News Analysis

Tuesday 2 September 2014

Judge's unenviable task in deciding who was told what – and when

Dearbhail McDonald

Published 29/04/2014 | 02:30

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Judge Martin Nolan placed the blame for failings in Anglo firmly in the State's corner

THE task facing Anglo trial judge Martin Nolan as he sentences two former directors is not an enviable one.

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Judge Nolan has had to navigate many complex arguments and conundrums during the 11-week trial.

And now he is faced with another as he contemplates what mitigation should be afforded to Pat Whelan and William McAteer who each face up to five years in prison.

In the salad days of the trial, after extensive legal argument, Judge Nolan (pictured) told jurors they must ignore any issue of what legal advice Anglo received in the run-up to the now illegal Maple 10 deal.

The jury was also told it could not consider the knowledge or involvement of the Office of Financial Regulator or Morgan Stanley, the blue-chip bank that played a major role in the execution of the Maple transaction.

Judge Nolan indicated in legal argument he could take these matters into account in sentencing.

And now they are centre stage.

The legal advice ruling was a major coup for the DPP, which strongly argued against its inclusion on the basis that ignorance of the law affords no defence.

Yet it was the DPP who yesterday called solicitor Robert Heron, who advised Anglo in 2008, to demonstrate there was "not one written word of legal advice" provided, notwithstanding the scale and complexity of the deal.

The DPP's decision to call Mr Heron is intriguing in circumstances where the testimony of two former Anglo officials – granted full immunity from prosecution by the DPP – are wholly at odds with their newest State witnesses' evidence.

Mr Heron provided legal advice to Anglo in March 2008 and later in July as the Maple 10 deal went through.

He insists that he did not provide any "positive" legal advice about the Maple 10 transaction and says he only found out about lending to the 10 individuals – and the generous 25pc recourse on their €45m loans – in the aftermath of the deal.

Morgan Stanley convened a critical due diligence or legal call on Saturday, July 12, two days before the Maple transaction.

The bank's officials took contemporaneous notes of "the big call".

The notes of Harry Eddis, an in-house lawyer at Morgan Stanley, recorded that one of the things that came up in the call was that "some of the lending was very close to the high net worth of some of the individuals".

Mr Heron did not take any notes of the call and says he has no recollection of the conversations or what advice he may have provided.

But, yesterday, Judge Nolan received a note Mr Heron made at the time of the call in his diary.

These "jottings" record a reference to "10 Inds" which, he told Judge Nolan, refers to 10 individuals.

Morgan Stanley recorded that Mr Heron's law firm, MOP – now known as Matheson – thought the deal was "clearly within" an exemption in S60 of the Companies Act. Section 60 makes it an offence for a company to provide financial assistance for the purchase of its own shares, unless the lending was in the ordinary course of business.

Fiachre O'Neill, Anglo's former head of compliance who enjoys full immunity from prosecution, said he was of the view that Mr Heron had provided positive legal advice about the whole transaction – including the Maple 10 – and that the lending fell within the exemption.

The State contends that there was no legal advice, meaning that Mr Whelan and Mr McAteer cannot rely on it in mitigation.

It will be up to Judge Nolan to navigate the major conflicts in evidence, on who was told what – and when.

Irish Independent

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