Setback for Drumm as judge rules he must give Anglo damning report
Published 05/03/2011 | 05:00
DISGRACED banker David Drumm has lost a legal battle to keep secret a damning report on his tenure at the helm of Anglo Irish Bank.
A US judge last night ruled Mr Drumm (44) must hand over a copy of the report to lawyers for Anglo. The decision represents a major setback for the bank's former chief executive, who is now facing the prospect of a major lawsuit from Anglo's new management.
The report, written by former Comptroller & Auditor General John Purcell for the Chartered Accountants Regulatory Board (CARB), outlines five disciplinary charges against Mr Drumm. It forms the basis for disciplinary proceedings Mr Drumm is due to face from CARB this April.
Mr Drumm had been refusing to disclose the document to lawyers for Anglo, arguing it was confidential. However, the way has now been cleared for the bank to use it in legal proceedings against him.
Anglo is opposing Mr Drumm's attempts to be declared bankrupt and also plans to sue him for misconduct and deception while he was Anglo's chief executive.
Dubliner Mr Drumm moved to Massachusetts after quitting the bank in December 2008. A month later it was nationalised.
He filed for bankruptcy in October last year after failing to reach agreement with Anglo over the repayment of more than €8m in loans.
At a hearing in Boston yesterday, Judge Frank Bailey rejected arguments from lawyers for Mr Drumm, who fought to have the report kept confidential. Anglo lawyer Kenneth Leonetti argued that the Purcell report was "highly relevant" to off-the-books loans and transfers made by the bank during Mr Drumm's tenure as chief executive.
Mr Leonetti said Anglo needed the documents to fact-check the "fantastical story" Mr Drumm had told lawyers for the bank in a behind-closed-doors deposition last month.
Mr Leonetti said Mr Drumm introduced the documents to the proceedings himself, when he said he had referenced them to prepare for a deposition. Anglo's lawyers had not known of the report's existence prior to that statement, he said.
Mr Drumm's lawyer, Heather Zelevinsky, argued that the report was confidential and not relevant to the bankruptcy proceedings. She also said Mr Drumm felt the report violated his rights, calling it a "political" report that omitted facts and contained factual errors.
Ms Zelevinsky asked the bank to repay Mr Drumm for lost wages and legal fees.
However, Judge Bailey ordered that the report be handed over, saying the bank had a right to information that could lead to admissible evidence.
Judge Bailey also rejected a request for Anglo to repay any lost wages or legal fees.
CARB rules meant the accountancy watchdog would have been unable to give the report to Anglo as a disciplinary process is still in train. However, the regulatory board's by-laws do not prohibit Mr Drumm sharing the report with a third party.
In court papers filed last month, lawyers for Anglo said the bank was interested in pursuing four of the five areas of alleged misconduct detailed in the Purcell report.
Anglo has accused Mr Drumm of misconduct and of failing to fulfil his fiduciary duties to the bank through his alleged role in the concealment of €87m worth of loans by former Anglo chairman Sean FitzPatrick; and in amendments made to loans given to some major customers which made the borrowing non-recourse, meaning the borrowers could not be held personally liable for the debts.