Esmond Casey joined the exclusive club of Ireland’s nouveau very riche in
2008, along with those of the like of Brendan Allen and Derek Quinlan,
who had become national heroes. The dream was short lived, barely a year
later Casey found himself opting for voluntary bankruptcy with debts amounting to
four billion euros. The vast fortune amassed by the London-Irish businessmen
during the economic boom had simply evaporated.
In 1970, Casey had set out to make his fortune in London. Well-spoken and a
smartly dressed, the young man was hired as a runner by a City brokerage firm.
After a couple of years he graduated to junior broker working the phone to sell
investments.
A decade later, Casey returned to Ireland, sensing conditions were ripe to launch
his own business. The years spent in London had provided him with sufficient
money to put a deposit on a couple run down houses in an up-and-coming Dublin
suburb. After a quick he renovation job he sold them at more than twice the initial
price and repaid the loan taken out with the National Dublin Bank. Then, by
repeating the experience, he quickly built up a capital and invested it in the
construction of small housing estate on the outskirts of the city.
Fifteen years later Casey found himself at the head of an international empire
with property assets in Ireland, the UK, Spain, Croatia and Morocco, employing
more than five thousand people in London and Dublin. At the height of the Irish
property boom, he was one of Ireland’s richest sons.
During the early years of his meteoric rise, Casey realized Ireland was headed for
a long period of prosperity and economic expansion. On the recommendation of
National Dublin’s then managing director, he bought shares in the bank on the
basis of CDFs, or contract for difference.
His experience in the City had taught him a few of the finer points of investing.
The contract for difference market offered Casey a certain number of advantages:
there was no set future price and no set future date. A buyer simply agreed to pay
or receive the difference between the starting price and the price at the point of
liquidation of the contract. In addition there was the advantage of leverage, with
ratio of up to 20:1, he could boost his potential profit ― just as it could increase
the losses.
At that time banking share prices went in only one direction ― up. So as the
value of the shares in the National Dublin Bank rose, so did the borrowing power
of his property development business; his assets providing the necessary guarantee.
The problem was Casey came to believe that prices could only go up and
progressively he increased his wager.
As Casey’s property development business grew over the course of the boom
years, he continued to use it as a guarantee to cover his position, gradually
increasing his shareholding in the National Dublin Bank to thirty percent of the
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bank’s total share capital. That was fine as long as prices went up, but with the
collapse of property values and the subsequent collapse of Irish banking shares
Casey was hit by a double whammy. Under the burden of failed property loans,
the National Dublin Bank collapsed, as did other leading Irish banks. From a peak
of twelve euros, the value of the shares Casey held fell to a mere twenty cents, a
calamity that led to the nationalization of the bank.
Casey had squandered the fortune he had built up in a senseless gamble on the
notoriously reckless National Dublin Bank. Casey, like the banks, had become
addicted to leverage at a time when Ireland had become intoxicated by it. His
disastrous investment in National Dublin Bank cost Casey Holdings more than one
billion euros.
But Casey still had a trick or two up his sleeve. He decamped to London where
bankruptcy laws were less onerous than those in the Republic. There he applied for
voluntary bankruptcy in London’s High Court. In Ireland he would have been
banned from running a business for up to twelve years, whereas in the UK, Casey
would be debt-free in a year, in spite of the billions he owed. That did not however
prevent the Court from seizing his properties and just about everything else he
possessed to cover his debts.