Monday 25 June 2018

Downfall of a banker who tricked the markets as the financial world crashed

David Drumm cut a solitary figure as a jury heard months of evidence that sealed his fate, writes Andrew Phelan

FALL FROM GRACE: Former Anglo Irish CEO David Drumm leaves the Criminal Courts of Justice after a guilty verdict of conspiracy to defraud and false accounting. Photo: Tony Gavin
FALL FROM GRACE: Former Anglo Irish CEO David Drumm leaves the Criminal Courts of Justice after a guilty verdict of conspiracy to defraud and false accounting. Photo: Tony Gavin
Matt Moran

Andrew Phelan

A decade after the spectacular demise of Anglo Irish Bank, and 87 days after he went on trial for his role in what was described as the "biggest fraud in Irish history", David Drumm finally faced the music alone.

Drumm had cut a solitary figure throughout his trial, usually seen making his way by himself through the cavernous Dublin Criminal Courts of Justice, pulling a small black wheeled business case behind him.

Each day he would set up his laptop on his bench in the dock in Court 19 and tap away, taking notes and occasionally peering over his glasses at one of the dozens of people who gave evidence against him.

They had once been his subordinates, colleagues and perhaps his friends, but for those 87 days, they were witnesses for the prosecution and the man they once called "Drummer" was the accused.

His family out of the country, there were no supporters on the public benches and nobody but his lawyers came forward to speak to him after the jury delivered its verdicts.

His mouth slightly open, he sat in the dock and stared at the jury as they found him guilty of conspiracy to defraud and false accounting. Drumm folded and unfolded his arms. Some observers noticed his hands trembling.

This was the man who had "called the shots" in Anglo, one of the "best banks in the world" during the boom, then one of Ireland's "most reviled" institutions when it was revealed to have tricked the markets as the economy crashed. "Drummer" is now a convicted criminal facing a potentially unlimited amount of jail time for his part in that massive €7.2bn "con job".

Over the course of nearly five months, the jury heard Drumm, a trained chartered accountant, had lived in the US in the early 2000s and had a role in running the American side of Anglo's operation.

He and his family had put down roots, with his children attending school there.

In 2005, Drumm came back to Ireland and "perhaps to the surprise of some", as defence barrister Brendan Grehan SC put it, he was selected as Anglo's new CEO. The jury, shown a detailed chart of Anglo' s chain of command, was told Drumm decided "who reported to whom".

On March 16, 2008, as the global financial crisis reached Ireland and engulfed Anglo, Drumm e-mailed colleagues about thoughts on "what the (Central Bank) Governor asked us, to look at how the Irish banks could help each other", or what became known as the "green jersey agenda".

He said they needed to make the "magic number" funding target to replace the money being lost in the crisis.

Up to 18 people gathered on Friday afternoons in Drumm's office to come up with and progress "funding initiatives" to try to stem the outward flow of cash. One of Anglo's highest ranking executives to give evidence, chief financial officer Matt Moran, was a regular at those meetings. When he testified, the jury was not told he had immunity from prosecution.

Prosecutor Mary Rose Gearty SC asked Mr Moran, what his view was of Mr Drumm's financial acumen, and what he contributed to the meetings.

"He was the chief executive," he replied. Ms Gearty asked what Mr Drumm "had to offer" in terms of contributions to the meetings.

"David was a very experienced person in the bank," Mr Moran said. "He had run the business in the US, he had run the business in Ireland, he chaired and drove those meetings," he said.

This was about as illuminating as any direct evidence of Drumm's leadership got. The prosecution then told how Drumm and others conspired to perpetrate a massive fraud on the markets and the public as the financial crisis deepened.

How it culminated in Anglo sending €1.2bn of its own money around in a circle through Irish Life, adding up to €7.2bn and pretending it was "customer" cash at its September 30 financial year end. But much of that story was delivered in the dry, impersonal language of boardrooms and balance sheets and, with a cast of at least 100, it sometimes seemed the accused was lost in the narrative.

Where Drumm really came into focus was in the now-infamous Anglo tapes that were played to the jury. Drumm had hatched the plot along with co-conspirators including Anglo's head of capital markets John Bowe, finance director Willie McAteer and ILP CEO Denis Casey. The tapes, the prosecution contended, showed his involvement.

In a call on September 29, 2008, John Bowe was heard explaining to him that the money goes around in a circle, and Drumm replied: "Yeah, I know how it works."

On one of the most revealing tapes, Drumm was heard talking to Bowe, describing financial regulator Patrick Neary as "f**king Freddie f**king Fly" and the Central Bank as a "shower of clowns".

This was on September 19, 2008, as the pair discussed seeking a cash injection for their ailing bank.

"I'm going to keep asking the thick question: 'When, when is the cheque arriving?'," Drumm said, adding: "If they don't give it to us on Monday they have a bank collapse. If the money keeps running out the door, the way it has been running out the door."

When the jury was out, prosecutor Paul O'Higgins SC contrasted this attitude to the banking authorities with Drumm's own admissions - that he authorised the ILP deals but was doing what the Central Bank had encouraged.

On the tapes, Drumm and others were prone to colourful, often vulgar, turns of phrase. Presiding Judge Karen O'Connor let the jury hear the tapes despite defence objections, and even the prosecution held back on playing some of the more "gratuitous foul language".

Judge O 'Connor asked the jury to bear in mind that "these were clearly very stressful and very difficult times".

Apart from the tapes and his admissions, read out by defence barrister Tessa White BL, the only other time the jury heard from Drumm was in his emails to colleagues.

He resigned from Anglo on December 18, 2008, and by early 2009, the ILP deals had become "controversial" with the banking authorities.

On January 14, on the eve of Anglo's nationalisation, Drumm sought to justify the ILP deals in a defiant email to Matt Moran. The Irish Financial Services Regulatory Authority (IFSRA) and the Central Bank were "fully aware of what we were doing to protect ourselves," Drumm said.

"We had been encouraged on a number of occasions, particularly by the governor who felt strongly about it, that we should be engaging with the other Irish banks to find an intra-Ireland market to create some liquidity," he continued. "I would relish the opportunity to sit in front of Con (Horan, IFSRA) and ask him to tell me to my face that he didn't know about this. If they insist on killing the bank with this for no reason and try to protect themselves, I will go public with it. It's not just Con, there was always a room full when you went to Dame Street."

This was perhaps the closest to testimony from Drumm that the jury would hear. As was his right, he himself never gave sworn evidence in his defence, and if he made a garda statement, it was not read out.

Brendan Grehan told the jury Drumm had "donned the green jersey", and acted in good faith to try and save the bank. Mr Grehan said: "He was captain of that particular ship heading into a storm and he did what he had to do to get that ship through the storm."

Whatever Drumm thought of his actions did not exonerate him, Ms Gearty argued, and the jurors agreed when they unanimously found him guilty. Their job done, they were not in court to hear how Drumm had been extradited here on consent in March 2016, after spending five months in a US federal prison, or how his co-conspirators had received "substantial terms of imprisonment" for their roles in the plot.

His wife Lorraine had had to return to Boston to attend a graduation ceremony for one of their two children. Drumm was granted a two-week adjournment and continued bail on humanitarian grounds, and to put his affairs in order before he is sentenced. Outside, in the glare of a bright afternoon, he ignored questions from the media as he made his way to a people carrier with blacked-out windows.

There is still one last chapter to be written in this decade-long story and on June 20, David Drumm will return to the Criminal Courts of Justice to find out how it ends.

Sunday Independent

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