I remember back in 2009 talking to someone who knew Seán FitzPatrick very well. He summed up the predicament the former Anglo Irish Bank chairman found himself in.
“The problem for Seán was that everything went at the same time – his directorships, his income, his investments, his wealth, the bank – the poor guy,” he said.
As falls from grace go, this one was off the charts.
At the time I didn’t exactly feel the same way about it as he did.
The banking system had been brought to near collapse and would have to be bailed out by taxpayers. Naively, people like me at that time feared Anglo could end up costing the State as much as €5bn – instead of a multiple of that figure.
This cost had been inflicted on us by a relatively small group of bankers and their property-developer customers. The whole lot of them could have fitted into one big South Dublin pub, as someone famously pointed out.
After all, hadn’t Anglo been rife with illegality which brought all of this to pass? The first time I heard about Seán FitzPatrick’s warehousing of €87m in personal loans every year at Irish Nationwide Building Society in the run-up to the annual audit, I thought: ‘That can’t be legal.’
Yet the immediate reaction of someone I knew in the Central Bank when he heard about it was: “Do you think that is wrong?”
What about Anglo using its own resources to lend millions to the Quinn family and the Maple 10 investors to prop up the bank’s own share price?
What about the Irish Life deposits merry-go-round, where over €7bn of Anglo money went through Irish Life and back to Anglo – but appeared as a customer deposit? That was rotten too, wasn’t it?
The list went on.
Looking back now, FitzPatrick was cleared of any involvement in the Maple 10 loans. He was acquitted of deceiving the bank’s auditors by warehousing his loans, as the prosecution case imploded and the trial effectively collapsed.
Former Irish Life chief executive Denis Casey was convicted of the deposits spin, but stood to make zero personal gain from the transaction, other than believing he was helping to save the Irish banking system. FitzPatrick was not involved.
What all of these different cases depict is an appalling culture in banking and regulation, a culture which had formed over many years.
In FitzPatrick’s case, you could not meet a more personable and bright individual – but he contributed in no small way to developing this culture that was destined to implode. Sadly, it brought a bill of billions of euro with it to the door of the taxpayer.
We now know that regulation at that time was a joke. But part of the Anglo culture was that too much regulation stifles growth. Not a bad philosophy if you are in manufacturing, but potentially dangerous when applied to banking.
The Anglo way was not so much to break the rules, but to use political influence to help shape the rules and their application. Light-touch regulation wasn’t invented by Patrick Neary.
In June 2007, Fitzpatrick told a Dublin dinner that business people had created the Celtic Tiger boom, and that Ireland’s regulatory regime had gone far enough.
“It is time to shout stop,” he declared. “We should be proud of our success, not suspicious of it. Our wealth creators should be rewarded and admired, not subjected to levels of scrutiny which convicted criminals would rightly find intrusive.”
FitzPatrick was like an entrepreneur in banking, as much as a banker to entrepreneurs. When he ran Anglo Irish Bank he did deals that other banks would not do. He backed individuals through higher risk ventures based on judgement, risk-taking, and the deeper professional relationships that he formed with an expanding group of Irish businesspeople who were doing well.
The bank also took lots of personal guarantees.
At first he was frowned upon by the stuffier traditional bankers – and then later he was copied.
This paid enormous dividends for him personally. He bagged €27m when he sold shares in Anglo in 2004, a year before retiring as chief executive to become chairman.
It placed him at the centre of Irish business, which meant he knew everything that was going on. It wasn’t just that he was connected. So many of the connections ran through him and the bank he had built up.
The scale of Anglo’s backing of some of these businesspeople was not fully appreciated – until the bank came crashing down. The scale of the crisis for FitzPatrick and the personal toll it took was immense.
But that doesn’t change the damage done by a culture at the bank which he helped to mould. Irrespective of the acquittal in the loan warehousing trial, the practice was reprehensible and went against every basic principle of transparency.
But his notoriety spread beyond his role. He became the whipping boy for all of the bank’s misdeeds – even where it was shown that, as part-time chairman, he was not involved.
He garnered huge loyalty from others, perhaps too much, partially because of his genuine charm and force of personality.
I remember being at an awards dinner shortly before Seán FitzPatrick resigned in December 2008. Hundreds of the country’s top executives were there to honour Gary McGann who was receiving a lifetime achievement award. McGann was on the board of Anglo Irish Bank.
The room was alive with rumours that FitzPatrick was about to resign, but nobody was clear exactly why.
There had been rumours before that it had something to do with personal loans.
The first thing we journalists had done was check the level of loans owed by the directors. The figure was big, but not off the charts, and the annual report did not break down amounts for each director.
The likelihood of media digging was one of the reasons why FitzPatrick’s tens of millions of borrowings had been temporarily shipped out each year before the annual report.
Gary McGann gave a very strong speech that night, in which he rallied the business community to roll up its sleeves and deal with the crisis. He said it would be for academics in future years to argue over what had gone wrong, but it was for businesspeople to forge a path through it.
He also said it would be wrong to give someone a red card for doing something when a yellow card was more appropriate. It was a cryptic reference that many of us present took to be about FitzPatrick, but we weren’t really sure.
Former Unilever chief executive Niall FitzGerald gave the next speech – and it was very different. He said that senior people in banking had created the crisis and the entire business models of many large corporations would have to change following an immediate appraisal of how they had lost their way.
A straw poll of those present said a lot about the culture of Irish business at that time, as most people I spoke to preferred McGann’s speech.
One important question is whether that has changed.