Opening day of Anglo trial hears of €7.2bn in bogus transactions
Published 21/01/2016 | 02:30
Former Anglo Irish Bank chief executive David Drumm authorised €7.2bn in allegedly misleading transactions, the trial of four senior bankers was told.
The executives, including former Irish Life and Permanent (IL&P) chief Denis Casey and Anglo's former group finance director, Willie McAteer, are accused of conspiring to mislead investors by using interbank loans to make Anglo appear €7.2bn more valuable.
In his opening speech to the jury at the Circuit Criminal Court, Paul O'Higgins SC, prosecuting, said that the four men engaged in a scheme on a vast scale which had no commercial substance.
He said that on the night that the bank guarantee was being put in place, the artificial transfer of €1bn was taking place repeatedly in order to make the bank's customer deposits look healthier to anyone examining them.
Mr McAteer (65) of Greenrath, Tipperary town; Mr Casey (56), from Raheny, Dublin; IL&P's then group finance director Peter Fitzpatrick (63) of Malahide, Dublin; and John Bowe (52), from Glasnevin in Dublin, who had been Anglo's head of capital markets, have all pleaded not guilty to four charges.
The charges allege that they conspired together and with others to mislead investors through financial transactions designed to make the bank appear €7.2bn more valuable that it was between March 1 and September 30, 2008.
Yesterday, as the trial got under way, the jury heard that a former Director of Treasury with Anglo Irish Bank claimed he was instructed to ask Irish Life and Permanent if they would "do €6bn to €7bn with it" ahead of its 2008 end-of-year report.
Matt Cullen said Mr Drumm asked him to talk to IL&P to see if it would "do transactions worth €6bn to €7bn" in September at Anglo's year end.
Mr Cullen said IL&P agreed to do it, if Anglo would do the same for IL&P in December, which was IL&P's year end.
He said he spoke to Mr Drumm and Mr McAteer, who said that would be no problem.
Mr Cullen, the former Director of Treasury in Anglo, told the jury that by October 2007 it was getting harder to get deposits into the bank, due to what was happening internationally.
He said there were "difficult liquidity conditions in the market".
Anglo was anxious to show a "strong corporate number" in its half-year results in March 2008 after the so-called 'St Patrick's Day Massacre', when the bank's share price fell significantly.
It was believed that if the market saw a strong customer number, the bank would be regarded "as more secure".
Mr Cullen said he was told to brainstorm with colleagues and speak with other Irish banks to see what assistance they could give.
He contacted David Gantly, head of treasury in IL&P, and IL&P agreed to a "back-to-back" transaction.
Anglo transferred €750m to IL&P, which then deposited the money back in Anglo, via Irish Life Assurance (ILA), and "from the market perspective we got a €750m corporate deposit from ILA".
Mr Cullen said he understood this transaction was discussed at executive level.
He received approval for it from his boss at the time, Anglo's former chief financial officer Matt Moran, and Mr Drumm had said it "was not an issue".
He also detailed a €3bn "repo" deal with IL&P in June 2008 when IL&P was coming to its half-year end and needed cash coming in.
He said that Anglo temporarily bought IL&P's mortgage portfolio for €3bn as IL&P wanted to reduce its reliance on the ECB for its own half-year results.
The court heard Mr McAteer, Mr Moran and Mr Drumm all "said yes" and agreed to the repo transaction.
The trial continues.