Saturday 25 October 2014

Ivan Yates: Real villains may escape scrutiny, but you better not be caught stealing pair of socks

Published 19/04/2014 | 02:30

Opinion Cartoon 19 April
Opinion Cartoon 19 April

FORTY-EIGHT days of an Anglo trial may be as near as we ever come to any form of Anglo accountability. That's if the recent shenanigans of evasion at the Public Accounts Committee involving no-shows by Rehab's Frank Flannery and Angela Kerins are copied at any banking inquiry at the Finance Committee.

Expect star witnesses to lawyer up. Powers of compellability won't match the lethal effectiveness of cross-examination in court.

So this case and conviction of William McAteer and Pat Whelan is the most important in corporate history. There remain as many unasked questions as answers. Many culprits of our financial crash only had cameo roles in this trial.

We have ample evidence confirming Sean Quinn as the most reckless Irish gambler of all time. Let's compare and contrast our life before and after his splurges. We had a functional, competitive insurance sector, notwithstanding past scandals of PMPA and ICI.

Insolvency practitioners Grant Thornton, the court-appointed administrators of Quinn Insurance, estimated total losses there to be €1.65bn. We must pay for many years a percentage levy on all insurance policies to cover Sean Quinn's speculative losses on equivalent volumes of investments in Anglo contracts for difference. Legacy costs of Quinn Insurance will be surcharged on householders and motorists indefinitely.

In October 2008, the largest fine ever, of €3.45m, was imposed on Quinn Insurance, plus a further fine of €200,000 on Sean Quinn himself, for inadequate claims provision. Cash was diverted towards Anglo bets, we pick up the tab.

Maple 10 loan arrangements were an illegal share-support scheme. There wouldn't have been a Maple 10 if Sean Quinn hadn't dabbled in Anglo shares. He and his family portray themselves as victims in pursuit of a €2.3bn lawsuit against the State. Yet his actions preceded Anglo's destruction and were followed by nefarious practices of cover-up and concealment that were revealed in this trial.

It transpires that his shareholding was not 24pc, but 29.4pc. This startling figure is close to the 30pc threshold of being compelled under stock exchange rules to make an outright takeover bid. Sean Quinn was Anglo's biggest borrower. It is so tempting to contemplate that his level of investment in the bank was not just a flutter, but perhaps a strategic attempt to control his lender. The jury seems to have sussed the differences between the Quinn loans and the Maple 10 facilities.

Beyond Sean Quinn, others must face responsibilities for Ireland's worst financial scandal. David Drumm, Anglo's CEO, was architect and author of the Maple 10 loan/share purchase scheme. He is the 'black box' of this crash. He implemented the deal; got board approval and sold it to regulatory authorities. As Anglo floundered, he took charge of the abortive rescue. Yet he faces no DPP charges.

He went to the US without assisting garda authorities or the Director of Corporate Enforcement officers. No explanation has been proffered as to what steps will be taken to bring him to justice. Drumm was the best-paid CEO in Ireland in 2008 at €4.65m and was amongst the highest-paid bankers in Europe. He also facilitated his own personal director loans from Anglo. Astonishingly, there has been no comment from any member of government or public official about Drumm since the court verdict.

Next up, Pat Neary. His trial evidence was truly extraordinary. This man reassured the world on October 18, 2008 that Ireland had the best-capitalised banks in the world. What a Wally. Between September 2007 and March 2008, he inexplicably didn't know what officials in his office knew about precarious Anglo share dealings. He didn't ask Sean Quinn basic key questions about his Anglo share investments. Pity the poor suckers who depended on Neary as Anglo shares fell from €17.53 to zilch and ultimate liquidation. Punters lost everything in a sea of ignorance about false and misleading annual accounts.

Nobody – including the Central Bank governor John Hurley; Kevin Cardiff at the Department of Finance; members of Government; Paul Appleby, the Director of Corporate Enforcement; the Irish stock exchange or Anglo's auditors, Ernst & Young – had any grip on illiquidity levels and insolvency inside Anglo.

Neary walked away with a package of €630,000 as reward for his ineptitude and incompetence. Nice work, if you can get it.

Taxpayers took responsibility for Anglo's toxic loan book of €72bn. NAMA, the IBRC merger and liquidation all flowed from bailing out this institution. It was an investment bank of limited systemic value to the economy as it didn't involve national retail clearing and transmission systems. In retrospect, it should have been put into administration on day one.

Ireland doesn't do accountability. Hopefully, this trial is just one of the first of many. Three central characters of Quinn, Neary and Drumm currently don't face any sanctions for their culpability in this catastrophic banking collapse.

Instead, expect a political show trial (leading up to the general election) that will make Cowan and Co the fall guys. They are not blameless. Meanwhile, as real villains escape scrutiny and sanction, remember not to steal a pair of socks in Dunnes Stores. That's real blue-collar crime. White collar-stuff: fraud, putting assets beyond the reach of creditors, false accounting, concealed losses, insider loan schemes and complicated stuff like that involving important people, well that's all okay.

Irish Independent

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