Legacy of Quinn stock market gamble now plain to see

Many thousands of people employed by Quinn Insurance and other Quinn Group companies protested in front of the Dáil, in Cavan town and in Enniskillen last week. They knew the stakes and spoke about their fears. An executive from Sean Quinn's home place of Derrylin, holding a placard as she set off in the rain past Dublin's Buswells Hotel and up Kildare Street, put it well. She said her fight was not with Matthew Elderfield, the Financial Regulator who had put Quinn Insurance into administration and stopped it selling in the north and in Britain. The regulator, she said, had a job to do. But her concern was with the effects on all the jobs if the Quinn Insurance was severed from the rest of the group. Tom, 58, who works in one of Sean Quinn's building products companies in Ballyconnell, Co Cavan, also feared for his job. Companies in the Quinn Group were interlinked and Sean Quinn should be "given a clear path" to pay his debts, said Tom. Clive, in his early 30s, a stock controller from Newtownbutler, Co Fermanagh, said such was the importance of the insurance company, he feared for his job in an unrelated Quinn company if the insurer were cut loose or sold off. Even employees from rival companies were on the capital's streets to protest because, they said, they knew the importance of Sean Quinn's companies to their counties. Rory, 26, from Ballyconnell, did not work for a Quinn company, but was nonetheless down at the Dáil. "Sean Quinn is a local and decent man," he explained. 'Where do You Want Us? On the Dole? Not without A Fight' said the placard held politely aloft by another protestor as the rain poured down. Anyone watching the marchers holding their umbrellas with the Quinn Insurance and Quinn building insignia could not but be impressed. The 5,500 people the Quinn Group employs across Ireland know that their fortunes are linked to those of Quinn Insurance. The marchers had a message for commentators who glibly stated in recent days that thousands of jobs will be protected. Some appear to believe that the Quinn companies will continue uninterrupted if the group were dismembered and sold off. Jobs in Cavan and Fermanagh and surrounding counties such as Leitrim and Meath never grew on trees, the protestors said. They wanted to preserve what Sean Quinn had built. The prosperity of distant townlands far from the midlands was surprisingly strongly linked with Quinn Group companies. The protesters last week in Dublin, Cavan and Enniskillen made their point well. But the people least helpful to their campaign were surprisingly the senior directors of the Quinn Group and, paradoxically, Sean Quinn himself. Quinn, in attempting to save his business empire, has unwisely personalised a fight with the new regulator Matthew Elderfield, who had little choice but to put Quinn Insurance into administration. Mr Elderfield, starting his new job three months ago, had signaled that a new start was required in regulating the banks and financial firms. Insurance firms are as important as banks. They should be managed and run with extreme sensitivity to the rules. That is the law. The regulator had signaled in recent weeks that he had become more exasperated the more he learned about the financial services industry here. Quinn Insurance had already paid a substantial fine in October 2008 for other breaches of the insurance rules. Sean Quinn, at the time, was also fined and stepped down from the Quinn Insurance board. Mr Elderfield's predecessor had allowed little scrutiny of the negotiations with Sean Quinn that led to the settlement. In 2008, the public and journalists were offered two short carefully-written releases, one from the regulator and the other from Sean Quinn. The new regulator could not have ignored the new information showing that Quinn Insurance's reserves were lower than the levels sanctioned by the rules. Quinn Insurance had guaranteed some of the bond debts belonging to the Quinn Group. It matters little that this information was published in the accounts of the Quinn companies. It was also unconvincing to argue, as a former director of Quinn Insurance and currently a senior Quinn Group director did on RTE Radio last Sunday, that the reserves the Dublin regulator demands from Quinn Insurance were much higher than regulators elsewhere require from their insurers. It's a weak argument because Quinn Insurance was found to have breached the rules for the second time in 15 months. Picking a fight on the basis that information has been published in the reports and accounts will fail if, at the same time, a company needs taxpayers' cash. In truth, Sean Quinn and his public relations advisers appear unaware of the new realities. As taxpayers, an exasperated public faces even more demands from the banks. Sean Quinn supports a proposal that Anglo Irish Bank inject money into Quinn Insurance and buy out about €600m of the bond debt to reduce the €1.2bn debts the sprawling Quinn Group currently holds. Any proposal involving Anglo Irish - a bank that will likely swallow €22bn of taxpayers' money before the banking crisis ends - requires careful and reasoned argument if Sean Quinn wants to win the support of taxpayers. Phoning into RTE's 'Prime Time', as Sean Quinn did last week, was not the way to start to win over public opinion to the merits of a rescue plan involving Anglo Irish and taxpayers' money. In the good times, the Quinn Group fed selected business journalists with stories of the Quinn Group's plans to invest billions in hotels and commercial properties across the Continent and into Russia. Sean Quinn, at the top of the boom, recklessly bet and lost €3bn on stock market investments. The losses included €2.5bn he wagered through particularly risky bets called contracts for difference, hoping that the shares of Anglo Irish would continue to soar. Mr Elderfield's predecessors at the Central Bank and the Financial Regulator inexplicably failed to stop Sean Quinn's huge gamble on Anglo Irish shares. The circumstances of that gamble have yet to be explained. But the legacy of it remains. Sean Quinn and his family personally owe Anglo Irish €2.8bn. They are among the largest debtors of the taxpayer-supported lender. His future and the future of Anglo Irish are unfortunately linked. Without the insurance company, there is less chance that the Quinn family can repay Anglo Irish for Sean Quinn's gamble. Picking a fight with Mr Elderfield just will not do. Perhaps Sean Quinn needs to try other approaches if he wants taxpayers to sanction Anglo Irish to rescue his business empire. More jobs could be saved. Quinn Group employees, protesting in front of the Dáil last week, know what is at stake only too well.