The Celtic Tiger's Greed

AT the start of the New Year and facing into a serious downturn in the economy in 2008, there has been a good deal of rueful questioning here recently about where all the Celtic Tiger money has gone.

The fact is that after a 10 year boom, most people here don't really feel that much better off. Of course there are those who have done spectacularly well. It's nothing to be a millionaire a few times over in Ireland these days.

And we have some prestigious projects to show off, like the Port Tunnel and the Luas light rail line in Dublin, and motorways that reach out to most of the country. But hospitals, schools, public transport and a lot of the other things that affect the everyday lives of ordinary people do not seem to be much better.

The realization is slowly dawning on people here that although emigration was reversed and the overall size of the economic cake grew substantially over the past decade, most people only got crumbs from the rich people's tables.

The big fat slices of the Celtic Tiger cake went to the people who did really well out of the boom, the developers, builders, business entrepreneurs, senior management and the professionals who serviced the boom, the lawyers, accountants, financial advisors and so on.

When the boom reached its peak a few years back, a lot of these people were in a money-making feeding frenzy, displaying levels of selfishness that made the fictional Gordon Gekko look like an altar boy.

Greed was good, indeed, and Gekko's mantra seemed to have been adopted by many of our business leaders and financial movers and shakers. Everybody, from the mergers and acquisitions expert down to the local plumber, was charging fees that made what the rest of us earned look like chicken feed.

This frenzy continued up to the first half of last year, despite signs that the boom was running out of steam. And the perfect illustration of the madness that was going on is reflected in the story of what two young solicitors were getting up to in Dublin.

The two of them (and there may well be more out there that we don't know about yet) were bending rules and playing fast and loose with clients' money like there was no tomorrow. You could see them as poster boys for the worst aspect of the Celtic Tiger - forget the morals and go for the millions was their code of practice.

The pair operated separately and may not even have known each other, but what they were getting up to was remarkably similar - playing the property game with other people's money.

Of the two, the biggest chancer was Michael Lynn, a 39-year-old solicitor from humble beginnings in Crossmolina, Co. Mayo who became a major promoter of overseas apartments and villas for the property mad Irish and used the millions he made to fund a lifestyle of extraordinary opulence. He even had a share in the use of an executive jet when he was in a hurry.

But in the past few months Lynn's multi-million euro property empire collapsed, and it emerged that he owes various banks and mortgage companies a grand total of over *80 million.

After initially denying there was a problem, he has now fled and is rumored to be somewhere in South America, possibly in Brazil, where he has property interests.

The other chancer is a younger solicitor called Thomas Byrne, also with offices in Dublin, who owes the banks and mortgage lenders around *40 million.

Both of them had been caught by the property downturn. What happened to Lynn in particular shows the dangers of getting carried away on a rising market.

When the market slowed and the money stopped coming in from new clients, he was badly overstretched. He could not finish new developments he was involved in on a global basis and he could not sell apartments in Portugal, Bulgaria and other parts of Eastern Europe he had already finished.

But even before it all started to fall apart on him in the last few months, he had been juggling his finances to keep the show on the road. He duped the banks into advancing multiple mortgages on the same properties, both overseas and in Ireland, letting each bank think they were the only one with a charge on the properties. Basically, he was getting several loans on the same property.

He even bought a trophy home sitting on several acres on the Howth Head peninsula (one of Ireland's most prestigious addresses) with spectacular views across Dublin Bay. His next door neighbors were the Riverdance duo, Moya Doherty and John McColgan.

The house and land cost him *5.5 million in 2006, but he managed to take out at least three mortgages on the property for around three times that amount.

The general point about this is that it shows how keen the banks were to lend money during the boom. Lynn was a lawyer, not a developer, yet the banks were throwing money at him like he was a property specialist with a long track record.

As a result there has not been much sympathy in recent weeks for the banks involved which have been literally lining up in court to try to get to the top of the queue for the money that may be realized from the sell-off of Lynn's property empire.

But the best estimates are that less than half the value of the loans will be repaid, and that it could take a very long time to get even that much.

The other point that the case of the two boyo solicitors brings to attention is the daft system that has evolved here which allowed fraud on this scale to happen.

The legal system here for dealing with a property sale is a Dickensian nightmare that used to take months, or even a year or more to complete. Much of the problem has to do with the antiquated Registry of Deeds which could not cope before the boom happened and was completely snowed under when the boom took off.

To get around this situation, a system evolved which depends on so-called "solicitors' undertakings." Basically these are legally binding promises made by the buyer's solicitor to the lender to verify the title, complete the transfer and register the charge that the lender has against the property.

Before the purchase of a property, a buyer's solicitor provides the lending bank with an undertaking that the title of the property has been verified, and undertakes to register the banks security on the property.

The system has worked very well since it began in the early 1990s, and it has to be said that without it property transactions here in recent years would have been extremely slow.

Apart from avoiding delays, the banks and mortgage companies also went for it because it reduced duplicate legal costs (the buyer's solicitor undertook to look after the bank's interest).

But it was wide open for abuse by a rogue lawyer who could give an undertaking to several banks on loans on the same property. Which is exactly what Lynn was doing.

What seems really bizarre now is that the banks were doing this even when the solicitor was also the buyer. Undertakings were being accepted by the banks in what were clearly property speculation businesses being run by the same solicitor giving the undertaking.

Whatever about the normal situation where a solicitor represents an ordinary client buying a house, this was obviously stupid. Yet it was happening frequently with high flying solicitors like Lynn and Byrne as the property market went into overdrive. That's a measure of how greedy the banks were for profit.

Of course it was just two rogue lawyers. And there may not be any more. So it might seem unfair to be damning the whole Celtic Tiger barrel because of two rotten apples.

But to many people here this bizarre example of greed and crooked principles is emblematic of the whole Celtic Tiger culture among the movers and shakers of the past decade.

Greed was good. Lots of people got very rich, not always behaving ethically or even legally.

The rest of us carried on ... and now that the boom is fading we are the ones left wondering where all the money went.