Tuesday 22 October 2019

Anglo officials described transactions at height of financial crisis as 'funny stuff' - Drumm trial hears

Former Anglo Irish CEO David Drumm arriving at the Circuit Criminal Court. Photo: Collins Courts
Former Anglo Irish CEO David Drumm arriving at the Circuit Criminal Court. Photo: Collins Courts
Andrew Phelan

Andrew Phelan

ANGLO Irish Bank officials described transactions being carried out at the height of the financial crisis as “funny stuff,” a court heard.

In phone conversations recorded at Anglo in 2008, bankers also referred to “rinky dink” figures and making the balance sheet looking “aesthetically as well as it can.”

The tapes were played to the jury today in the trial of Anglo’s former CEO, David Drumm.

Mr Drumm (51) is pleading not guilty to conspiring to defraud Anglo investors by dishonestly creating the impression that the bank’s customer deposits were €7.2bn larger than they were.

He is alleged to have conspired with Anglo’s former Finance Director Willie McAteer and head of Capital Markets John Bowe, as well as then-CEO of Irish Life and Permanent, Denis Casey, and others. The case centres on a series of interbank loans which circulated between Anglo and ILP in September 2008.

The transfers were routed through Irish Life Assurance, returning to Anglo where they were then treated as customer deposits, which are a better indicator of a bank’s health.

Mr Drumm also denies false accounting, by providing misleading information to the market.

This afternoon, Anglo’s former head of liquidity Ciaran McArdle was giving evidence at for a second day at Dublin Circuit Criminal Court.

The jury was played tapes of phone conversations Mr McArdle had between March and November in 2008. Mr Drumm was not on any of the calls.

On October 8, Mr McArdle was heard speaking to Financial Regulator officials Ciaran Rogers and Clare Taylor. In the call, they discussed Anglo figures being sent to the Regulator, including the underlying corporate flow number.

The jury was then played a number of calls between Mr McArdle and Paula Twomey in the Central Bank on November 4. In the first call, Mr McArdle read out a list of Anglo’s “numbers” to Ms Twomey and said he would send her a spreadsheet. In the second, he spoke of “confusion” and told Ms Twomey: “I understand why you can’t see it.”

He said the movements at the end of September did not “give a true reflection of our core corporate position” because at the year end Anglo did deals with people “that increased our customer funding position” and those amounts “were always going to be leaving us.”

Mr McArdle told Ms Twomey Anglo had “lost €4bn” on October 2 but “it was nothing to do with core corporate numbers.”

“So what we have tried to do is strip out those adjustments to give you our core numbers,” he said.

Mary Rose Gearty SC, prosecuting, said Ms Twomey had been having difficulty “reconciling” figures she had been given.

In another call later that day, he explained to Ms Twomey how the “corporate number” was arrived at.

On March 26, Anglo’s liquidity risk manager Stephen Hiles told Mr McArdle about being called to a meeting in the bank about customer funding.

He recounted the question of “how do we get it up to €4bn” referred to “conventional ways” and then said  “they’re looking at more reporting ways of how to get it there.”

They were “trawling through” things to try to do it, he said. There were “certain things that are more transparent than others.”

Mr McArdle called David Fagg in Royal Bank of Scotland in March 2008 and said he was looking to do “a back to back” over March 31.

“What I would like or what they would like is for, aesthetically, the balance sheet to look as well as it can,” Mr McArdle said.

The jury heard calls between Mr McArdle and Paul Kane, his counterpart in ILP on March 28, 2008.

Mr McArdle asked if David Gantly, ILP’s head of treasury, had spoken to Mr Kane. He replied that Mr Gantly had not, as he was “in the States on some road show.”

“I’m giving you a yard,” Mr McArdle said.

“I’m giving it back to you,” Mr Kane replied.

Mr McArdle said Mr Kane may be giving it back “in Irish Life’s name” rather than Irish Life and Permanent’s.

Mr McArdle explained to the jury a “yard” was “terminology for a billion.”

In another phone call on the same day, Mr McArdle asked Mike Nurse, Anglo’s head of treasury risk: “Are you aware of the deal they’re trying to do with Irish Life and Permanent over March 31?”

“No,” Mr Nurse replied.

Mr McArdle told Mr Nurse it was a “back to back… cash against cash.”

They spoke about a credit line for ILP for the transaction.

Still on March 28,, ILP’s David Gantly told Mr McArdle he had chatted with Denis Casey and: “we are approved to do.”

“Tight as a duck’s a**e in this environment is kind of key,” Mr Gantly said.

Mr Hiles called Mr McArdle, who told him things were “pretty intense.”

“All focused on corporate numbers, seeing what we can do, seeing what we can’t do to get the number as accurate as we can,” Mr McArdle said during the call.

“I was going to say when did accurate ever come into it,” Mr Hiles said.

“Yeah, torturous, torturous,” Mr McArdle said, telling Mr Hiles the target was “5.4.”

Mr McArdle said it had been a positive day and they were arguing whether it should be 5 or 4.

“Whether it’s total rinky dink or not, they just seem to be more relieved that at least they’re discussing what the number should be or not,” he said to Mr Hiles.

“We have inflated the balance sheet by too much. Doing the deal with the Central Bank has inflated the balance sheet by too much,” Mr McArdle continued on the tape.

“As I said, I was talking to Con and I said look, ‘we have never managed our balance sheet’ and he said ‘oh, come on lads’, so I said ‘we have never managed it like this’.”

The jury then heard Mr McArdle talking to Mr Kane again on the same date.

“Do a billion into us and we will take it on board and get Irish Life to sort you out,” Mr Kane said.

The jury then heard another call that day in which Mr Hiles said: “1.5bn, pretty bloody hard to hide it. We’re going to see it anyway. When we sit down on what, Tuesday or Wednesday, with them. To be honest I don’t see any other way of avoiding it in fairness.”

Tapes were then played from later in 2008. On September 25, Mr McArdle was heard discussing a transaction with Mr Kane.

“I know I can’t do f**king six yards worth of funny stuff,” Mr McArdle said.

On September 29, Mr McArdle told non executive director Donal O’Connell: “I think with the exception of Irish Life they should all be treated as corporate funding.”

“All those guys were supposed to be doing special favours… none of them are doing special favours,” Mr McArdle was heard saying..

On September 30, treasury operations manager Russ Carter told Mr McArdle: “There’s probably not much more we can push down at Central,” before asking: “Are you more or less finished today on the funny stuff?”

“When that news came out this morning from Central, there was a buzz around the place,” he added.

The trial continues.

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