ANGLO Irish Bank approached clients as they holidayed in the south of France and Portugal, in a planned €800m deal to unwind a secret stake built up by former billionaire Sean Quinn, a court has been told.
The overseas approaches were made after the bank put in place the scheme to lend money to 16 people to buy shares in the company as its share price plummeted in 2008.
Anglo's former chairman and managing director of lending in Ireland have accepted the bank planned the massive scheme to lend out money to borrowers, in order to buy shares in the bank.
The factual admissions were made by Sean FitzPatrick and Pat Whelan on the opening day of their trial.
One borrower was in the south of France when he was approached by Whelan and former chief executive David Drumm – who is living in the US and is not on trial, said prosecutor Paul O'Higgins SC.
"A lot of people if they were on holidays and saw their bank manager might head for the nearest sand dune," Mr O'Higgins said.
An "historic" 15-strong jury at the Circuit Criminal Court in Dublin also heard Anglo sought investors in the US and Middle East with a view to unwinding Mr Quinn's stake.
Mr O'Higgins, for the DPP, said the three former directors at the bank played a role in an "absolutely illegal" scheme to fund the buying of the bank's own shares.
Mr FitzPatrick (65), Mr Whelan (51) and William McAteer (63) – Anglo's former chief risk officer and director of group finance – have each pleaded not guilty to 16 charges of unlawfully providing financial assistance to individuals for the purpose of buying shares in the bank in July 2008.
Mr Whelan also denies seven charges of being privy to the fraudulent alteration of loan facility letters to seven of the borrowers.
The prosecution claims that Anglo created a scheme to lend up to €800m to Mr Quinn's wife Patricia and their five adult children and 10 "high net worth" clients – who became known as the "Maple 10" – to buy the Quinn shareholding.
Mr O'Higgins said that the lending scheme, whose "clear and direct purpose" was to buy shares in the bank, was originally costed by Anglo at up to €800m.
But because of a sharp fall in Anglo's share price, a lesser sum of €625m was ultimately lent.
Of this, approximately €175m was lent to the wife and five adult children of Mr Quinn and €450m to the "Maple 10".
"This was lending in very extraordinary circumstances which had nothing whatsoever to do with the ordinary course of business," said Mr O'Higgins.
The prosecutor also said that unsuccessful attempts were made to get investment from the US and at a roadshow in the Middle East where Anglo tried to line up sovereign funds to invest.
The court heard the enormous lending was designed to let investors buy the Quinn holding, 25pc of the bank's share value.
The former business tycoon Mr Quinn built it up in undisclosed stock market deals known as Contracts For Difference (CFD). Mr O'Higgins told the jury the now bankrupt businessman's investments were a bet.
"At some time financial geniuses of some description offered an extraordinary form of gambling to members of the investing public – it was called Contracts For Difference," he said.
Yesterday, shortly before the first prosecution witness was called, lawyers for Mr FitzPatrick and Mr Whelan made certain factual admissions that do not now have to be proven by the State.
Mr Whelan admitted that the bank lent money to the 16 borrowers, who include the wife and five adult children of businessman Sean Quinn Snr.
Senior Counsel Brendan Grehan, for Mr Whelan, said that the former director admitted the money concerned was "lent for the purposes of acquiring shares in the said bank and was used either directly or indirectly for that purpose".
But Mr Grehan said that the lending arose as a result of the execution of a plan by Anglo – known as the Maple Transaction – which was to enable an orderly unwinding of a substantial contracts for difference (CFD) position in relation to the bank's shares which had been built up by Sean Quinn.
Mr Whelan has admitted that he was one of those who helped implement the plan. But he said that he did so on the basis and in the belief that the lending involved was in the ordinary course of the bank's business.
Mr Grehan said: "This was in circumstances where his (Mr Whelan's) understanding was and is that the Irish Financial Regulator as well as the English Financial Regulator had agreed to the plan; that the bank's own compliance department had obtained positive expert legal advice from a leading law firm in relation to it; and that as a major international services provider was executing the transaction, they would only do so if satisfied that the bank was in compliance with all the relevant legal requirements."
Mr FitzPatrick also admitted that in July 2008 Anglo lent money to the 16 people named in the charges, and this was done for the purpose of acquiring shares in the bank.
Senior Counsel Michael O'Higgins, for Mr FitzPatrick, also said that this was to enable an orderly unwinding of a substantial CFD position in relation to the bank's shares which had been built up by Sean Quinn.
The trial continues.
Dearbhail McDonald and Donal O'Donovan