Business Anglo Tapes

Tuesday 16 September 2014

Anglo: the new tapes revealed

* Recordings show how Drumm tried to gloss over perilous state of bank
* Bankers laughed and joked as financial crisis engulfed the economy
* Drumm said he would give 'Ladybird version' of events to the board

Paul Williams Special Correspondent

Published 17/07/2014 | 02:30

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NEW tapes have emerged which throw the months before the calamitous bank crash into fresh light.

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They reveal how Anglo Irish Bank's then chief executive laughed and joked as Ireland's economy shuddered to a halt. The tapes also reveal David Drumm speaking to a fellow senior bank executive about giving his own board "the Ladybird" version of events.

The latest recorded telephone conversation occurred in January 2008 – just two months before the bank's disastrous share price meltdown which became known as the St Patrick's Day massacre.

On January 22, Mr Drumm – who has outstanding Anglo loans of €8m – talks about a planned meeting with the bank's board of directors, which was chaired at the time by Sean FitzPatrick.

As chief executive, it was his job to ensure that the board members, most of whom were not full-time Anglo employees, were fully appraised of the events.

"I kind of think it's good to give them a walk around the park of the world," he tells the Head of Capital Markets, John Bowe.

But Mr Drumm appears to indicate his intention to ration the amount of information he is prepared to offer.

"I'm not gonna do the big, long agenda. I'm going to give a spiel, probably a rant if I get warmed up.

"Then I'll open up the questions and then, when it comes around to it and it is going to be the first question – funding – you can just say, 'Look, this is David mentioned this, David mentioned that, but I, look, this is actually what's going on behind the scenes...'" Mr Drumm tells his executive.

The former Anglo chief executive then tells Mr Bowe to give the board "just a balance sheet" or "just to give them colour".

Mr Drumm moved to the United States after the bank collapse and is currently awaiting a verdict of a US bankruptcy court, which will decide whether he can emerge debt-free from personal insolvency.

Lawyers for Mr Drumm, IBRC (formerly known as Anglo Irish Bank) and a bankruptcy official overseeing his case filed their final legal papers late on Tuesday.

A judge will rule on the case, which has been running since 2010, in the coming weeks.

In his conversation with Mr Bowe on January 22, Mr Drumm indicates that he intends to gloss over the perilous state of Anglo’s finances when meeting with the board.

“When I meet them for dinner, I'll give them the Ladybird version of the movement of numbers which I gave them the last time.

“Then it's a question of they're getting a little bit of market knowledge and expertise from you, so we'll probably do that.”

Earlier in the same conversation, Mr Drumm also discusses the idea of burning the bank's own bondholders by buying back its own bonds at a huge discount.

If the bank paid less for the bonds than it owed, it would anger investors and reduce even further its access to money.

He then poses the question of whether there is a “morality” issue around these actions.

But Mr Drumm gets over that by admitting that the bank can make a €200m profit by quietly buying back €500m worth of bonds.

During his conversation with Mr Bowe, Mr Drumm asks if secretly buying back bonds issued to the bank's own clients would leave a bad taste.

Mr Bowe raises a number of reservations about the idea and says: “There's some people who might regard it as profiteering on the back of our clients' losses.”

It's at this point that Mr Drumm considers the “morality” of burning his own clients.

“It's the morality of, I don't know what the f**king morality is. It's the morality of, well, we're not going to do it because it would be wrong of us to do it. But that's the price, that's the offer price,” says Mr Drumm.

He goes on to refer to those selling the bonds and points out that the bondholders are willing to sell to anyone, even though the practice of a bank – or issuer – buying its own bonds at less than face value is frowned upon.

“So if they're offering it, they haven't qualified, ‘Well we'll f**king sell it to anybody but the issuer,’” he says. “You know you can get lost in that.”

Earlier Mr Drumm suggested to Mr Bowe that if they were to buy back €541m worth of bonds for €300m then the bank's balance sheet would show a profit of €200m.

He says: “Now we've made a couple of hundred million.”

The revelations of Mr Drumm's “Ladybird version” of events, which he planned to give to the Anglo board in the third week of January 2008, appears to corroborate what the former chairman Sean FitzPatrick told gardai when he was questioned about alleged irregularities at the bank.

Mr FitzPatrick, whose interviews were read into the record during his recent trial, told detectives that he was never involved in any executive discussions at the bank while chairman.

He said that this was because Mr Drumm – who replaced Mr FitzPatrick as CEO in 2005 – was “the man in charge”.

Sean FitzPatrick also told gardai that he was in the south of France when Mr Drumm told him that 10 substantial customers – the Maple 10 – would be lent money to unwind Sean Quinn's secret stake in the bank.

Mr FitzPatrick said he was never told the identity of the 10 by chief executive David Drumm, who wanted to keep the details of the deal “very, very tight”.

“He (Drumm) was ringing me not to discuss it, but telling me it's |happening and I was to ring the board and tell them the good news – that we were coming to the end of this difficult situation,” Mr FitzPatrick told officers.

A jury acquitted Mr FitzPatrick on all charges.

Irish Independent

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