Wednesday 21 February 2018

Anglo case: Former director Pat Whelan fined €3k over failing to register €8.2m loan

Pat Whelan (52), of Coast Road, Malahide, Co. Dublin at court
Pat Whelan (52), of Coast Road, Malahide, Co. Dublin at court
Shane Phelan

Shane Phelan

Former Anglo Irish Bank director of lending Pat Whelan has been fined €3,000 for failing to register a fraudulent €8.2m loan to fellow director Willie McAteer.

Mr Whelan (54), of Coast Road, Malahide, Co Dublin has also been disqualified from being a director of a company for five years.

But the sentencing of former Anglo finance director McAteer (66), who admits fraudulently obtaining the cash to avoid having to sell his Anglo shares, has been postponed to next week.

Dublin Circuit Criminal Court heard Mr McAteer, of Greenrath, Tipperary Town, Co Tipperary,  faces up to seven years in prison for the offence.

He took the loan on September 29, 2008 to avoid the forced sale of 3.3 million shares, a situation Anglo felt would be catastrophic for the bank.

But not only was the loan obtained fraudulently, it was never included in any register of directors loans, as required by law.

In imposing the fine on Mr Whelan (54), Judge Martin Nolan accepted he “probably did not know the appropriate way to record the loan” as there was no register kept by Anglo.

Mr Whelan has three months to pay the fine or else he will face three months in prison.

The maximum fine the judge could have imposed was €12,697.

Under questioning from prosecution counsel Sean Gillane SC, Detective Garda Glen Mackessy told the court that at the time directors of Anglo were encouraged to hold shares in the bank.

Mr McAteer funded his shareholding through five loans obtained from Bank of Ireland.

The court heard he borrowed sums of €5,535,000, €1,293,000, €984,832, €310,000 and €133,095 to purchase his shares.

The Bank of Ireland loans were secured against the shares.

However, under the loan facility agreement, if the value of the shares fell to 1.8 times below the value of the loans, Bank of Ireland could seek a reduction in the loans or an increase in the security.

Another clause said that if the value of the shares fell 1.4 times below the value of the loans, Bank of Ireland could sell the shares without reference to Mr McAteer.

With Anglo’s share price in freefall during 2008, Mr McAteer informed colleagues he was in breach of his loan agreement with Bank of Ireland and that his shares could be sold at any time.

Det Gda Mackessy accepted that the sale of shares by a director would have had a considerable negative impact on the bank.

He said Anglo decided to help Mr McAteer refinance his Bank of Ireland borrowings via a loan of €8,246,307 from Anglo.

The security for the Anglo loan was a charge over the 3.3 million shares and Mr McAteer had no personal liability.

The court heard Mr Whelan signed a facility offer for Mr McAteer on September 29, 2008, but the loan was never recorded in a directors loans register.

Anglo’s chief financial officer Matt Moran subsequently approached Mr McAteer in 2009 seeking to amend the terms of the loan.

That February, Mr McAteer signed a undertaking making him liable for the borrowings, but excluding his family home and pension.

Det Gda Mackessy said that when questioned in March 2010, Mr McAteer said the terms of the Anglo loan were not decided by him, but he had accepted them.

Mr Whelan was questioned the following month and told gardaí Mr McAteer was “under pressure” to refinance his Bank of Ireland borrowings.

Judge Nolan asked if Mr Whelan was ever asked by gardaí why he had not registered the Anglo loan.

But Mr Gillane indicated that garda inquiries were focussed on other matters and that he was never asked the question specifically.

Det Gda Mackessy also told the judge: “He didn’t tell me, but there was confusion about the register in the bank at the time.” 

Mr Whelan’s counsel, Brendan Grehan SC, said his client had pleaded guilty at the first opportunity to failing to maintain a register in respect of granting the loan.

He said Mr Whelan had cooperated fully with an investigation by gardaí and the Office of Corporate Enforcement.

Mr Grehan said it was not a situation where the loan was concealed, it was just that a separate register was not kept.

Such registers weren’t kept in Anglo at the time and there was confusion as to what constituted a register and who was responsible for keeping it.

The court heard Mr Whelan had one previous conviction for giving illegal loans to developers to buy shares in the bank, for which he got 240 hours community service.

Imposing a €3,000 fine on Mr Whelan, Judge Nolan said that he was satisfied Mr Whelan did not know of the obligations placed on him to ensure directors loans were recorded.

The judge said he was satisfied the defendant “probably did not know the appropriate way to record the loan”.

Mr McAteer’s counsel, Patrick Gageby SC appealed for leniency for his client and asked that any sentence run concurrent to a three-and-a-half year term he is already serving for conspiring to mislead investors by using interbank loans to make Anglo appear €7.2bn more valuable than it was in 2008.

Mr Gageby said Mr McAteer had not sought the Anglo loan and that the loan document “had been put in front of him to sign”.

He also said his client had pleaded guilty to the offence, saving the State the substantial expense of running a trial which would have included voluminous disclosure.

Judge Nolan said he would sentence Mr McAteer next week.

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