Friday 15 December 2017

Anglo anxious to show 'strong corporate number' after so-called St Patrick's Day Massacre, jury hears

Left to right, William McAteer, Denis Casey, John Bowe, and Peter Fitzpatrick
Left to right, William McAteer, Denis Casey, John Bowe, and Peter Fitzpatrick

Anglo Irish Bank was anxious to show a "strong corporate number" in its half year results in March 2008 after the so-called St Patrick's Day Massacre when the bank's share price fell significantly, a jury has heard.

The bank's former Director of Treasury Matt Cullen said it was believed that if the market saw a strong customer number the bank would be regarded "as more secure".

Mr Cullen was giving evidence on the opening day of the trial against former Anglo executives, John Bowe (52), from Glasnevin in Dublin, and William McAteer (65) of Greenrath, Tipperary town, Co Tipperary, and former Irish Life and Permanent executives, Denis Casey (56), from Raheny, Dublin and Peter Fitzpatrick, (63), from Malahide in Dublin.

They have denied conspiring to mislead existing and potential investors, lenders and depositors by engaging in transactions between Anglo Irish Bank, Irish Life and Permanent (IL&P) and Irish Life Assurance to make Anglo appear €7.2bn better off than it was.

This was allegedly done so "people who lent to Anglo would continue to lend" to them, prosecution counsel Paul O'Higgins SC said in his opening address to the jury.

Matt Cullen, the former Director of Treasury in Anglo, told the jury that by October 2007 it was getting harder to get deposits into the bank, due to what was happening internationally.

He said there were "difficult liquidity conditions in the market".

These liquidity issues came to a head with the so-called St Patrick's Day massacre in March 2008 when the Anglo share price fell significantly, shortly before Anglo was due to report its half year results.

Mr Cullen said he was told a decision had been made at senior level to show "a strong corporate number to the market" for the half year results. If the market saw a strong customer number, it would see the bank as more secure, the court heard.

Mr Cullen said he was told to brain storm with colleagues and speak to other Irish banks to see what assistance they could give.

He said he contacted David Gantly, Head of Treasury in IL&P and IL&P agreed to a "back to back" transaction. Anglo transferred €750 million to IL&P, who then deposited the money back in Anglo, via Irish Life Assurance, and "from the market perspective we got a €750m corporate deposit from ILA".

Mr Cullen said he understood this transaction was discussed at executive level, he received approval for it from his boss at the time, Anglo's former Chief Financial Officer, Matt Moran, and Anglo's CEO David Drumm had said it "was not an issue".

Mr Cullen said IL&P posted its half year results in June, and Mr Gantly approached him, instructed by his bosses Mr Fitzpatrick and Mr Bowe, to ask if Anglo would agree to a repo transaction, where Anglo would temporarily buy IL&P's mortgage stock for €3bn, as IL&P wanted to reduce its reliance on the ECB for its half year results.

The court heard Mr McAteer, Mr Moran and Mr Drumm all "said yes" and agreed to the repo transaction.

Mr Cullen will continue with his evidence tomorrow.

Earlier today, in his opening address to the jury, prosecution counsel, Paul O'Higgins SC, said the case concerned events which allegedly occurred between March 1 and September 30, 2008, when Anglo provided its end of year accounts.

 Mr O'Higgins claimed that in the days before September 30, 2008, the accused conspired to make financial transactions from Anglo to Irish Life & Permanent and then bank to Anglo, via Irish Life Assurance, so as to appear customer deposits were greater than they were.

He said these customer deposits were "actually funded indirectly by Anglo".

Mr O'Higgins said that at some time on September 29, 2008 Anglo discovered it had no more money to keep things moving so it stopped for a period as it could not access money.

Between September 29 and September 30, "the money does the rounds six more times" so that by September 30 the "reporting snapshot" gave the totally false impression of customer deposits of €7.2 billion, he claimed.

Mr O'Higgins claimed the whole purpose of the scheme, its raison d'etre, was to "produce the temporary illusion that non-bank deposits had been made to Anglo in a massive, massive sum". He claimed this was to disguise the reality that "non bank deposits were declining at a rate that Anglo feared would alarm those who viewed Anglo as a going concern".

Mr O'Higgins also told the jury there are undoubtedly other people who could have been charged as forming this conspiracy and who took part in events.

However, he said this was not relevant to the jury. "Your role is to decide on the guilt or innocence of the four people before the court", he said.

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