath to Mr. Quinlan please.

Thank you. Before we commence there, do you have your phone switched off, Mr. Quinlan, have you?

Pardon?

Do you have your phone switched off?

Oh I do, yes.

Okay, thank you. All right, with that said so, I'll get down to business and maybe if I could ask you to make your opening remarks please, Mr. Quinlan, to the committee.

Thank you, Chairman. Good morning, Chairman, and inquiry members. I have furnished the committee with a written statement in accordance with a request made to me. I don't intend to quote from this statement but will welcome the opportunity to make some additional comments to the inquiry.

It may be of assistance if I begin by providing the committee with a short introduction of myself so that I may outline my financial background and experience. In 1970 I graduated from University College Dublin with a bachelor of commerce degree. Subsequently I trained at Cooper Brothers and Co., now known as PricewaterhouseCoopers, where I qualified as a chartered accountant in 1973.

While at Cooper Brothers and Co., I worked in their tax department. In 1975 I successfully applied to the Civil Service Commission and became an inspector of taxes, where I stayed for six years. In August 1981 I was made a tax partner at John Woods and Co., now known as Grant Thornton. In May 1986 I formed Quinlan Ryan, a small chartered accountancy firm, with two partners, and the firm remained in existence for three years. In May 1989 I commenced trading as a chartered accountant under the title "Derek M. Quinlan, Chartered Accountant". In 1990 I put together a deal to purchase a number of units in the recently opened Square shopping centre in Tallaght, Dublin. This was my first significant property deal on behalf of clients. Other significant investments took place during the 1990s, including an investment of approximately €250 million in the IFSC.

The committee will have noted from my statement that I refer to the ... the activities of Quinlan Private, as I was asked to provide a statement regarding my company. I believe it is important to note that I would have personally invested in a large number of the investments put together by Quinlan Private. I would also have invested personally in other investments. The committee has, I'm sure, at this stage heard from other witnesses that, with hindsight, the growth in the Irish property market from 2001 to 2008 was enormous. It is now clear, for a number of reasons that were then unknown to me - and, I believe, to the majority of people at that time - that this growth was unsustainable. I genuinely did not believe that the market was in danger of collapse until I heard of the fall of Lehman Brothers in September 2008.

In my opinion there are three key areas which I feel are important in the context of the inquiry. During the period 2002 to 2007 there was a huge "feel good" factor in play in Ireland and most people bought into this reality, including myself. There were very few opposing views. This was just not an Irish phenomenon, it was actually international. In his book The Map and the Territory, published in 2014, Alan Greenspan, the former chairman of the American Federal Reserve said:

The Federal Reserve['s] ... highly sophisticated forecasting system did not foresee a recession until the crisis hit. Nor [he continued] did the [...] forecasting model developed by the [...] [IMF], which concluded as late as spring 2007 that [the] "[...] economic risks had declined since September 2006 [and that] [...] signs everywhere were encouraging."

The second point I'd like to make, I did not realise that the long-term bank finance being provided by the Irish banks was being funded on short-term borrowings from international banks and others. This model was clearly not sustainable. If I had known this at the time, I certainly would not have invested in Irish property. Finally, I was not aware - and I believe that most people were not aware - of what was going on internationally with sub-prime lending in the United States. This had, I believe, a huge impact on both the Irish and international banking sector, as liquidity dried up in a very short period of time.

I believe it's important to note that Quinlan Private invested in quality commercial properties. These were in prime locations. I have a fundamental philosophy in relation to property investment which is based on four main tenets: location; timing; liquidity; and confidence. It is clear, in Ireland, that, at the one time, all of these factors were decimated. I did not foresee this. I don't believe it would have been reasonable to do so. Neither the Irish banks nor the Ministers for Finance nor the Economic and Social Research Institute knew that the banking crisis was imminent. Rather, all parties envisaged a very bright future for the Irish economy and the Government of the day continued with high expenditure to fit in with that forecast.

I would like to conclude by taking this opportunity to state that I am deeply saddened at the fallout from the banking crisis. I recognise that, for a very large number of people in Ireland, it has had an unprecedented and devastating impact.

Thank you very much, Mr. Quinlan. We'll commence with the questioning this morning, so if I can invite Deputy Joe Higgins. Deputy, you have 25 minutes.

Thank you. Good afternoon, Mr. Quinlan. Mr. Quinlan, the banking inquiry is for the purpose of, and I quote from the terms of reference, "to inquire into the reasons Ireland experienced a systemic banking crisis, including the political, economic, social, cultural, financial and behavioural factors and policies which impacted on or contributed to the crisis". Now, in your opening statement, Mr. Quinlan, you say it's not accurate to call you a property developer. But can you give the inquiry any insights into how the activities of people like yourself - however you would describe yourself - and companies and partnerships, like Quinlan Private, impacted on or contributed to the crisis?

Well, we ... I can only ... I can't answer for anybody else, Deputy, but, I mean, we were not aware that ... I say hindsight is 20/20 vision, we were not aware how bad things were in 2008 or 2007, in fact. And, as I said in my opening statement there, the sub-prime crisis in America, nobody here could spell "sub-prime", you know, there was no sub ... what was known as sub-prime lending that took place in America ... was taking place in Ireland. And that had a devastating effect on liquidity in the banks and it came very quickly. And, as I quoted from my opening statement, Alan Greenspan, who was 19 years the chairman of the Federal Reserve, said that their own systems didn't forecast the dreadful happening that was going to happen in the financial world.

So just to clarify, are you putting all this then on the macro-financial situation internationally and-----

Well, Ireland was ... in my view, Ireland was affected by the sub-prime crisis. Banks here were very seriously ... because liquidity in the banking system dried up very, very quickly.

But we ... we'll explore some of those and related issues. Could I just bring up the graph from your introductory written statement ... from page 3, which will come up on the screen there, Mr. Quinlan. "Assets by Type - Based on valuation", and this is from your 2006 business and transaction overview, Quinlan Private.

Yes.

So, we have here 6% retail, then we have office, then the light blue is hotel and mixed use is a considerable portion, and then some residential. Can you just say ... tell us, what is mixed use, just briefly?

Well, in a mixed-use development ... it would contain an element of retail, it might contain some warehousing, storage, all the things that would make a mixed-use development.

Okay. Would land earmarked for future development come into ... under that?

No.

What would that be in?

Well, at the time, as you can see there, at that time, we didn't have land for future development or very little, I would suggest.

Okay. Mr. Quinlan, on page 5 of your ... your written statement, you gave us a table showing what seems to be exponential growth of the total property assets under management.

And if I just take an example there of... for example, in 2003, your total assets is €1.6 billion, which is a 43% increase over 2002; 2004 €3 billion, which is 83% over 2003; 2005 is an increase of 41%; and then you say that, I think, your total assets were about €10 billion probably by 2008, which would be another 136%. So from 2000 to 2008, Quinlan Private went from €602 million to €10 billion - a growth rate of 1,561%. Looking back on that, is that an astonishing rate of growth of your assets?

Well, that's factually what happened, Deputy, and I can explain. You know, in 2003 ... The difference between 2002 and 2003, we were involved in very significant international investments at that point in time.

And in general how-----

Sorry ... so these were not investments in Ireland, these were investments... We were involved with Deutsche Bank in the refinancing. They had fixed assets on their ... they had property assets on their balance sheet and, in 2002, Deutsche Bank, for the first time, I believe, in a long time, maybe in their history, lost money and the advice from their advisers to the board of the bank was they have to get rid of their property that was on the balance sheet and also to get rid of their private equity business because Deutsche Bank would have been famous for holding investments in companies like Mercedes-Benz, Siemens and other well known German companies. So they had to sell this property and we were involved in the refinancing of that.

In general, Mr. Quinlan, you financed this large accumulation from a range of banks, Irish and international, would that be true?

Yes.

Okay. Now on page 3 of your opening statement, Mr. Quinlan, you say, "Anglo Irish Bank was Quinlan Private's principal financial institution". And Anglo's assets growth, which we've had evidence about in the course of the inquiry, would kind of mirror to some extent, the rate of growth of Quinlan Private. For example, in 2004, you don't ... I will just allude quickly to these figures. In 2004, Anglo's assets grew by 34.5%; 2005, 44.4%; 2006, 32%. So Anglo was growing exponentially, obviously, with much greater loans outside of Quinlan Private. Can you see a relationship between what was going on with Quinlan Private and with Anglo Irish at the time?

It was exactly the same, Deputy, and when you refer to Anglo Irish Bank, I would just like to make a quote so ... just to put it all in context for you if you don't mind for a moment. Oliver Wyman in January 2006 at the World Economic Forum in Davos - Oliver Wyman - I will explain who they are in one moment - described Anglo Irish Bank as "the world's top performing bank" in a report called "State of the World's Financial Services Industry" presented at the World Economic Forum. Oliver Wyman is a global managing consulting group with 3,700 professionals. It is part of a bigger group called Marsh and McLennan, which is quoted on the New York Stock Exchange and has a market capitalisation of €31 billion. In fact, I see a note from Davy Stockbrokers in 2003 quoting, in relation to Anglo Irish Bank, "A phenomenon in the European banking sector, excellent and tightly knit management team, a simple and ruthlessly pursued business model, an entrepreneurial culture which is rare in a bank." I am just quoting two things in relation to the bank so I can't comment about ... you know, I haven't followed the statistics that you are saying in relation to the bank but I would have said that all the banks were showing exponential growth.

Yes, and the evidence is that there was a heavy concentration of property lending as part of that growth. But can I put to you then what Governor Honohan of the Central Bank said in relation to this type of growth:

A very simple warning sign used by most regulators to identify a bank exposed to increased risk is rapid balance sheet growth. An annual growth rate of 20% is often taken as a trigger. Each of the locally controlled banks had at least one year in which this threshold was triggered. One of them Anglo crossed it eight out of nine years and indeed this average annual growth rate was 36% from 1998 to 2007.

And other witnesses here reference alarm at that level of growth. Were you alarmed by the level of growth in the banks that you were dealing with, of their lending? And, indeed, had you any worries about your own amount of exposure?

Yes, we at the time ... hindsight, as I say, Deputy, is 20:20 vision, but, at the time, there was no sign out there that any of the Irish banks were stressed. You know, as I say I am only quoting from the Oliver Wyman report to the World Economic Forum at Davos, which is a very prestigious meeting that takes place every year, and a firm of this repute would not be making that statement about an Irish bank without some hard facts at the time. They don't do that kind of thing.

On the other hand, Mr. Quinlan, would the property bubbles and crashes, for example, in the Scandinavian countries in the 80s and 90s, would that not have given you pause for thought?

Well, quite frankly, Deputy, I was not focused on ... I've never invested in Scandinavia and I wasn't focused on what was happening in Scandinavia in the late 80s or early 90s. I did not reference it to what was happening here in the-----

Would you agree that there are elements here that are universal? Scandinavia just happened to be the ... you know, Professor Morgan Kelly illustrated up to almost 30 property booms over the last 20 or 25 years which bubbled and then burst.

Well, obviously, one of the points that I have made there in my submission is about timing. When I spoke just a few minutes ago, I spoke about how important timing is so I can't comment about the Scandinavian... I don't know enough to say anything about Scandinavia.

In page 10 of your written statement, if you can put it up please, your modus operandi under that graph, financial gearing is... you say "deliver the benefits of financial leverage providing the investor with geared returns on the non-recourse basis". Can you explain that, please?

Sorry what page?

It's page 10 of the written statement that Mr. Quinlan has provided and those arrows there. It's the second last one, financial gearing. It is from "Business and Transaction Overview", April 2006, Quinlan Private.

Just to explain, Deputy, depending on how much ... you measure the return on an investment, on the amount of equity that is invested. So if you buy a property for €1 million and you invest €1 million in it so there is no borrowing and the property is producing, we will say, 7%, you're getting a 7% return on your €1 million. But if, in fact, you can gear that and put in half a million bank debt, which would be comfortable, assuming that the level that the interest rates were at the moment, then you are improving the return on your equity because after 12 months, if you sell the property, we'll say, for €1.1 million, then there is a much higher return on your equity because you have only €500,000 of equity in there. You're earning 20% on your equity in a year. So people in, not alone in property companies, publicly quoted companies, everybody uses bank debt to ... They need bank debt.

And was the use of extreme leverage a factor in the crash?

I think there is ... like, in hindsight, it's very easy to say the answer is yes to that question. There was definitely, in some instances, you know, there was too much leverage being given. But you-----

Okay. Mr. Quinlan, speaking in general terms, the average loan discount of loans transferred by the banks to NAMA went from the 30% suggested initially by the banks to 58%, the write-down.

Yes.

Did that size of discount surprise you or Quinlan Private at the time?

Well, I had retired from Quinlan Private when NAMA came into operation in November 2009. And I'm not too sure how you arrive at that statistic. What's ... how do you arrive at that? I'm not ... I don't understand the percentage.

Well, the face loans ... the face value of the loans before they were transferred and to when NAMA took them over was a haircut of 57%.

Sorry, I don't understand, Deputy. Is that based on €74 million of debt-----

Yes.

-----or the cost price of the property?

Mark to market-----

Yes.

The write-down was-----

No, no-----

-----NAMA told us in evidence-----

Sorry, I don't understand.

The book value, Mr. Quinlan.

The book value?

The book value, yes.

The book value. But the book value, Mr. Chairman, could have been more than €74 million. That was the value of the debt.

Well, in any case, it was, would you agree, a substantial haircut?

Oh yes.

In ... do you agree that there was a bubble? Would you call it a property bubble that existed in the 2000s?

In hindsight, in hindsight, Deputy, there is no doubt about it, that prices in Ireland fell more than anywhere else and I have a graph here in relation to what happened in Spain as a comparison and our prices dropped significantly more than Spain. I cannot say why the reason for that is.

Okay. Mr. Quinlan, in evidence to this inquiry, a US regulator and financial prosecutor, Professor Bill Black, you may have heard of him; perhaps you didn't?

No, I haven't heard of him.

He spoke about the dangers which he claimed were ... should have been well recognised of too fast a growth and I'll just quote, it's page 1 and 2 of his written ... or, sorry, his oral testimony, but you don't need to read it because I'll read a paragraph or two.

Is this going to come up on the screen?

It will, yes, but I think it's easily absorbed, the idea that he is putting here. So, to quote, he said:

Here is the recipe which leads to something distinctive. It is a recipe that the institutions [he's speaking about financial institutions] follow-----

Sorry, what page there?

Yes, we need to assist the witness and just show him on a page where it is, Deputy.

It's in the very first of his oral evidence, of Mr. Black's oral-----

Yes, and what page?

It's page 1 and 2 from my-----

Okay, all right.

I'm on page 260 here.

Yes, that's all right.

Yes, if you just ... sorry, we are nearly there, just keep going ... scrolling up, please. Now, yes, exactly. The last paragraph there, Mr. ... oh, stop, stop.

Yes, "Here is the".

Okay.

So, "Here is the recipe"; can you see that?

Yes, I can see that now.

Yes. I'll read it quickly perhaps:

Here is the recipe which leads to something distinctive. It is the recipe that the institutions follow which produces the worst losses, is most likely to cause hyperinflated bubbles, is most likely to cause catastrophic individual losses, and is most likely to cause future crises. I am speaking about the past throughout the world, but my focus is going forward in Ireland with regard to policies the committee might consider recommending. The recipe has four ingredients: grow like crazy; make terrible quality loans - not kind of bad but absolutely terrible and obvious on their face loans; while employing extreme leverage, which means a whole lot of debt compared to equity; and while setting aside no meaningful loss reserves for the inevitable catastrophic losses which will follow.

And just the next paragraph:

these four ingredients are followed it is mathematically guaranteed - and let me emphasise it is not hypothetical but mathematically guaranteed given how ... accounting works - there will be three ... things. The bank will report, almost immediately, record profits. Under modern executive compensation the senior leadership will promptly be made wealthy but many other people in the food chain will also be made wealthy because the same perverse incentive structures are used to ensure they make those really crappy loans I talked about. The third sure thing is that down the road there will be catastrophic losses.

Question, Deputy.

Do you recognise any prominent features that were manifest in the Irish property bubble and bust from Mr. Black's theoretical outline there, Mr. Quinlan?

Well, I've ... this is the first time, Deputy, that I have read this. What I'm saying, in hindsight, of course one can look back and say, you know ... but a lot of people at the time, Deputy, and I want to just ... just to put this in context, the ... sorry, I apologise, I just need to get my paper out. A lot of people mistook what was happening in the market place and including those who internationally were extremely well advised. The chairman of the Federal Reserve, in 2007, felt that $100 million ... billion was going to be the sub-prime losses. This is the chairman of the Federal Reserve in 2007. Now, that was around February 2007. Now, the chairman of the Federal Reserve, they have a wonderful system, as I refer to it back here about Alan Greenspan, they did not see this coming. Now, that was in March 2007 where, you know, the Federal Reserve, the biggest Government bank, as I understand it, in the world did not see it coming while, within a very short period of time, in May 2008, the Swiss bank UBS announced that they had $37 billion worth of write-downs due to their holdings of the US mortgages. It's a very short period of time. It's ... I know it's just ... it's over a year, but there's the chairman saying ... so, it's very difficult to say ... because we're taking this in extract, I'm taking in extract, what I have found international commentators were commenting on the market. In hindsight, there is no doubt about it that some of the comments that are here are valid for not alone in Ireland but elsewhere.

In that regard, Mr. Quinlan, in regard to how it worked with developers and, you know, taking risks and speculation, in The Irish Times in 2004 there was a prominent article in relation to what was, in those circles, a rather famed deal that Quinlan Private organised, which was the sale of 11 acres which you purchased in 2000 for €32 million and sold, four years later, for €85 million, which was a speculative gain of €53 million and all that happened was you got planning permission for it. Do you think that that is morally in the interest of society, that that type of gain could be made on land speculation?

Well, Deputy, I'm going to tell you something that you're not aware of in relation to that site. When we bought that site initially, our intention was to put a hospital out there and bringing in an international, US operator to build a hospital that would have student facilities; in other words for students in UCD or College of Surgeons could go there and I travelled to California to meet these people. And I said, "We want to build a new hospital with new facilities, big accident and emergency, everything there" and we spent a lot of time looking at this before we looked at any alternative. And what happened was that these people came here ... now, the investment in this hospital and for Ireland would have been huge, hundreds and hundreds of millions, to build a completely new, standalone student hospital that would teach students, the best accident and emergency and American facilities. And they arrived in Ireland and they went straight to the VHI and the VHI said, "Build the hospital first and then we'll see whether we'll give you accreditation." So that was our plan-----

This is outside the terms of reference here, Mr. Quinlan-----

Sorry, so I'm saying ... I'm answering the question, that the Deputy is not aware-----

Okay.

-----that our intention had nothing to do with what we ended up going for planning. We wanted to-----

Yes, it's interesting, but-----

Let's get back to the questions of today now.

Pardon?

I need to get back on to the reason why you're-----

Yes I think Mr. Quinlan is happy to discuss this issue.

Yes I am, but I need a report at the end of this work as well.

The point that arises, Mr. Quinlan, I'd be very interested in your view is that the 488 apartments that eventually got planning permission, that speculative gain for clients would have transferred, just the gain, into about €70,000 or €80,000 extra on young people purchasing that. Is ... do you see that as being socially just or not?

Site values went up very significantly in Ireland over this period and we applied for planning permission and tax was paid in full on the gain. So we did nothing that was not correct. We ... our original------

No, I didn't suggest that.

Deputy.

Sorry.

I didn't suggest that, but do you accept that there's ... it's the land prices and the deals that were done at the time added hugely to the burden of young people trying to buy a home?

It didn't just relate to the site in Stillorgan, land prices in general have gone up hugely. I mean, the Kenny report back in the '70s tried to do something about the price of land, or building land, and the recommendations were never followed to the best of my knowledge.

Finally, Deputy.

Sorry.

Finally, Mr. Quinlan, in your introduction to us in relation to the relationships between the property sector and the political world, you say that you gave £20,000 to the Tory Party in England, to four seats I think, four campaigns of £5,000 each to Tory candidates.

No, no, no. I didn't say that. I said it was ... I didn't say that. I said we donated ... let me get my statement. There wasn't ... it wasn't to four candidates, Deputy.

Well then to four constituencies-----

We need to get accurate ... we need to get it accurate, Deputy, if you put it out there.

Well, it's ... I'm ...

2.12 in the Mr. Quinlan's statement, it said that-----

"We made a contribution to the English Conservative Party for four seats at £5,000 each at a dinner with David Cameron."

Yes, that's correct.

"We also made a [another] contribution." And then you say, Mr. Quinlan, that you would have taken seats, or Quinlan Private "would have taken seats at dinners and golf outings held by Fianna Fáil, Fine Gael and the PD's [Progressive Democrats]". What was the purpose of this financing of these political parties?

Well, Deputy, what happened at the time was that somebody who we would have been friendly with would have rung, and this was typical across most of the political parties of the time and said, "We are having a golf outing." And this would be your friend, because I personally only knew one or two politicians at that time. And know them on a very casual basis. So I would say there was no politician a friend of mine. But these would be people who worked on a voluntary basis for Fine Gael or whoever and rang up and said, "We're having a golf outing we'd like you to put in a team." And that's the basis we did it. We didn't look for any political favours, good bad or indifferent.

All right, thank you very much, Deputy Higgins. I do have to move on. I just want to come back to an earlier aspect there of Deputy Higgins's questioning in regard to the NAMA and its approach. Could I ask you, Mr. Quinlan, in the pre-crisis period did you or management colleagues believe at any point that a property bubble was in the making or were you generally relying on the soft landing theory?

We believed in a soft landing theory, that's what we believed in. And we weren't alone in that. I mean, you know, if you look at the commentary from the ESRI at the time, that's what they were also saying.

Okay. Did you commission any evidence or research that would support the soft landing theory and were you provided by any documentation or supporting evidence in that regard from any Irish agencies such as the Department of Finance or the Central Bank or anybody else?

Not from the Department of Finance or anybody like that, Mr. Chairman, no.

Where was the assumption of a soft landing coming from?

This is what our belief was at the time. And as I say I can quote from the ... you know, the ERSI report in 2008, "The economy has the potential to grow at around 3.75% a year over the coming decade, despite significant short-term problems." I believed that we were going to have a soft landing. Obviously in hindsight we didn't have a soft landing, it was devastation.

Right, thank you. Senator O'Keeffe.

Thank you, Chair. Mr. Quinlan, you explained to us at the start that you qualified as a chartered accountant and that your first property deal was in Tallaght. And then you moved in obviously-----

I ... yes ...

I'm sorry ... you moved at some point then to handling private clients. And you talk about Quinlan Private clients on page 7 of your statement. And I'm just wondering, how did that emerge? Where did the private clients start to come from and what attracted you to that aspect of business, given that your first deal was, if you like, pure property?

Well my ... I started off in 1989 having had eight years experience in private practice as a chartered account. So, I wasn't starting afresh and I started off with a small nucleus of clients. And it was very tough. And I decided at the time that we would offer our clients a different service. And what I mean by that is that no firm was building financial models to show clients where they could be giving them any kind of forecast, where they could be in five years time or three years time or whatever. And I believe we were the first people to do that. To actually say, "This is a forecast of where you're likely to be." And as a result of that we attracted, it was purely by word of mouth, more clients.

And as you say word of mouth, Mr. Quinlan, does that mean that you would approach people or that-----

No.

------the clients would approach-----

The clients would-------

-----you through each other?

One of the big conversations, as you might know Senator, out is about, you know, education and everything. Otherwise it's ... at particularly 1989 was, you know, what's happening in Ireland Inc? There were lots of good things out there and we were doing something that no other firm in Dublin was doing. Remember my competition in 1989 was Arthur Andersen, Pricewaterhouse it was then known, they were you know ... were the competition out there. And you know, I was on my own. I had one girl who used to work with me in the revenue in a very small practice.

And-----

It was built from very, very small beginnings.

And did you see then, as you went through the '90s into 2000 and so on, could you see an increase in the number of your high net worth clients, were they growing all the time?

Yes, they were growing.

And what did that tell you about the state of the economy and the business that you were in?

Everybody at the time, as I say there was a fantastic feel ... we've forgotten the feel good factor. And I know you're ... you know, this is a very important inquiry but there was a tremendous feel good factor here in Ireland, people felt good to be Irish.

And as you were-----

And-----

-----managing their financial affairs-----

Yes.

-----were you just offering your expertise on the property side by now that had developed substantially or were you also offering other advices about financial matters?

Well, in general financial matters yes, but not ... property was the one that we had the knowledge in and the expertise. So nobody ever asked me about what shares they should buy.

And as you say, part of what you were doing in 1989-1990 that was different was that you were forecasting where things would be and------

For the client.

For the client.

Based on the client's ... I mean, in very simple terms we used to build a model that would show the client their forecast of their income, what tax they would have to pay. Then you would put in what they had ... what they were living on and you might have come up with a surplus or a deficit. But you gave a client some kind of a forecast out, three or four or five years, that they could have something to go home and talk about.

And as you did that and as people came to you, and you could see that this was growing, did it become ... how did it turn then that you started to create, if you like, particular vehicles for particular projects? So there's project X over there, well I'll gather these five guys for that project. How did that all emerge?

Well it was ... if ... I mean we started off, you know, when we went to The Square in Tallaght in 1990, it was a total accident. You know, this wasn't a great plan. I went to lunch, I won't mention his name, but somebody whom the committee would know very well in the world of finance, and he reminded me that my former partner was putting together a partnership, a very complicated structure to buy two or three shops up in The Square in Tallaght and he said to me, "You should do that as well."

And I went out the door after a nice lunch and I went to the first auctioneer I knew and I knocked on his door and I said, "I want to buy some shops in The Square in Tallaght." I knew the ... I knew Tallaght from back in the '60s when I used to cycle up there and there was nothing on The Square, and I knew it when the Connors family were the main occupants up there in the '80s.

You're giving colour now, Mr. Quinlan-----

Sorry, I apologise.

-----to Senator O'Keeffe.

I apologise.

So if we can stay on the evidence-----

I apologise.

-----if you don't mind, please. Okay. Thank you.

So you knew Tallaght, so you were encouraged to do that-----

Yes.

-----but what about the urban renewal scheme in Tallaght? Was that-----

That was ... yes.

Was that an attraction?

Yes. That ... I mean, that ... the urban renewal scheme, I think, was brought in by the then Minister for Finance in 1987, and Tallaght, you know, has been transformed as a result of it. And the IFSC - I remember the IFSC when there was nothing down there.

So were you one of those people who believed in the urban renewal scheme, in the town renewal scheme, in the-----

Yes, I did. I thought it was great. The purpose that the then Minister brought it in ... and it was supported by ... you know, when there was a change in government ... it was very, very good, I believed.

And did you, Mr. Quinlan, ever lobby to retain those schemes and those allowances?

Absolutely, I have never lobbied any politician in my life.

Ever?

Ever.

Okay.

And that includes Mr. Cameron.

Okay. Is it fair to say that you became known as a man who was good at understanding those schemes and could ... and could, if you like, if you'll excuse the parlance, work your way around them?

Well, there was no working the way around them. The law was there. The legislation was there to encourage people to invest in certain areas, these designated areas. So it was very straightforward, Senator.

Okay.

There was no mystery about it, in other words.

Although I think people did argue and report that you were just particularly good at it or particularly quick at it.

Maybe I was able to explain it, Senator, to the clients.

Okay. That's fair enough. Now, in the book Breakfast with Anglo, Simon Kelly's book, which I'm-----

Yes.

-----you may be familiar with, and if you're not, that's fine but he talks about the idea of selling tax allowances. He said that they would be ... separate the property asset from its tax allowance and sell the tax allowance to high net worth individuals. Is this something that you were familiar with or is it something-----

No, we bought the property and if the allowances came with the property ... we never split the thing.

Okay. Now, obviously, as your business progressed and grew - and we've seen the figures; it grew quite significantly - you obviously became more involved with more banks as time went by, I take it.

Yes, that's correct.

So could you describe the sort of business case, the process and criteria that Irish banks applied and how, if they did change in that period of time, how did they change? Because we've heard evidence, obviously, of how some of their models changed over time.

Well, I don't know the internal processes-----

I appreciate that.

-----of the ... of the banks, and, you know, for the first nine years when I was in practise, we had no contact whatsoever with Anglo Irish Bank. They did come and ask us to do some business but I thought they were too expensive and we only dealt with two or three banks. So I have no idea what the ... the first transaction we did was with the Bank of Ireland but that was the ... with the assistance of a friend of mine who brought me into the Bank of Ireland and said "These people will finance The Square in Tallaght."

And did you see, at all, any change in the way banks behaved towards you? Now, I don't mean their internal processes, because clearly you couldn't say-----

Well, I think, you know-----

-----but you were the client, if you like.

-----the reality is when people ... when you become ... it's like if you're playing football and you suddenly have the touch of Ronaldo, who plays for Real Madrid, lots of people want to see him. I, you know, went from, you know, very, very modest earnings, Senator, and I'm not going to say it here in public, but you'd all be surprised ... I'm probably the only trainee who had started in Cooper's ... Cooper Brothers in 1970, who 20 years later was earning less money than I was in 1970, and I think that was a pretty unique position to be in.

But possibly not ... possibly not the case 20 years later or 15 years later, but anyway.

Yes. No.

But my point is, did you see a change? Or how did the banks behave towards you now that you were, if you like, a player?

Well, the reality is that, you know, not in the ... not so much in the 1990s but I would say in the years 2000s what happened was more banks wanted to deal with you, more international banks wanted to deal with you.

So they were coming to you.

They were coming to me.

And what would they say, Mr. Quinlan? What were they ... how would they do that? Take you to lunch or-----

"We want to do ... we want to do business with you."

Right.

I, in general, refuse all corporate invites, in general. I'm making a generalised statement. But I got to know lots of very serious bankers.

And what would make you choose, if you like, one serious banker out of another? If all of us here are bankers, why would you choose one or two? What ... what ... what attracted you?

Well, we made ... we ... you know, obviously sometimes, you want to spread your business around and it depends where your ... the location of where the property would be located. I mean, if you were buying a property in London, you may be better off getting the money from a local bank in London. Not always, but some of the time.

And how, given that they were obviously competing for your business-----

Yes.

-----and you weren't taking all of the offers that were given, what sorts of deals, if you like, or terms were they offering in order to entice you? What would they say to you, apart from the lunch or the dinner, what were they really talking about?

If I may, Chairman, just illustrate what I was not aware of that was happening in the middle '90s when we first got involved in the IFSC, and-----

Too long ago, Chair?

No, we'll facilitate ... like, if ... if ... if ... if answers are drifting-----

I want to-----

I have to allow the ... the questioner, but I do need to return to questioning here at some stage or another.

All right. I apologise.

That is the question.

Mr. Quinlan, please.

All right.

Mr. Quinlan, you have the floor.

The first transaction we did in the IFSC, which was George's Dock 2, it cost 19.2 million. We put up 7.6 million equity. So plenty of equity went in. And I was at a function at Christmas that year and I met this German banker who advised me that she had lent me the money for this building and I said "No. We borrowed from an Irish bank." And it was the first time I knew that the banks were selling the loans. So ... and I discovered that we were paying the Irish bank 1.5% but her bank were only charging 0.5%. So the Irish bank were pocketing the 1% at the ... and our clients were losing out on this.

So how did you work out how to make-----

When did this happen, Mr. Quinlan? Can you just give us a timeline for this, please, if you don't mind?

Okay. Sorry.

When was the period of this?

This was in 1996.

Okay.

I can go forward, Chairman. I apologise.

Okay. Thank you.

But I'm just saying, you know, we were not aware that that was happening at the time 20 years ago, or 19 years ago.

But, obviously, Mr. Quinlan, that kind of capability, I assume other sorts of arrangements that banks offered ... interest only, repayment free, rolling up the interest, I mean, how-----

It totally depended on the asset, Senator.

Okay.

But the German banks ... I started dealing with the German banks because they were prepared to finance at less than 1% margin.

Now-----

So why pay an Irish bank 2.5% and let them pocket the 1.5%? I see the Deputies smiling there. And ... so I went directly to the German banks and I believe I was probably the first one here to do that.

The increased availability of access to cheap wholesale credit-----

Yes.

-----has been identified as a cause of the explosion in borrowing.

Yes.

What would you ... would you agree with that?

Well, yes, I do agree with that statement.

And did it have an adverse effect, do you believe, or not on the degree of loan risk assessment carried out by banks in the years ... I'm talking here now of the 2000s, not the '90s?

Yes. See, I don't know exactly how the individual banks, you know, processed a loan application or what their criteria were but, in general terms, Senator, once the loan was performing, the bank was happy.

Okay. But-----

And performing means that the interest was being paid and that the loan-to-value covenants that you would have signed up to at the start were being maintained.

In the years 2002-2008 ... I think is when you said you retired, is that correct?

2009.

2009, I beg your pardon. Did you observe any key differences in the way that loan applications were assessed by Irish banks?

No, not really, except that the Irish banks were very keen to lend money.

Well, when you say very keen, I mean, did they show their keenness in a particular way?

Well, hindsight is a great thing-----

Sure, but-----

-----there's no doubt about it.

-----you can tell us what happened.

Pardon?

You can tell us what-----

You know, I mean-----

Yes.

-----they clearly ... they were all very anxious to extend their client base, extend their lending.

But ... okay ... we understand that and we know that but what I'm asking you is whether or not you can indicate to us how ... how they did that?

I ... I ... well, I could tell you a story.

Okay, if it's relevant.

Sorry, Mr. Chairman. Well, it's relevant.

Thank you.

I had ... I met a very senior banker from one of the banks - not from Anglo Irish Bank - in 2006. And he proudly told me that he spent the ... the previous Friday morning parked outside a particular bank in St. Stephen's Green, which was Anglo Irish Bank at the time, to watch who was coming in and out. And I was shocked that here's a very senior banker ... that he's, effectively, I thought, wasting his time sitting outside on a Friday morning watching who was coming in and out of the bank. And then he said he went back and he made a report that these were the people who he had recognised coming in and out of the bank. I'm only making the ... that was a surprise to me.