At Tuesday’s hearing at the Commercial Court, Monaghan businessman Gerard McCaughey is suing Anglo Irish bank and a related company for $23m (€16.8m) over alleged fraudulent and/or reckless concealment and/or misrepresentation.

The Court was told that the fund was set up to purchase and renovate the Beekman Tower and Eastgate Tower hotels in Manhattan.

Mr McCaughey is suing the bank and the Anglo-owned, Delaware-based Mainland Ventures Corporation (MVC) over the 'Anglo Irish New York Hotel Fund'. This was a private equity investment in which 50 people invested an average $1m (€732,000) each in 2006. The claims are denied.

The action by Century Homes founder, McCaughey, with addresses at Sandymount, Dublin, and Manhattan Beach, California, is regarded as a test action for cases by 23 other investors. The case  is expected to last six weeks.

At the hearing it was claimed a "Black Brochure" given to 50 high-net-worth Irish individuals in September 2006 aimed at encouraging them to invest failed to disclose key risks and amounted to "conscious and deliberate dishonesty".

 

The brochure estimated the hotel’s renovation costs at some $25m (€18.3m), but these turned out to be $103m (€75.4m) and led to works being halted, it was also claimed. Counsel for Mr McCaughey, handed in a copy of the brochure to Mr Justice George Birmingham yesterday.

Mr Hayden said the issue was the manner and fashion with which Anglo brought this project to the investors and how Anglo Irish Private Banking arranged the project with its New York office.

 

Mr Hayden said the bank failed to tell the investors anything throughout 2006, 2007 and most of 2008 about problems being encountered.

That situation continued until December 2008, when Mr McCaughey visited the hotels. It was then he learnt that the bank had directed in June 2008 that no further works should be carried out, Counsel said.