Drumm: I forgot details of $1m in cash given to wife
Published 22/05/2014 | 02:30
FORMER Anglo Irish Bank boss David Drumm failed to include some details of $1.2m (€870,000) in cash transferred to his wife Lorraine before he sought a US bankruptcy because he "forgot", a court heard.
He also said he forgot to include a €6,000 loan made to his brother days before he signed official papers in the US in December 2010, declaring he had not made loans to family members.
Mr Drumm denied trying to conceal the loan as he appeared in a Boston court, where his entitlement to bankruptcy is being challenged by IBRC and the court-appointed trustee.
But he did concede that he lied on a US mortgage application – used to buy a $2m (€1.4m) home in the upmarket Boston suburb of Wellesley.
He signed the papers without declaring that he was being sued at the time, something explicitly asked in the forms.
The former Anglo banker, who the court was told earned $18m between 2004 and 2008, faced a barrage of detailed questions from lawyer John Hutchinson representing his former employer, now called IBRC, after taking the stand yesterday.
Only "fraud or recklessness" could explain mistakes and omissions in papers filed by Mr Drumm as part of his US bankruptcy, the court was told.
Judge Frank Bailey at one stage had to stop proceedings to warn Mr Drumm and Mr Hutchinson not to speak over each other, during the terse question and answer sessions.
The court heard about over a dozen cash and property transfers from Mr Drumm to his wife in the period immediately following the banking crisis.
The court also heard how some of $250,000 allegedly loaned back to Mr Drumm by his wife in 2009 to set up a US business was later used to buy and sell a number of Range Rover cars.
Money was also withdrawn from the business to pay school fees for the Drumms' children, and to pay advisers acting for Mr Drumm in relation to his personal bankruptcy, the court heard.
Mr Drumm was probed about $1.2m in cash transferred from accounts in either his name or held jointly with his wife to accounts in her sole name from September 2008 onward.
He was also asked about US and Irish property transactions, including the purchase of the family home in Wellesley.
Yesterday was the first day of Mr Drumm's five-day bankruptcy hearing at the David W McCormack Federal courthouse in Boston's financial district.
The non-jury case is to decide whether the former bank boss can emerge debt free from a Chapter 7 bankruptcy he filed for in 2010 after the couple had moved to the US.
If that is blocked, he remains on the hook for his debts.
Mr Drumm kissed his wife Lorraine as she dropped him off outside the high security federal courthouse in a black Jeep Grand Cherokee yesterday.
He was the first witness called in the case, where he was questioned in particular about two documents he filed after applying for bankruptcy known as a Statement of Financial Affairs (SOFA) 10, and a Schedule of Assets.
Mr Drumm accepted that there were omissions on the statement of financial affairs originally filed with the bankruptcy court.
"You left out two of three real estate transfers, isn't that right Mr Drumm?" John Hutchinson asked. "That's correct," Mr Drumm said.
Details in relation to a US property investment at Cross Street, Chatham, near Boston, "just didn't make it in", Mr Drumm told the court.
But lawyers for Mr Drumm told the court that under US rules only transfers made in the year before he sought bankruptcy should be under the spotlight.
Cash transfers between the Drumms during that period were to pay normal family bills, including a €50,000 tax bill back home in Ireland, the court was told.
"The bank's (IBRC) argument is tortured and the evidence will show it is nothing more than a smokescreen," said David Mack, for Mr Drumm.
"Their case will be a lot of bluster, but short on evidentiary substance," he said.
Asked about the Wellesley house, Mr Drumm accepted in court that he lied by signing an application with American bank Boston Private for a mortgage – by not disclosing that he was the subject of two legal actions including being sued by Anglo Irish Bank.
The house was bought by the Drumms jointly, but immediately after the deal closed, Mr Drumm signed a "separate property agreement" with his wife making her first in line for cash if it is ever sold.
The court was told the funds to buy the house originated in their entirety from Mr Drumm's previous income and from the sale of assets owned by himself, or by himself and his wife, in the 18 months prior to the deal.
Previous cash transfers which had ultimately helped fund the purchase had not been included by Mr Drumm in initial papers filed as part of his bankruptcy, the court was told.
Many of the transfers were included in later filings.
"Only fraud or recklessness explains how a former bank CEO could have gotten such basic and elementary forms so very wrong," Mr Hutchinson, the lawyer for IBRC, told the court.
Bankruptcy trustee Kathleen Dwyer and IBRC – which is Mr Drumm's biggest creditor in the case – have objected to Mr Drumm being discharged form bankruptcy.
They claim transfers of cash and other property from Mr Drumm to his wife, and errors they say were contained in documents provided by Mr Drumm as part of the bankruptcy, make him ineligible to be released from his debts.
Mr Drumm told the court that he was aware that any failure in filling out his bankruptcy papers could lead to civil or criminal action.
The case continues.