The Emerald that failed to sparkle

The Emerald Fund story / Film

ON the 10th anniversary of the Good Friday Agreement, Ian Paisley and Martin Guinness met in an office in Manhattan to jointly announce a substantial and highly significant financial investment in Northern Ireland. It was just the kind of good news event the two men needed as many back home continued to struggle with Sinn Fein and the DUP in government together.

Four New York city pension funds had decided they were going to pump $150m of their members’ money into the province, with the investment potentially worth ten times that amount over time.

It was to be the largest cash injection by US-based public bodies and capped months, if not years, of lobbying the controllers of the huge multi-billion dolllar funds.

Ian Paisley admitted he was speechless, “I am, and so are the people of Northern Ireland,” he said, as his former foe McGuinness stood beside him, smiling.

He added: “I want to just simply to say to you sir and to all who have helped in any way, from the depths of our hearts thank you.”

Ian Paisley and Martin McGuinness with New York comptroller

Ian Paisley and Martin McGuinness with New York comptroller

The man he was addressing was Bill Thompson, the then New York City Comptroller, head of the the office which oversees the management of the pension funds.

Fast forward three years, and as Northern Ireland’s politicians prepare to once again decamp to Washington and New York for the annual St Patrick’s Day push for investment, not a single cent of the promised money has been invested. The fund is dead.

What happened has never been fully told, indeed those centrally involved in putting up the money – the city pension funds, the comptroller’s office – and those charged with investing it have essentially thrown up a wall of silence around the whole affair.

But an investigation by The Detail has traced the history of the fund from its opaque beginnings, the key figures involved and how close to $3m was spent but not on any investment in Northern Ireland.

We reveal details:

- of a middleman, an associate of Comptroller Thompson, charged with finding a fund manager – and his close relationship with the fund manager itself;

-of the company which managed the fund, the background of its executives and their apparent lack of any prior knowledge or experience of Ireland;

- and the work done by the fund before it was dissolved for poor performance

The money was managed by a company called Emerald Infrastructure Development Fund and work began in September 2008, ground zero for the global financial crisis.

No-one from the fund would speak on camera and questions put to the firm went unanswered for weeks.

Instead, a public relations specialist issued a prepared statement and later sent abstracts of news articles published about the fund.

Spokesman Tom Vogel said: “The goal from the start was to find the right investments that would provide an acceptable risk-adjusted return for investors.

“Unfortunately Emerald’s investment period started at the end of September 2008 during the worst investment period in modern history.

“Nevertheless, Emerald investigated over a hundred deals and made investment proposals on the most qualified. However during the shortened investment period market conditions were such that Emerald made no investments.”

In January 2010, Emerald received notice from the Comptroller’s office that the pension funds no longer wanted to be involved. The money was pulled and it was dissolved.

So who exactly were those behind Emerald Infrastructure and how did they become involved in a fund that had huge potential and massive value as a signal Northern Ireland was ready and open for business?

New York Comptroller William C. Thompson

New York Comptroller William C. Thompson

On the same day as the investment was announced, Bill Thompson quietly revealed that Emerald was to manage the money, source investments and work with local companies in areas such as waste management, energy and possibly general infrastructure.

Emerald was incorporated in the tax avoidance friendly Cayman Islands the previous July and its parent company is Emerald Development Managers, with a head office in Manhattan.

The development fund’s executives were Neil Cohen, the founder of a salt mining company, his long-time right hand man, Charles Collins, a retired Maryland-based lawyer called Stephen Case and a retired mid level corporate executive, James Wells.

Emerald Development Managers LLC was incorporated in Delaware – a state that prides itself on its corporate secrecy rules – in May 2007.

That company grew out of a small private equity firm, Cohen & Co, set up by Neil Cohen in 1994, before he helped found the Pennsylvania-based American Rock Salt Company three years later.

It’s not clear just how much business Cohen & Co actually did as records reveal little information about the firm, except that it was incorporated in Nassau County, New York, in October 1994.

Indeed it does not appear among the thousands of companies listed on any of the main private equity firm search sites. Nor are any of a number of different Emerald entities.

None of the companies had any previous connection to Ireland and Emerald would not comment on whether any of the executives had ever visited the country.

What is known is that for at least a year before the announcement Neil Cohen and Charles Collins were in touch with an individual named William Howell.

Howell was a New York political insider, an investment banker, broker and a placement agent – a middleman who brings the pensions funds to private equity firms for a fee.

Placement agents have become hugely controversial figures at both the New York city and state level and indeed across the US, with a number of politically connected operators facing jail time after pleading guilty to using their links to carve up the considerable fees attached to multi-billion dollar pension funds.

Political consultant Hank Morris was sentenced last month to more than a year in prison after pleading guilty to using his connections to former State Comptroller Alan Helvesi to extract kickbacks from investment firms hoping to manage the pension funds’ assets.

As a result of numerous similar cases, the New York State Comptroller has banned the use of placement agents altogether.

New York Journalist- Tom Robbins

New York Journalist- Tom Robbins

Veteran New York journalist Tom Robbins covered the Emerald story for the Village Voice.

He said: “You know the question of what placement agents do to make these deals happen, I think even for people who watch these deals very closely it’s still a bit of a puzzle.

“ Everybody needs a broker to introduce someone to somebody else but that’s essentially all we’re talking about here.

“Someone has a large pot of money that they want to invest, they introduce someone else who needs that pot of money, that’s the role Bill Howell was playing in this case.

“In terms of putting a value on that, how much that is worth, well that’s a legitimate question the taxpayers could ask.”

Howell has not been accused of any wrongdoing. He is a close associate and fundraiser for former Comptroller Thompson and has been for many years.

According to Thompson, Howell was with the comptroller on a trip to Northern Ireland in September 2006.

In June that year Howell’s wife donated nearly $5,000 to Thompson’s ultimately unsuccessful mayoral campaign, while Howell himself donated another $5,000 in November.

Thompson told New York’s Village Voice newspaper he had no idea Howell was the placement agent on the deal.

Howell was also generous with his money in other arguably more surprising ways.

It was May 2007 and one of the highlights of the Irish-American social calendar, an always lavish New York gathering to raise money for the Ireland Funds – and to party among friends.

That year’s event was an especially stand-out one as the special guests at the Armory in Manhattan included President Mary McAleese and the actor and philanthropist Paul Newman – there to accept a $1m gift for his Hole in the Wall Centre in Barrettstown, Co Kildare.

The cream of the Irish-American business community turned out – many of them long time

supporters of the Ireland Funds set up in the 1970s to raise money for good causes back home.

But also listed among those who generously contributed were three individuals previously unknown within the tight-knit Irish-American circles.

Neil Cohen, the rock salt company founder, Charles Collins, and William Howell were all down as benefactors – each contributing a hugely generous $25,000 to the fund.

Cohen was listed as president of the Emerald Infrastructure Development Fund, Collins as managing director and Howell the general partner.

Emerald would not comment on their attendance, the donations or how Howell managed to be named as a general partner.

Emerald Development Managers LLC

Emerald Development Managers LLC

Emerald Infrastructure was not registered in the Cayman Islands until July of that year. Emerald Development Managers was registered in Delaware less than two weeks after the dinner.

Howell was also linked to a company called Shelbourne Securities, based in Acton, Massachusetts.

Documents filed with the Securities and Exchange Commission, the US financial regulatory body, and with FINRA, which regulates brokers, reveal that Howell brought in placement fees for Shelbourne and was paid 90% up to $1.5m and 95% on anything over that amount.

And the thin number of SEC documents filed by Emerald Infrastructure during its short history show that Howell received an estimated $1.5m, 2% of the initial $75m offering.

It’s also emerged that Emerald was investigating whether Howell paid anyone else in relation to the offering and that it would file details on this probe at a later date. No documents have been filed to date.

Emerald said Howell received in total $250,000 for his work in connection with the Emerald placing.

Shelbourne Securities was dissolved in late 2009 just as the controversy over the use of placement agents reached its peak and after the state ban on their use.

Neither Howell nor the key figures involved with Shelbourne returned calls for comment.

However, Shelbourne’s 2008 annual report shows that Howell received payments of just under $600,000 for his placement work that year.

In total, according to the comptroller’s office, Emerald Infrastructure Development Fund received $2.9m in fees and expenses by the time its control over the funding ended.

Emerald blames the global downturn for the failure of the fund, even though the initial funding available was ring-fenced. Others believe pension fund money seeking stable investments and solid returns was never going to work in Northern Ireland.

Whatever the reason for the failure, any fresh announcement or hype on the back of our politicians’ St Patrick’s exodus may be greeted with more scepticism this time.