Courts

Tuesday 29 July 2014

Regulator left Anglo bosses 'speechless', court is told

Published 13/02/2014|02:30

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THE Financial Regulator asked Anglo Irish Bank officials to reconsider releasing the Quinn Group's €250m guarantee six days after the bank had refused it, a court was told.

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Former Anglo executive Michael O'Sullivan said he and colleague Pat Whelan were "left speechless" when Con Horan, number two in command at the regulator's office, made the suggestion when fully aware of the bank's exposure from Sean Quinn's stake in Anglo.

Mr O'Sullivan, divisional director of lending with Anglo, said the request contradicted the rest of discussions, which focused on how to protect the bank by selling Quinn shares and assets, including Quinn Insurance.

He agreed under cross examination it was "no coincidence" the request was made in May 2008, less than a week after he had personally told the Quinn Group he would not do it as it would trigger a default.

Mr O'Sullivan said they felt that they "might go back and have a second look" after talks with Mr Horan, the prudential director with the regulator.

Six days later, on May 14 2008, Anglo released the Quinn guarantee, believing that as it already had obtained security over Quinn shares, it was in "no worse position" by releasing the €250m guarantee, Mr O'Sullivan added.

The bank was nationalised in January 2009 and the shares were worthless.

The bank's former chairman, Sean FitzPatrick (65), from Greystones, Co Wicklow; former chief risk officer William McAteer (63), from Rathgar, Dublin; and 51-year-old Pat Whelan, from Malahide, Co Dublin, all deny 16 charges of unlawfully providing financial assistance to individuals for the purpose of buying shares in Anglo Irish Bank in 2008.

Mr Whelan also denies seven charges of being privy to the fraudulent alteration of a loan facility letter.

DISASTROUS

Mr O'Sullivan told the Circuit Criminal Court that he was "in complete shock" when he was told in November 2007 that Mr Quinn had at one stage built up a 29pc stake in the bank using contracts for difference (CFDs).

"It was one of those moments that you will never forget in life," he said.

Under cross examination, senior counsel for Mr Whelan, Brendan Grehan, asked if it was he who brought Mr Quinn to Anglo when the bank took over his previous employer, Smurfit Paribas.

"Unfortunately, yes," he said, to laughter from the court.

He revealed the CFDs caused a "major concern" as the bank was not allowed go above 25pc of its own funds and they were approaching that number with Sean Quinn.

Mr O'Sullivan said he was aware senior executives were flying around the world to try and unwind the stake to would-be investors at road shows.

He was on annual leave in July 2008 when a colleague called him to tell him a solution had been reached to unwind Mr Quinn's CFDs – the Maple Ten. The term "Maple" transaction was created by financial services company Morgan Stanley as Maple has the same number of letters as Quinn, Mr Grehan said.

Mr O'Sullivan said he returned to work on July 14 when the paperwork was finalised and signed the documents approving €60m loans for shares to 10 customers that went before the credit committee. He agreed with Mr Grehan that the Quinn stake had been potentially disastrous for Anglo and Quinn Insurance, with the Financial Regulator, Central Bank and Department of Finance all fearing a domino effect with other banks.

"Rumours in the market were causing uncertainty," he added.

Mr Grehan said "hedge funds were circling" and Mr Quinn could not meet his margin calls – with potentially disastrous consequences for Anglo and the entire Irish financial system.

"Yes," Mr O'Sullivan agreed.

The trial continues.

Sarah Stack and Dearbhail McDonald

Irish Independent

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