The subprime saga of Ron Weisz

20 March 2011

By Kathleen Barrington

It is almost 12 years since The Sunday Business Post conducted a major investigation into the activities of US businessman and mortgage lender Ron Weisz. Many Irish clients of Weisz had been unaware of his previous business difficulties in the US, including a conviction for attempting to get a bank loan by fraudulent means.
In this newspaper, journalist Catherine O’Mahony revealed that, in 1979, Weisz had been charged on five counts related to his bank dealings.
Weisz absconded from the US in 1984 before facing trial - travelling first to Israel,then Britain. He ended up in Ireland, where he has been based since 1994. He said at the time that he left because he feared being sent to jail, although he returned after prolonged negotiations with the US courts.
In 1995, he entered a ‘‘guilty’’ plea to the Eastern District Court of New York on a charge of supplying ‘‘false statement to influence the award of a loan from a federally insured institution, a class E felony’’. Because of a plea bargain, four other charges were dropped, and he was fined $500 for the offence.
‘‘It’s not something that I’m proud of,” Weisz said in 1998. ‘‘But it’s a fact. It’s true. And I did also settle it, for $500.”
O’Mahony also reported that US court records listed a series of unsatisfied judgments totalling $400,000 against Weisz arising from civil appeals to a move by him to file for bankruptcy in the early 1980s.
But Weisz categorically denied that he was ever bankrupted. ‘‘I did not go bankrupt, I will swear to that. I was poorly advised [to file for bankruptcy] and the bid was withdrawn,” he said.
Weisz had also been to the District Court in Ireland in 1995, after the Central Bank of Ireland spotted an advertisement by his company Wise Finance seeking to take in deposits - something the company was not licensed to do. Having pleaded guilty, Weisz was fined IR£150. He described the Central Bank case as a misunderstanding.
The following year, Weisz’s fraud conviction was raised in the Dáil with specific reference to The Sunday Business Post article.
The response was that there was little the authorities could do as Weisz fell through various legal and regulatory loopholes, leaving him free to sell what we now call subprime loans - in other words, high-cost loans to borrowers who were unable to borrow elsewhere.
In 1999, the then Tánaiste Mary Harney called for amendments to two separate pieces of legislation, following an investigation by the Department of Enterprise, Trade and Employment into Weisz’s activities.
Journalists continued to report on his business dealings over the years, while the Irish Farmers Association warned farmers in 2008 to stay a million miles away from lenders of last resort such as Weisz, following a furore after many farmers who had taken out mortgages with him faced repossession proceedings.
But despite the questions that have been raised about whether a man with a fraud conviction ought to be allowed to sell financial services to Irish consumers and despite the warnings from the likes of the IFA, Weisz has continued to operate through various companies down the years. His many firms include the Wise Mortgage Company, the Wise Finance Company and Secured Property Loans.
Secured Property Loans was in the headlines again last week, after it emerged that it was charging a Co Clare businesswoman a mortgage interest rate of almost 20 per cent, a rate which her barrister Brian Sugrue described as ‘‘unconscionable’’ in court. The woman is challenging the level of interest being charged by the lender at a time when the European Central Bank rate is at a historic low of 1 per cent.
The court heard that, in 2008, the woman borrowed €125,000 by mortgaging her Co Clare pub, which was also her home, to pay off debts and to pay her former husband as part of a separation agreement.
She had hoped to refinance the loan.
Counsel for the lender, Alastair Rutherdale, said there was no evidence, historically, of the courts intervening to set aside loans where interest rates as high as 60 per cent were charged. He said the woman had not objected at the time the loan was taken out.
The woman had received legal advice at the time of taking out the loan. Ms Justice Mary Laffoy reserved her judgment until next week.
The high interest rates being charged by Secured Property Loans spell misery for many of Weisz’s clients. But they appear to be paying off for him personally.
The abridged financial statements for Secured Property Loans examined by the Insider reveal that it had retained profits of €1.78 million and total assets of €6.9 million at November 30, 2009 - a very good performance in the middle of a deep recession.
The reality is that all the bad publicity over the years hasn’t stopped Weisz, because the legislators have failed to plug the legal loopholes which allow people with fraud convictions to lend to riskier borrowers.
Then there is the question of the interest rates which lenders may charge borrowers. It is generally assumed in Ireland that lenders should be free to charge an interest rate that reflects the risk they are taking in lending to risky borrowers such as the Co Clare publican.
But the long queue of subprime lenders seeking to repossess homes before the courts suggests that it may be time to challenge that assumption. For what is the point of making finance available to borrowers if its main effect is to drive them so much further into debt?