Prima facie case of fraud established in Davy case, judge says

The property developer who is suing Davy and 16 of his former employees and senior executives has established a prima facie case of fraud, a High Court judge has heard.

Important comments were made in a decision on a pre-trial application in the action brought by Belfast businessman Paddy Kearney and his company Kilmona Holdings Ltd.

Mr Kearney is suing for damages over Davy’s 2014 sale of Anglo Irish Bank bonds he held to a group of Davy employees known as the O’Connell Partnership (OCP).

The Belfast businessman claims he was told OCP was an independent client of Davy and only learned that was not the case when the Central Bank imposed a fine of 4.1 million euros to stockbrokers last year for breaching market rules in a transaction involving its own staff.

The scandal prompted Davy to put himself up for sale.

In a pre-trial ruling, Judge Michael Twomey denied a request by Davy for additional information from Mr Kearney regarding his allegations of fraud.

The judge said it appeared to the court that the plaintiffs had established a prima facie, or prima facie, case of fraud and that Davy already had a reasonable picture of the allegations.

He said based on the pleadings and evidence contained in a Central Bank report, it could not be said that the plaintiffs were making outlandish or baseless claims.

The judge said the names of those suspected of making fraudulent statements and the specific and approximate dates of those statements had all been provided.

He also said that although it was a considerable sum of money, the case was not complex.

However, he stressed that it was “still a long way from establishing, on a balance of probabilities, that the defendants are guilty of fraud”.

In his action, Mr Kearney alleges that the bonds were sold at an undervaluation, depriving him and Kilmona of the best price, and that Davy made a windfall profit of 25 million euros on the sale.

Details of the defense filed in the case were also outlined in the ruling.

The defendants claim that Mr. Kearney and Kilmona were “execution-only” clients and therefore the firm had no fiduciary duty to them.

They also claim there was no secret profit to be accounted for to Mr Kearney and Kilmona and that the plaintiffs knew the buyer of the bonds was made up of Davy employees.

Davy is also expected to object to the admissibility of the Central Bank’s report.

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