'Only fraud or recklessness' can explain mistakes in former Anglo chief Drumm's US bankruptcy papers - court told
Published 21/05/2014 | 19:34
Only "fraud or recklessness" can explain mistakes and omissions in papers filed by David Drumm as part of his US bankruptcy, a Boston court has been told.
The former Anglo Irish Bank boss, who the court was told earned $18m between 2004 and 2008, faced a barrage of detailed questions from lawyer John Hutchinson representing his former employer, now called IBRC, after taking the stand earlier today.
David Drumm was probed about more than $1m in cash transferred from accounts in either his name or held jointly with his wife Lorraine to accounts in her sole name from September 2008 onward. He was also asked about US and Irish property transactions including the purchase of a family home in the upmarket Boston suburb of Wellesley.
Earlier today, Mr Drumm accepted in court that he lied by signing an application with American bank Boston Private for a mortgage to buy the house by not disclosing that he was the subject of two legal actions including being sued by Anglo Irish Bank.
The house was bought by the Drumms jointly but immediately after the deal closed Mr Drumm signed a "separate property agreement" with his wife making her first in line for cash if it is ever sold.
The court was told the funds to buy the house originated in their entirety from Mr Drumm's previous income and from the sale of assets owned by himself or by himself and his wife in the 18 months prior to the deal.
Previous cash transfers which had ultimately helped fund the purchase had not been included by Mr Drumm in initial papers filed as part of his bankruptcy, the court was told.
Many of the transfers were included in later filings.
"Only fraud or recklessness explains how a former bank CEO could have gotten such basic and elementary forms so very wrong,” Mr Hutchinson, the lawyer for IBRC told the court.
He was speaking on the first day the of former Anglo Irish Bank chief David Drumm's five day bankruptcy hearing at the David W McCormack Federal court house in Boston s financial district.
Mr Drumm was the first witness called in the case, where he was questioned about two documents he filed after applying for bankruptcy known as a Statement of Financial Affairs (SOFA) 10, and a Schedule of Assets.
Mr Drumm accepted that there were omissions on the statement of financial affairs originally filed with the bankruptcy court.
“You left out two of three real estate transfers, isn’t that right Mr Drumm?” John Hutchinson asked.
“That’s correct,” Mr Drumm said.
Details in relation to a US property investment at Cross Street, Chatham, near Boston, "just didnt make it in," David Drumm told the court.
But lawyers for Mr Drumm told the court that under US rules only transfers made in the year before Mr Drumm sought bankruptcy should be under the spotlight.
Cash transfers between the Drumm's during that period were to pay normal family bills, including a €50,000 tax bill back home in Ireland, the court was told.
"The bank’s (IBRC) argument is tortured and the evidence will show it is nothing more than a smokescreen,” David Mack, for Mr Drumm.
“Their case will be a lot of bluster, but short on evidentiary substance" he said.
Before the hearing Mr Drumm kissed his wife Lorriane as she dropped him off outside the high security Federal court house in a black Jeep Grand Cherokee.
The non jury case in front of Judge Frank Bailey at the Federal Bankruptcy Court is to decide whether the former bank boss can emerge debt free from a Chapter 7 bankruptcy he filed for in 2010 after the couple had moved to the US.
If that is blocked he remains on the hook for his debts.
Bankruptcy trustee Kathleen Dwyer and IBRC which is Mr Drumm's biggest creditor in the case have objected to Mr Drumm being discharged form bankruptcy.
They claim transfers of cash and other property from Mr Drumm to his wife and errors they say were contained in documents provided by Mr Drumm as part of the bankruptcy make him intelligible to be released from his debts.
Mr Drumm told the court that he was aware that any failure in filling out his bankruptcy papers could lead to civil or criminal action.
The case continues.