‘Anglo not just a bad bank, but the worst’, say Quinn children
- Sean Quinn gambled with his children's future, court hears
- No one explained transactions to five children
- Plaintiffs had 'modest lives' - any indulgences were in the gift of their father
The five children of former billionaire Sean Quinn say they received no legal advice in relation to share pledges and guarantees they signed related to €2.34bn in loans from Anglo Irish Bank.
The High Court has heard they often only got “a signature page” to sign and not the entire document.
The court heard that although the sums were advanced to the children, as shareholders in Quinn Group ROI, they were not consulted about drawing down the funds and these were used to cover losses endured by their father while investing in Anglo shares through financial instruments known as contracts for difference (CFDs).
Their counsel, Bernard Dunleavy SC, said as far as the children were concerned, “Anglo wasn’t just a bad bank, it was the worst”.
He said that if they had been advised by the bank of the “dire circumstances” in which they would find themselves, they would never have signed.
An action by the five children, Sean Jr, Ciara, Colette, Brenda and Aoife Quinn, against Anglo’s successor Irish Bank Resolution Corporation and its liquidator Kieran Wallace opened today in the High Court.
The case, in which the children deny any liability for the loans and claim the security on them was invalid and unenforceable, is expected to last six months.
Mr Dunleavy outlined to the court the huge size of the Quinn business empire in the 2000s. It involved 95 associated companies with a wide range of interests, including insurance and hospitality.
Quinn Group ROI was the main holding company and the shares in this were held by the five children.
Mr Dunleavy said that “on paper at least” from 2002 onwards, the children might have been viewed as among the wealthiest in the country and controlling a massive business empire.
But he said that perceived state of affairs was not the reality.
The plaintiffs, he said, had modest lives. While they enjoyed some indulgences, these were always in the gift of their father.
Mr Dunleavy said that what Sean Quinn Snr said went. The possibility of refusing a request from their father was not something any of the children could contemplate. The barrister said this was a state of affairs known by Anglo.
The court heard how Sean Quinn Snr began investing in CFDs in September 2005 through Bazzely, a company in Madeira.
Using CFDs, it is possible for someone to invest in the performance of shares without actually owning them.
Mr Dunleavy explained there was “a huge degree of risk” involved.
When the share price went up, the profits to be made could be enormous. But when they went down, the losses could be colossal, he said.
After a period, Bazzely began to invest almost exclusively in Anglo shares.
Mr Dunleavy said Sean Quinn Snr’s problem was not just that he invested in CFDs, but he also put all of his eggs in one basket.
Anglo’s share price would fall so precipitously, he had to go back to the bank to fund the “margin calls” he had to pay.
Mr Dunleavy said in doing so, he gambled with his children’s property and not his own. The barrister said he gambled with their future and that was why they were in court today.
The bank agreed to loan massive sums as it wanted to support its own share price.
“Mr Quinn and the bank were engaged in a process where they had to run and run to keep up, but no matter how much they ran, they could not keep up with the falling share price,” said Mr Dunleavy.
The barrister said that in total some €2.3bn was advanced by the bank from September 2007 onwards. But no one, he said, explained the transactions to the children.
Mr Dunleavy said there was an after the fact effort to make it appear they had received sufficient legal advice, but this was not the case.
Various security documents were signed by the children in connection with the loans.
One of the central issues in the case is the validity of share pledges and guarantees given to Anglo as security for the sums loaned to Quinn companies.
The Quinn children allege negligence and breach of duty by the bank. They claim the bank's conduct involved intentional infliction of economic harm on them.
The claims are denied by IBRC.
The court heard how during one six day day period in April 2008, sums of €50m, €20m, €220m, and €60m, were drawn down to fund margin calls as Anglo’s share price fell.
Sean Quinn Snr’s CFD position in Anglo reached 28pc of all the bank’s shares at one point.
As the share price continued to plummet, Anglo demanded the Quinns reduce the CFD position and most of the CFDs were unwound into shares.
One portion of those was purchased by a group of investors known as the "Maple Ten" and the rest by the Quinn Group.
The Quinn shares were transferred to six Quinn-owned Cypriot companies which ultimately received €498m from Anglo.
Mr Dunleavy’s opening statement to Mr Justice Garrett Simons is expected to last over three days.
Up to 49 witnesses are expected to be heard from, including former Anglo chief executive David Drumm, who is currently serving a six year jail sentence for conspiracy to defraud.