Ex-Anglo chief bids to be made bankrupt in the US
Published 15/10/2010 | 05:00
THE former chief executive of Anglo Irish Bank has filed for bankruptcy in the US after the state-owned bank rejected a deal that would see only half of his €8.3m loans repaid.
David Drumm, who is now living in Cape Cod, Massachusetts, and is wanted for questioning by gardai in relation to a series of investigations into the bank, claimed he offered all his assets, including his pension rights, to Anglo.
But the Irish Independent has learned that the settlement talks, which have been ongoing since the bank began its lawsuit against Mr Drumm last year, broke down after Anglo rejected a deal that would not have "extracted the best value" for the State.
Lawyers for Mr Drumm last night claimed that their client had "bent over backwards" to settle a long-running row over an €8.3m debt to Anglo, which has already put aside €6.7m to cover potential losses on the loans given to its former boss.
Mr Drumm's representatives said he had offered the bank all his assets, including a €5.4m pension pot, in a deal that would have seen Anglo get back €2m more than it was owed.
However, several sources close to the settlement talks dismissed this claim.
They insisted Anglo had rejected Mr Drumm's settlement offer because it fell far short of the ex-banker's debts.
"Anglo wanted to get every penny back," one source told the Irish Independent. "He didn't offer that."
Sources point out that while Mr Drumm's pension pot might be worth €5.4m to him, it would be worth a "fraction" of that to Anglo if it was liquidated today.
Mr Drumm may have received tax relief on his pension contributions, tax that would have to be repaid if the pension was cashed in.
"Straight away, there's half the pension gone," another source said.
Mr Drumm has filed for a Chapter 7 bankruptcy in the US Bankruptcy Court District of Massachusetts, a declaration that could force a stay on the Anglo litigation, but one that is likely to be opposed by the bank.
A Chapter 7 or liquidation bankruptcy, one of the fastest ways for debtors to "start afresh" in America, would allow Mr Drumm to retain his Cape Cod home.
Documents filed in a US court -- obtained by the Irish Independent -- do not give an exact breakdown of Mr Drumm's assets and liabilities.
Mr Drumm only gave a very broad outline of his financial situation. In it, he ticked boxes stating that he had between between one and 49 creditors, that his liabilities were between $1m and $10m (€710,000 and €7.1m) and assets in the same bracket.
It is anticipated that a more detailed breakdown will be demanded over the coming days.
Anglo has brought two legal actions, one against Mr Drumm over non-repayment of loans and a separate action against Mr Drumm and his wife seeking to set aside the transfer of their former family home in Malahide. Anglo claims that Abington was transferred from the couple's names on May 13, 2009, into the sole name of Lorraine Drumm as "full owner" c/o the Dublin offices of solicitor Noel Smyth.
The house was first registered in both names in 2003. Anglo claims that this property was Mr Drumm's main asset and the transfer is void as a fraud on creditors because it would mean the property could not be used to reduce Mr Drumm's liability to Anglo.
The Drumms claim the transfer was "for taxation reasons" based on advice from US lawyers and not designed to protect the property from claims by creditors.
Mr Drumm had been taking a counter-claim against Anglo, in which he was seeking €2.6m over the termination of his employment, loss of bonuses and damages for "mental distress".
A spokesman for the Department of Finance last night declined to comment on Mr Drumm's case. But he stressed the bank was mandated to "pursue all debts owing to it".
"It's a matter for the bank and its legal teams to assess this latest development and to take whatever action is necessary to project the bank's and the taxpayer's interest," the spokesman said.
Sources for Anglo said that while the developments could make the recovery of Mr Drumm's debts a "slower" process, there would be no change in the "vigour" applied by the bank.
Brian O'Moore, representing Mr Drumm, yesterday told High Court judge Mr Justice Brian McGovern that the voluntary bankruptcy petition would have the logical effect of discharging Mr Drumm's solicitors and counsel here.
He added that it appeared inevitable that the US Trustee Program may take over the defence of the proceedings and prosecution of Mr Drumm's counter-claim against Anglo.
These events may or may not disrupt the trial of the action, but that was out of Mr Drumm's hands.
Barry O'Donnell, for Anglo, said this was "quite an extraordinary turn of events" and his client wanted the matter mentioned in court early next week.