THE board of Anglo Irish Bank was not told the lender would fund the unwinding of businessman Sean Quinn's secret stake before a loan-for-shares deal took place, according to the bank's longest serving board member.
Michael Jacob, a former non- executive director of Anglo, also told the Circuit Criminal Court that the board knew the bank had a different plan to place Mr Quinn's shares with three entities, Bain Capital, a sovereign fund in the Middle East and Dutch bank Rabobank.
Senior management travelled to the Middle East, the United States and Holland as they tried to unwind Sean Quinn's 29pc stake that was built up through contracts for difference before the Maple 10 deal was agreed, Michael O'Higgins SC, for Sean FitzPatrick, said.
He said "Anglo was a helpless spectator" as it came under attack from international hedge fund speculators.
Mr Jacob, who served on the board for 21 years, described Mr Quinn as a "loose cannon". He said the businessman had built up a secret stake in the bank – at one point holding 29pc of its shares – and had invested in Anglo for the purpose of "a financial gamble".
Mr Jacob said the board was "very disturbed" to find out, in mid-2007, that Mr Quinn had built up a stake in the bank, then valued at between 15pc and 18pc.
He said he was told it would be possible to dispose some of the shares through the international investors and he didn't think these would require funding from the banks to buy shares.
Mr Jacob told gardai that he did not know until August 2008 that Anglo had funded a deal to unwind Mr Quinn's stake by loaning money, in July 2008, to 10 of the bank's valued clients to buy shares in the bank.
He was giving evidence yesterday in the trial of Sean FitzPatrick (65), from Greystones, Co Wicklow, Patrick Whelan (51), of Malahide, Co Dublin, and William McAteer (63), of Rathgar in Dublin. The men have pleaded not guilty to 16 charges of unlawfully providing financial assistance to individuals for the purpose of buying shares in Anglo Irish Bank in 2008.
Mr Whelan has also denied seven charges of being privy to the fraudulent alteration of a loan facility letter.
Mr Jacob said he became aware the plan to unwind Mr Quinn's stake, by placing shares with institutional investors, changed at the end of June 2008 when the original plan was found "not to be working". But he stressed the fact that the bank was to lend money to 10 customers of the bank to buy shares was not discussed by the board.
He said he remembers getting a brief phone call from Mr FitzPatrick in July during which the then chairman told him that "the transaction was completed", but stressed "he did not think" he knew in advance about the lending.
But Mr O'Higgins maintained that his client called board members, including Mr Jacob, around lunchtime on July 9 with the details of the Maple deal, and that the Financial Regulator was aware and legal advice received.
"My recollection is that I was told the transaction was completed," replied Mr Jacob, who accepted it was common practice for Mr FitzPatrick to "pick up the phone" and ring board members to circulate any new information as he received it.
Mr Jacob, a member of Anglo's audit committee at the time of the alleged offences, maintained he had no knowledge of the funding arrangement for the deal and only became aware later in the year.
He told Brendan Grehan SC, representing Mr Whelan, that the recourse to the investors – the amount they would have to pay back – was also not discussed at board level.
Mr Jacob said he only became aware of the nature of the recourse arrangements at the end of the year and said he only became aware of a letter which altered the recourse at the end of the year. He said this change, which could have allowed the borrowers to repay nothing, was not discussed by the board.
The trial continues.