ANGLO Irish Bank lent almost €2bn in just seven months to businessman Sean Quinn to fund his “spectacular punt” on the bank’s shares.
The trial of three former Anglo directors has heard the bank lent €1.97bn in six separate tranches to fund Mr Quinn’s margin calls between November 2007 and July 2008 as the bank’s share price plummeted.
The margin calls – hundreds of millions required to cover the shortfall in Mr Quinn’s secret stake in Anglo built using contracts for difference (CFDs) – increased dramatically on March 17, 2008, after the ‘St Patrick’s Day Massacre’ when up to 30pc was wiped off Anglo’s share price.
Mr Quinn, who at one point held a 29.3pc share in the bank, is due to give evidence in the trial at Dublin’s Circuit Criminal Court on Monday.
The former CEO of the Quinn Group, Liam McCaffrey, has testified that Mr Quinn denied he wanted to own Anglo, saying the former tycoon liked Anglo’s management, thought its business model was “good” and thought Anglo was undervalued.
Mr Quinn told the bank’s then CEO David Drumm and non-executive chairman Sean FitzPatrick in September 2007 that he controlled 24pc of the shares.
But it was revealed yesterday that Mr Quinn continued to increase his CFD stake to 29.3pc over the next seven months before being “forced” to sell them.
Mr McCaffrey also told the jury of eight women and seven men that the Financial Regulator was fully aware of a plan to have Mr Quinn sell his CFDs, and for his family and other investors to buy the shares outright using Anglo funds.
Mr McCaffrey said former Financial Regulator Pat Neary, who is a potential witness in the case, was “four square” behind a deal agreed at Easter 2008 – between Mr Quinn and Anglo – and fully aware Anglo was providing the funding for the purchase of the shares.
He also told gardai that, to his knowledge, Anglo received legal advice from leading Dublin law firm Matheson Ormsby Prentice (MOP).
The scale of lending by Anglo to fund Mr Quinn’s CFD position was outlined on the third day of the trial of three former directors.
The prosecution alleges that Pat Whelan, Anglo’s former MD of lending in Ireland; William McAteer, former Chief Risk Officer and Director of Group Finance; and Sean FitzPatrick were involved in a plan by Anglo to loan money to the Quinn family and the ‘Maple Ten’ group of investors so that they could buy shares in the bank and guarantee the stability of the share price.
The three men have been charged with 16 counts of providing unlawful financial assistance to 16 individuals to buy shares in the bank. Each charge relates to a specific person, who allegedly received loans between July 10 and July 30, 2008.
Mr Whelan also faces seven charges of being privy to the fraudulent alteration of loan facility letters to seven individuals in October 2008.
Mr FitzPatrick (65) of Greystones, Co Wicklow, Mr McAteer (63) of Rathgar, Dublin and Mr Whelan (51) of Malahide, Dublin, have pleaded not guilty to all charges.
Mr McCaffrey agreed with defence counsel for Pat Whelan, Brendan Grehan, that Mr Quinn lost a total of €2.4bn by betting on Anglo’s share price through CFDs.
Mr Grehan asked Mr McCaffrey to agree that Mr Quinn’s CFD losses were “a spectacular punt”.
“He paid a very high price for investing in that bank,” replied the former Quinn group CEO.
“He paid a very high price for investing in CFDs. That can't be called investing,” counsel said.
“It's a matter of terminology,” was the final response from Mr McCaffrey.
Mr McCaffrey also confirmed that Mr Quinn had to pay a record fine of around €3.5m to the Financial Regulator because of improper inter-company loans which he used to fund the CFDs.
During a meeting with the regulator, Mr Quinn admitted that he had been greedy and, speaking in the third person, said: “Sean Quinn needed to be reined in.”