independent

Wednesday 16 April 2014

Anglo: Sean Quinn was 'an eternal optimist' on bank shares

Witnesses Liam McCaffrey (left) and Seamus Coffey

SEAN Quinn was the eternal optimist when it came to his belief in Anglo Irish Bank shares, a jury at the Criminal Courts of Justice has been told.

The jury in the trial of three former Anglo Irish Bank directors was told how the one-time tycoon's indirect stake in the bank got as high as 28pc or 29pc in March 2008.

Falling share prices in 2008 and 2007 meant the Quinn Group was forced to borrow more and more from Anglo Irish Bank to fund the bet, but Mr Quinn remained convinced the shares would eventually recover.

"How low can they go?" was Mr Quinn's attitude, the former chief executive of Quinn Group told the jury.

"He had an underlying belief the shares would recover," Liam McCaffrey added.

Mr McCaffrey was giving evidence on the second day of the trial of three men charged with permitting the former Anglo Irish Bank to illegally provide financial aid to investors to fund the purchase of shares in the bank.

He outlined how Mr Quinn's bet on Anglo Irish Bank shares through so-called contracts for difference (CFD) led the Quinn family to ultimately pledge all of the shares in the Quinn Group to the bank in exchange for loans of hundreds of millions of euro made to the group.

The CFD holding was built up outside the main Quinn Group as part of a strategy to provide members of the Quinn family with independent wealth, he said. The strategy "went fatally wrong in the end", he said.

Mr Quinn is expected to give his own evidence today.

Economist Seamus Coffey explained to the jury how investing in CFDs instead of in shares was like betting on a horse rather than owning a horse.

If shares rise in value, the investor could make a lot of money, but if shares fell, brokers would make "margin calls", meaning they would demand more money upfront to keep the bets open, Mr Coffey said.

A jury of eight women and seven men in the trial of Sean FitzPatrick (65), from Greystones in Co Wicklow; 51-year-old Patrick Whelan, of Malahide in Dublin; and 63-year-old William McAteer, of Rathgar in Dublin, heard evidence from the first witnesses, including Mr McCaffrey and Mr Coffey, for the first time yesterday.

ACCUSED

The three accused 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 McCaffrey told the court that he and Mr Quinn met Anglo Irish Bank chief executive David Drumm and the bank's chairman Sean FitzPatrick at the Ardboyne Hotel in Navan in September 2007 where the main topic of discussion was the CFD holding.

"Sean (Quinn) told David and Sean that it was at 24pc. They were concerned at the level of it. Sean (FitzPatrick) seemed quite surprised."

Mr Quinn's stake in Anglo Irish Bank had risen to 28pc by the following March, Mr McCaffrey said.

By then the brokers were making "margin calls" on Mr Quinn because the Anglo share price was falling, Mr McCaffrey said.

These were around the magnitude of "two, three hundred million, a significant amount of money", Mr McCaffrey said.

Money to fund the calls was coming from Anglo.

A plunge in share prices in March 17, 2008, led to the date being referred to as the "St Patrick's Day Massacre", the jury heard.

At the March 24 meeting, it was suggested Mr Quinn would get out of CFD holding. Some of the shares would be purchased under the "Quinn umbrella" and the rest sold.

But Mr Quinn did not accept that proposal, Mr McCaffrey said.

At a later meeting, however, it was agreed to move forward with this "unwinding" of the CFDs. Mr McCaffrey said Mr Quinn's attitude was "one of reluctant agreement".

It would mean 15pc of what at that stage was a 25pc CFD holding being purchased outright by the Quinn family and 10pc being "placed" or sold in the market.

Mr Quinn "reluctantly agreed" to that deal, the court heard.

The other witnesses called yesterday were Natasha Mercer, a former Company Secretary at Anglo Irish Bank. She explained the workings of its board of directors, including responsibilities of executive and non executive board members, how often the board met and where.

Witness Aisling McArdle, of the Irish Stock Exchange, was questioned about movements in the price of the bank's share in 2007 and 2008, which are tracked by the Stock Exchange.

Charts based on share price data prepared by Ms McArdle were show to the jury.

"The dubious honour of being the first witness in this case" in the words of a prosecution lawyer, went to Claire Pyke of the Companies Registration Office.

She gave evidence in relation to the history of Anglo Irish Bank, including previous names for the bank and the times at which directors in the bank were appointed.

Irish Independent

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