Drumm's €3.7m pension pot beyond his creditors' reach
Published 13/11/2010 | 05:00
CREDITORS of former Anglo Irish Bank chief executive David Drumm will be unable to seize his €3.7m pension pot, the Irish Independent has learned.
A clause in Mr Drumm's pension scheme means taxpayer-owned Anglo, which is owed €8.5m by the banker, cannot lay any claim to his massive pension.
The terms of the pension state that it must automatically be held in trust for Mr Drumm's family in the event of personal insolvency or bankruptcy.
This means that his wife Lorraine and their children will become its sole beneficiaries, should Mr Drumm's application for bankruptcy be ratified by a US court.
They will benefit once the pension kicks in on the former banker's 55th birthday in 11 years' time. Mr Drumm (44), who fled to the US after resigning from Anglo in December 2008, had offered his pension pot to Anglo earlier this year as part of negotiations to clear his debts to the bank.
However, Mr Drumm filed for bankruptcy in Massachusetts last month before a deal could be finalised.
Under US law, Mr Drumm is under no obligation to offer the pension to Anglo and other creditors, who are owed €10.26m in total.
Mr Drumm listed the pension as his single-largest asset in documents lodged with a court in Boston last month.
With the pension excluded from the list, the value of Mr Drumm's assets available to creditors amounts to just €6.3m.
Mr Drumm will come face-to-face with his creditors at a meeting being convened in Boston next week, where Anglo will seek an order from the bankruptcy courts to compel him to give evidence on oath about his finances.
Officials from Anglo, which has retained two high-profile US law firms in a bid to recover its monies, will travel to Boston for the hearing.
Most of the money loaned by Anglo to Mr Drumm was for the purchase of shares in the bank. But those shares are now worthless after the institution was nationalised.
A number of US banks, mortgage lender GE money and Dublin law firm Eversheds O'Donnell Sweeney are also among Mr Drumm's creditors.
During the negotiations earlier this year, Mr Drumm's pension had represented the best chance Anglo had of recovering some of the money it loaned to its former chief executive.
However, the proposed deal was beset with legal difficulties and it is understood the bank has conceded that the multimillion-euro asset is now beyond its reach in America or in Ireland.
A pension cannot be automatically assigned to a creditor under Irish law and clauses such as those in Mr Drumm's pension are common.
Despite these general restrictions, Mr Drumm and Anglo had been on the brink of an unprecedented deal to override the non-assignment rule before Mr Drumm suddenly filed for bankruptcy.
The two sides had been engaged in intense negotiations throughout the summer to arrange a deal that would see Anglo receive a once-off payout from the pension.
Anglo Irish Bank had engaged a host of experts, including actuaries and lawyers as well as tax and accountancy specialists, to override the non-assignment clause.
The deal had been placed before both the trustees of the pension scheme as well as the Revenue Commissioners, but Mr Drumm filed for bankruptcy before the plan could receive approval.
Previous efforts to assign pensions, widely regarded as sacrosanct in Irish law, have been rejected.
All of Mr Drumm's assets have now fallen under the control of US bankruptcy trustee Kathleen Dwyer, who will now administer his estate.
It is understood pensions can only be assigned under US law in exceptional circumstances, which do not apply to Mr Drumm.