Tuesday 17 October 2017

Drumm knew of Anglo €6bn ploy to save bank

Latest Anglo Tapes reveal Drumm aware of secret ruse to save bank

THE former chief executive of Anglo Irish Bank admits he knew his disgraced lender was sending €6bn "around in a circle" between it and Irish Life & Permanent, new Anglo Tapes reveal.

On tape, David Drumm states that he knew about the transaction, which has been investigated by the Central Bank, An Garda Siochana and the Office of the Director of Corporate Enforcement for four years at a cost of millions to the taxpayer.

The revelation comes after Central Bank Governor Patrick Honohan described the tapes as containing "no new issues" worthy of being referred to investigatory authorities.

He then altered his position and said he would share an "analysis" of why this was the case with An Garda Siochana.

The Central Bank has not explained how it concluded that a tape recording of Anglo executives discussing one of the major issues being investigated is irrelevant.

latest tapes and analysis, Page 22

The fact that the Central Bank had not even heard the Anglo Tapes until recently has already led to questions for Honohan about how hard the authorities are trying to get to the bottom of what happened in Irish banking.

In the new tapes, Anglo head of treasury John Bowe is heard telling Drumm: "So what happens is the money goes around in a circle."

The money being referred to is €6bn that went around in a circle just before Anglo's financial reporting date of September 30, 2008.

The Anglo Tapes show evidence that both men appear to understand how the transaction was structured to disguise from the market Anglo's financial weakness.

"What is happening is that we give the money to them," Bowe tells Drumm.

"The dance here is that we actually get it back in time. That is becoming very, very tough to do. So, in other words, we have to pay it into the bank. The bank has to give it in to the assurance company. The assurance company has to give it to us."

"Yeah, I know how it works," Drumm admits.

The movement of Anglo's money into Irish Life & Permanent's assurance arm allowed Anglo to describe its deposits to the market as of a higher grade than a mere deposit from another troubled bank.

Bowe adds: "It has to go through a lot of hands in terms of the assurance company payment agent as opposed to the bank. It is actually very tough to do, but we are picking away at it."

When Drumm jokes that the bank would have to audit "the books" itself, Bowe replies: "Ha, ha, ha."

Around the same time, Bowe and Drumm discussed plans to try to raise money from the European Central Bank to keep Anglo afloat.

Drumm tells Bowe that he planned to: "Go on a rampage today around the various fucking politicians to try and get them to focus on our proposal [to raise money from the ECB]. The Central Bank don't seem to have the quantum.

"And that is where we are at. If they don't succeed in that [coming up with a solution to help Anglo], they can have the fucking thing and good luck with getting the money back from Bernard Mac [Bernard McNamara, a developer client of Anglo] will be what I will be telling them. Fucking eejits!"

Bowe then asks Drumm if anything came out of talks between Anglo and the Central Bank that weekend.

"I got the governor [then John Hurley] and told him to stop asking for one-month cash flows. They are meaningless," Drumm says.

The Central Bank, he feels, does not understand that, in the crisis, it is about getting through the day rather than the month.

"[The Central Bank] are playing a game. We have to be deadly careful with them. They are trying to get us to admit that there is not enough money in the kitty so that they can push us over so we are not their problem any more," Drumm says.

"We can't do that. We have got equity and bond holders to protect. They will fuck us. That would be incompetent. That is what we are paid not to do. So fight until the end."

The new Anglo Tapes also reveal examples of the lender trying to educate Central Bank officials about what is going on in the crisis.

Bowe tells a Central Bank official about five or six days before the State rushed into the bank guarantee that Anglo will run out of money by the following Monday [September 29, 2008, the day of the guarantee].

"That by Monday you will be out of collateral?" the Central Bank official asks.

"By Monday, we would, yeah, exactly," Bowe replies. "We will be out of cash and collateral."

An Anglo executive tries to explain to the Central Bank what is happening with its balance sheet and how hundreds of millions are running out the door daily.

The official struggles to follow what is going on as Anglo tries to explain a spreadsheet it has sent him setting it out.

"Are you at your desk?" an Anglo executive eventually asks when this becomes obvious.

"I am not at my own desk, actually, as I had something else on in my office. I had to come out. If you hold on for a minute, I'll just check if I've got it yet," the official replies.

In response, the Anglo executive says: "Super, thanks."

How urgently this message, that Anglo was likely to run out of money on Monday, September 29, 2008, was passed up the line from the Central Bank to the then Minister for Finance, the late Brian Lenihan, is not known.

Tom Lyons and Gavin Sheridan

Sunday Independent

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