Thursday 19 September 2019

David Drumm's long-running fraud trial is close to 'coming to an end', judge says

Former CEO of the Anglo Irish Bank, David Drumm. Photo: Collins Courts
Former CEO of the Anglo Irish Bank, David Drumm. Photo: Collins Courts
Andrew Phelan

Andrew Phelan

The long-running fraud trial of former Anglo Irish Bank CEO David Drumm is close to "coming to an end", the jury has been told.

Presiding judge Karen O’Connor said today that evidence in the prosecution’s case would finish next week and the four-month trial was close to concluding.

Earlier, the jury heard an Irish Life manager described the multi-billion euro deal with Anglo at the centre of the trial as “not normal.”

The manager, Lorraine Hanrahan, said in a statement that when she first heard about the deal she was “concerned about the fact that it was to be kept highly confidential.”

Mr Drumm (51) is pleading not guilty to conspiring to defraud by dishonestly creating the impression that Anglo's customer deposits were €7.2bn larger than they were in September 2008.

The case centres on a series of interbank deposits which circulated between Anglo and Irish Life and Permanent.

The transfers were routed through Irish Life Assurance (ILA), 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, on the trial’s 72nd day, Judge O’Connor told the jury she could provide them with a progress update.

“We are getting very close to the conclusion of the prosecution’s case in the trial,” Judge O’Connor said.

“The prosecution witnesses will conclude their evidence next week. The trial is coming to a conclusion, I can’t say any more than that at this stage. It is actually coming to an end.”

She then reminded them of warnings she had given previously - that they would be deciding on the evidence in the case and they were to do that “on the basis of what you have heard in this room” and nothing else.

She asked them not to carry out their own research, and said they would realise the relevance of these warnings when they begin deliberating.

Earlier, witness statements which had been agreed by the defence were read out to the jury by prosecution barristers.

Lorraine Hanrahan told gardai she had worked in as a manager in cash management services on Irish Life Investment Managers' back desk at the time of the Anglo transactions. Gillian Farrell and Stephanie McCarthy reported to her.

In her statement, read out by Sinead McGrath BL, prosecuting, she said she was not in the office on the day of an earlier deal with Anglo on March 31, 2008.

She first became aware of the September transactions on the 25th of that month when she had a conversation at her desk with ILIM’s chief investment officer Colm O’Neill. He told her they would be doing “some large transactions” with Anglo and that treasury manager Jacinta Gaffney would fill her in on the details.

Ms Gaffney told her the deals were “to be kept highly confidential” and Ms Hanrahan was “concerned about the fact that it was to be kept highly confidential.”

She told Ms Gaffney she would  speak to her manager Shaun Murphy and she told him about her concerns - that it was a large amount.

Mr Murphy told her he was not aware of the transaction and they went together to the office of Ger Knowles, ILIM’s head of business risk management.

Ms Hanrahan told Ms Knowles the conversation had “raised alerts with me.”

Ms Hanrahan stated she did not think Ms Knowles knew about the transactions before, and Ms Knowles told her she would speak to Colm O’Neill. Ms Knowles came back to her and Mr Murphy with updates and informed them that the transactions were going ahead.

The jury was then played a taped phone conversation Ms Hanrahan had with ILP liquidity manager Paul Kane on September 25, the day the first Sterling transactions totalling £978m took place.

“I believe you are sending us in some Sterling today,” she said.

“That’s right,” Mr Kane said.

“A small amount!” Ms Hanrahan said, to which Mr Kane replied: “A wee amount, yeah!”

Mr Kane then suggested a change to ILIM’s “custodian” bank for the transactions.

He spoke of “trying to take your exposure out of it.”

Elsewhere on the call, Ms Kane told her he was having lunch and she said: “you’ll have the luxury of lunch? I wouldn’t be able to eat!”

“I’ll tell you when people start panicking later when I’m at lunch isn’t worth it,” he said.

“I’m seven and a half months pregnant so this sort of thing is not good for me,” Ms Hanrahan said.

Ms Hanrahan said in her statement it was decided at a meeting the next day that ILIM’s custodian bank, Citibank, would not be involved in the transactions. Because of this, they would be “electronically matching but not making actual physical payments.”

The jury was shown an e-mail ILIM CEO Gerry Keenan sent her on September 29, saying “well done on Friday.”

After the final transaction took place on September 30, Mr Murphy e-mailed Ms Hanrahan, saying: “Well done, Lorraine! Hopefully, that is the end of it.”

Mr Kane sent an e-mail saying it had been agreed with Anglo to the payments due in and out that day, and Ms Hanrahan said she believed he omitted the word “net.”

He had said there was no need to make any payments as the principal and interest amounts  were the same.

Another email stated PTSB, as agent bank for ILA was instructed to net receipts and payments for the transactions with Anglo.

PTSB netting the transactions meant there was no involvment of the ILIM back office, which was a change in the procedure that had been set out by Ms Knowles.

“I had no involvement in the settlement of the deals with Anglo on maturity,” Ms Hanrahan told gardai.

“No, this transaction was not a normal transaction," she told gardai. "It was a non standard transaction because of the amount involved.

It was not normal for PTSB to act as agent for ILA rather than the custodian Citibank. It was unusual to put a transaction like this across a suspense account. I would never normally use suspense accounts.”

Diana Stuart BL, prosecuting, then read out a statement by Ger L’Estrange, ILP's then treasury settlements manager.

She said in relation to the March 31 transaction, she spoke to Paul Kane and was satisfied with how it would be recorded. She did not know what the purpose of that transaction was and was not concerned with the amount at that stage.

On the September transactions, she said she checked with Mr Kane one of the €1bn transfers to Anglo on the 30th of that month, “due to the quantum.”

She was not happy with his response to her query but could not recall specifically what he said.

Ms L’Estrange queried with ILP Head of Treasury David Gantly “was the deal in order.”

“David Gantly assured me that the deal was OK,” she said. “I was satisfied on that basis.”

The trial continues.

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