Anglo Irish Bank - Controversy of Business Practices & Loans - EMPG Loans

EMPG Loans

On 13 January 2009, opposition party TD George Lee highlighted the potential exposure of the Irish taxpayer to the failure of Education Media and Publishing Group, the holding company of Houghton Mifflin Harcourt given loans by Anglo Irish Bank to investors in EMPG. George Lee, TD for Dublin South, told journalists that EMPG, the parent company for US publisher Houghton Mifflin Harcourt, has failed with equity investors likely to be wiped out. The Irish taxpayer was exposed since Anglo Irish Bank had loans outstanding to the shareholders of EMPG.

George Lee commented:

It has been reported to me that the education materials company Houghton Mifflin Harcourt has failed, and that a number of Irish equity investors have lost significant sums of money as a result. Many of these investors were funded through large loans from Anglo Irish Bank, which is now wholly owned by Irish taxpayers.

As a company, Houghton Mifflin Harcourt was a highly leveraged operation and had very significant banking commitments. I understand that the remaining US business is to be transferred to its bond holders. However, it appears that its Irish equity investors will lose all of their investment as a result of this failure. This will have repercussions for Anglo Irish Bank, and possibly other Irish banks, and therefore the Irish taxpayer.

This incident adds further weight to Fine Gael's calls for an urgent investigation into the Irish banking crisis. Fuller details of the goings-on within Anglo Irish Bank's risky lending practices are still emerging, and this development with Houghton Mifflin Harcourt sheds further light. However, only a full, forensic investigation into the crisis will ensure that it never happens again.

Interviewed on Irish State broadcaster, RTÉ, Barry O'Callaghan, Chairman of EMPG and CEO of Houghton Mifflin Harcourt, confirmed that Irish investors as well as he himself were facing huge losses. He stated that "no-one has lost more than me".

According to the Irish Times, investors of Davy Stockbrokers had US$475 million of equity in EMPG. The article did not identify how much or any of this investment was backed by Anglo Irish Bank loans. According to the Irish Independent, Barry O'Callaghan is a large personal customer of Anglo Irish Bank. The Irish Independent article noted that former Anglo Irish Bank Chairman, Sean FitzPatrick is one of the Davy clients that had invested in EMPG.

Based on an analysis of the Irish Independent's "2008 Rich List" and the Sunday Times "2009 Rich List", Barry O'Callaghan's personal debts in March 2008 were circa US$400 million.

On 15 January 2010, O'Callaghan admitted to having multimillion loans from Anglo Irish Bank and other international banks. Refusing to confirm the level of his indebtedness, O'Callaghan claimed to still be solvent and stated that he expects to honour all his obligations.

In contrast to the statement of George Lee that Irish taxpayers were exposed, an Anglo Irish Bank spokesperson was reported by the Irish Times to state that it did not have a "big exposure" to EMPG. However, the spokesperson did not comment on whether it has exposure to individuals that has exposure to EMPG.