Courts

Monday 28 July 2014

In the end, despite all their efforts, the nightmare happened anyway

Lise Hand

Published 18/04/2014|02:30

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Unlike Whelan and McAteer, Fitzpatrick was a non-executive director of Anglo Irish Bank and was not involved in its day-to-day management at that time Photo: Collins
Unlike Whelan and McAteer, Fitzpatrick was a non-executive director of Anglo Irish Bank and was not involved in its day-to-day management at that time Photo: Collins

AFTER the brief frenzy sparked by Sean FitzPatrick's walk to freedom from the Anglo trial as Wednesday afternoon drew to a close, a sort of calm settled back over Court 19 yesterday. But it was a more uneasy calm than before, with tension rippling close to the surface. A final verdict was in all likelihood only hours away now for the two remaining accused, Anglo executives Pat Whelan and William McAteer.

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As the day wore on, the inhabitants of Court 19 drifted out the door. Journalists and legal eagles strolled about making phone-calls, checking emails, writing up notes or swapping speculation on the possible outcomes when the jury returned.

And so the courtroom was almost empty at 3.19pm when the jury's minder materialised and indicated to the court registrar that the jury were ready to return.

Suddenly, there was a quiet commotion as people scrambled into the room, all eyes on the jury as they filed in, looking a little weary.

The registrar asked the foreman had they reached a verdict and she replied, "Yes". One by one, the verdicts were read aloud – "Not guilty" to the charges relating to the provision of unlawful loans to Sean Quinn's family, and then a litany – 10 in all – of "Guilty" verdicts relating to giving illegal loans to the Maple 10.

Again there was no outburst of emotion, and no visible reaction from either Pat Whelan or Willie McAteer. No smiles, no winks to friends, just straight faces, eyes fixed forward.

Judge Martin Nolan thanked the jury, telling the seven women and five men that they were "a credit to the jury system". Then the two men stood and were told to return on April 28 for sentencing.

And then it was over, after almost 11 weeks of evidence and over 17 hours of jury deliberations. Quietly, everyone filed out of the courtroom.

In a way, the trial had been a reflection of the bank at the centre of this legal drama. For Anglo Irish Bank itself had resembled one of the graceful swans gliding along the Grand Canal – all poise and calm on the surface, while paddling like crazy beneath it.

The storm clouds started to gather in August 2007 when rumours began circulating the financial world concerning the extent of billionaire Sean Quinn's Contracts For Difference (CFDs) stake in Anglo; one witness at the trial, Elma Kinane, who was head of 'Team 91' – the team of staff who looked after the Quinn Group – told the court how she had heard the whispers when she returned from inspecting Quinn property investments in Russia, and shortly after the rumours were confirmed, she was informed that the group needed €150m and subsequently an additional €500m as their cash reserves were low.

The rumours were finally confirmed the following month by Sean Quinn himself at a meeting in the Ardboyne Hotel in Navan, when he informed Anglo chiefs Sean FitzPatrick and David Drumm that he held a 24pc stake in the bank through CFDs.

This announcement sent the senior management reeling. One Anglo director, Michael O'Sullivan told the trial that the day he heard about the size of the Quinn stake "was one of those moments that you never forget in life". Over the next 10 months – even as Quinn's CFD holding rose even higher to 28pc – an increasingly frantic effort was made to disentangle Sean Quinn's shares from Anglo.

Tense meetings were held – at one such pow-wow on February 20, 2008 involving the Financial Regulator Patrick Neary and Sean Quinn, the businessman himself admitted that "Sean Quinn needed to be reined in."

This became even more urgent after the collapse of US financial institution Bear Stearns on March 17, 2008, in what became known as the St Patrick's Day Massacre, when the hedge-fund vultures of the international markets sensed Anglo blood in the water and began to circle over the vulnerable Quinn shares.

Anglo board member, Michael Jacob told the court that the board regarded the Quinn CFDs as "a loose cannon – it was uncontrollable, as far as we could see".

All sorts of rescue plans were hatched by Anglo executives to offload the shares in an orderly fashion. One plan, called Project Sleeve, involved making a rights issue to current shareholders; another, dubbed Operation Dribble, produced a calculation whereby the bank could release a certain amount of shares into the marketplace without causing a collapse in the share-price. But both came to naught.

The bank began to cast its net further afield – in early April, senior executives flew to the Middle East seeking buyers, with no success. Then they travelled to America to open negotiations with US investment firm Bain Capital, and reportedly came close to a deal, but it too failed to materialise. And there were other meetings in the Netherlands with Rabobank about the option of a reverse takeover. However, that petered out also.

Time and options were running out and the bank was under attack. Finally, a plan was floated to put in place a consortium of 10 investors from among existing bank clients – who would become known as the Maple 10 – who would then be loaned up to €60m each by Anglo to buy a certain number of shares.

This plan was described in court by Anglo's Chief Financial Officer Matt Moran as "a last roll of the dice" and "last chance saloon".

Investment bank Morgan Stanley was brought in to execute the transaction. In early July, Anglo executives, CEO David Drumm and finance director Pat Whelan recruited members for the consortium – mainly property developers.

The pair flew to the south of France to meet with Gerard Maguire, and to Faro in Portugal to put the proposal to Joe O'Reilly.

There followed an intense period of activity over the weekend leading up to July 14 when the paperwork for a deal was being put together, involving a flurry of conference calls between Anglo staff, Morgan Stanley and the bank's solicitors, Matheson Ormsby Prentice.

Lorcan McCluskey who worked in the bank's lending department, was called into Pat Whelan's office on July 9 and asked to prepare 10 loan facility letters. .

But not everyone was filled with relief when the Maple 10 deal began coming together. A phone call on July 14 involving Anglo chief David Drumm and Sean Quinn, was described in court by Liam McCaffrey, former CEO of the Quinn Group as "angry and difficult". In its aftermath, bank chairman Sean FitzPatrick was sent to Sean Quinn by Drumm "to mend fences", according to FitzPatrick's Garda statement which was read aloud in court.

Amid all the detailed evidence presented at the trial, there were only flashes of insight into how fraught the situation had been inside the bank, but even these glimpses were telling.

In his closing statement to the jury last week, Judge Martin Nolan said, "There was terror with Anglo Irish Bank that if all these shares came in to the market together as a result of Sean Quinn being knocked over that it would have a calamitous effect on the share price."

But in the end, and despite all their frantic efforts, the nightmare happened anyway.

After the curtain had fallen on Court 19 yesterday, Pat Whelan stepped into a lift to the exit, along with two reporters. As the lift door opened, one journalist spoke.

"Happy birthday, Pat".

The Anglo man, who turned 52 yesterday laughed ruefully and walked out to face the chorus of clicking cameras one more time.

Irish Independent

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