Anglo 'shovelled' €2.3bn at Quinn as share price fell, court hears
Published 03/02/2012 | 05:00
ANGLO Irish Bank unlawfully tried to prop up its share price by "shovelling" about €2.34bn of loans into companies in the Sean Quinn group, a court heard yesterday.
This was after it had learned in September 2007 of a "towering" Quinn shareholding in Anglo which could collapse the bank, a lawyer for Sean Quinn's wife and children alleged.
Brian O'Moore SC said Anglo's then CEO David Drumm was told by Sean Quinn Snr in December 2007 that a €400m loan was needed to pay off the companies' loans -- in order to avoid having to disclose the extent of the shareholding in Anglo -- and that Mr Drumm then said the bank would provide €500m "to tidy up matters".
The claims were made on the opening day of a hearing before the Commercial Court of a preliminary issue in an action by the family to avoid liability for the loans to Anglo.
Mr O'Moore said the bank sought to have the loans disguised as property and other loans but knew they were to fund margin calls on "contracts for difference (CfD) positions" taken out in Anglo by Sean Quinn Snr via Madeira-registered company Bazzely. This was to avoid the 24pc Quinn shareholding being made public knowledge, counsel said.
The bank engaged in "very serious illegal activity" on a "persistent, ongoing basis" involving an "egregious" and "almost deliberate" breach of laws carrying penalties of €10m and/or a maximum 10-year jail sentence, counsel said.
Anglo was not entitled to recover €2.34bn from Patricia Quinn or her children, who owned but did not manage Bazzely, under various guarantees and share pledges provided by them over loans tainted with illegality, said counsel.
"Illegality was central to this -- there would have been no loans without a desire to manipulate the market," he said.
The bank, for example, provided about €300m over three days around St Patrick's Day in March 2008 to meet margin calls when its share price plummeted, counsel said.
Reflecting on the bank's "wild willingness" to do this, the knowledge of the purpose of those loans was "striking", argued Mr O'Moore, adding: "No one in the bank seems to have stood back and asked, why are we shovelling all this money into our own shareholding?'"
"Systems" were put in place to ensure that the 24pc stake in Anglo held by the Quinns did not become public knowledge, Mr O'Moore said.
Up to September 2007, about €750m of the Quinn group's own monies were put into building up the stake.
But after March 2008, as Anglo's share price continued to fall, the bank shovelled €2.34bn of its money in an ultimately unsuccessful effort to prop up the Anglo Irish Bank share price and avert "catastrophic" consequences.
Certain Anglo personnel, said counsel, would be told by Quinn group personnel what funds were required and the money would be advanced.
Mr Justice Peter Charleton rejected a last-minute attempt by the Quinn family to use a previously unknown expert report as part of their bid to be allowed to challenge the legality of more than €2bn of loans advanced by Anglo.
The family's lawyer claimed that the report showed that the 28pc stake built up by the Quinns was "towering and dominant" on Anglo's share register and proved that the bank would have been "acutely concerned" about how it was to be "unravelled".
The argument goes to the heart of the family's contention that the €2bn was loaned illegally for the sole purpose of propping up the bank's own share price by preventing the forced sale of the stake -- something they say would breach laws on market manipulation and other legislation.
The judge said that he didn't have "any doubts" in refusing to allow discussion of the report to proceed because yesterday's court session was not a full-on hearing.