Thursday 19 October 2017

Willie McAteer got €8.2m loan on day of bank guarantee

Willie McAteer
Willie McAteer
Maeve Sheehan

Maeve Sheehan

Convicted Anglo Irish banker Willie McAteer could face new criminal charges over an €8.2m director's loan he received just hours before the Government rushed through the bank guarantee.

Former Anglo CEO David Drumm sanctioned the huge non-recourse loan to McAteer, his second in command – even though the bank was on the brink of collapse – on September 29, 2008.

McAteer was investigated for fraudulent trading in relation to the loan and the Director of Public Prosecutions (DPP) is now considering whether he should be prosecuted, the Sunday Independent has learnt.

McAteer, a finance director, was spared a jail sentence last week after he and co-accused Pat Whelan were found guilty of allowing Anglo to make illegal loans to the Maple 10 investors, in connection with the loan.

But the revelation that Anglo bailed out its own finance director to the tune of €8.2m will infuriate taxpayers who have already lost a staggering €34bn bailing out the now defunct bank.

Mr Drumm played a crucial role in facilitating the loan to McAteer at a time when the bank was in crisis, allegedly to shield the share price from further falls.

McAteer had borrowed €8.2m from Bank of Ireland to buy shares in Anglo. One of the conditions was that the shares had to be worth more than the value of the loan. But as Anglo's share price plummeted in late September 2008, Bank of Ireland threatened to seize McAteer's shares and dump them on the market if the loan wasn't repaid.

The prospect of a senior director's shares flooding the market would have accelerated the collapse of Anglo's share price. On September 29, the day before the guarantee was introduced, Mr Drumm sanctioned the €8.2m loan to McAteer to stop the share price falling further while simultaneously courting other banks to bail out Anglo.

In statements disclosed since the Anglo trial, Richard Burrows, governor of Bank of Ireland, described how Sean FitzPatrick, Anglo's former chairman, and Mr Drumm came to him that day.

They told him Anglo was running out of credit and asked if Bank of Ireland would buy it. It triggered alarm within the banking sector.

Later that night, the Government introduced the infamous bank guarantee, which has since cost the taxpayer €64bn.

Mr Drumm was also taking a massive risk that the loan would not be repaid. The only security the bank sought against the loan was Anglo shares, which at that point were in free fall.

The loan to McAteer was investigated by the garda fraud squad and the Office for the Director of Corporate Enforcement (ODCE) after the bank was nationalised. The ODCE sent two files to the DPP in 2010 and again in 2011.

The ODCE referred to the investigation in its annual report in 2011 but McAteer was not named. In its list of investigations it included the "provision by Anglo in 2008 of a loan to one of its directors" (Section 297 of the Companies Act 1963).

That particular section of the act relates to fraudulent trading and states that "every person who was knowingly a party" to it could face up to two years in jail or a £500 fine if convicted.

A spokesman for the ODCE declined to comment on the specific case, but confirmed that two files had been referred to the DPP in relation to a loan to one of Anglo's directors.

It is not clear whether Mr Drumm will face any charges in relation to the loan.

The Sunday Independent has learnt that gardai plan to extradite Mr Drumm from his US bolthole to stand trial over the €7.2bn transfer from Irish Life and Permanent to Anglo, allegedly to bolster its share price.

Three bankers have already been charged with conspiracy to defraud the public in connection with the €7.2bn transfer to "mislead" investors and dishonestly create a false impression.

The charge of conspiracy to defraud is also an offence in the United States, which is one of the conditions that must be satisfied before its courts will agree to extradite a suspect.

The DPP received a file on the case almost three years ago and it is understood that gardai are at an advanced stage in terms of preparing the ground for Mr Drumm's extradition. He decamped to America shortly before the bank was nationalised and is now working as a consultant in New York and New Jersey.

Anglo – now the IBRC – had challenged Mr Drumm's attempt to go bankrupt in the US over loans of €10m.

He is due to face a bankruptcy trial in Boston on May 21, at which a judge will rule whether he can walk away from his debts.

Sunday Independent

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