Wednesday 12 December 2018

Ex-Anglo boss claims the Financial Regulator and Central Bank were 'fully aware of what we were doing'

Former CEO of Anglo Irish Bank, David Drumm (51) Pic Collins Courts.
Former CEO of Anglo Irish Bank, David Drumm (51) Pic Collins Courts.
Andrew Phelan

Andrew Phelan

Anglo Irish Bank’s former CEO David Drumm said after the bailout that the Financial Regulator and Central Bank were “fully aware of what we were doing” and he would “go public if they deny it and try to protect themselves,” a court heard.

In an e-mail to another senior banker, Mr Drumm also said Anglo had been “encouraged” to engage with other banks to create liquidity during the financial crisis.

The e-mail was shown to the jury during the trial of Mr Drumm, who is accused of taking part in a €7.2 billion conspiracy to defraud.

Mr Drumm (51) is pleading not guilty to conspiring to defraud Anglo investors in 2008 by dishonestly creating the impression that the bank’s customer deposits were larger than they were.

He is alleged to have conspired with former Anglo officials Willie McAteer and John Bowe, as well as then-CEO of Irish Life and Permanent (ILP), Denis Casey, and others.

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

The case centres on a series of circular billion-euro inter-bank transactions between Anglo and ILP, routed through Irish Life Assurance (ILA). The money was placed back in Anglo and treated as customer deposits, which are considered a better measure of a bank’s strength. Mr Drumm admits he authorised the transactions but denies there was anything dishonest or fraudulent in them.

The email was shown to the jury as Gary McGann, a former non executive director of the bank and chair of the audit committee was giving evidence.

Dublin Circuit Criminal Court heard it was sent to Matt Moran, Anglo’s former Chief Financial Officer on January 14, 2009, after Mr Drumm had left Anglo. The subject of the mail was “Balance Sheet Management.”

In it, Mr Drumm described discussions at Anglo’s board meetings about the “desirability in the prevailing market conditions to manage the balance sheet over the year end (a practice that is common in all banks, credit crunch or not).”

“My memory of these meetings was that it was all about funding and what the bank was going to do to get out of the trouble we were facing, including talking about looking for a strategic partner,” he said.

He wrote that he was “asked was I happy ILP wouldn’t let me down.”

He also described meetings with the the Irish Financial Services Regulatory Authority (IFSRA) and Central Bank.

“Willie (McAteer) informed Con (Horan, IFSRA) that we would be doing some balance sheet management over the year end,” Mr Drumm said. “He mentioned taking in some short term deposits.”

Mr Drumm said he “told them the two big boys wouldn’t help us” but they had an “excellent relationship with ILP and they were helping us out.”

“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,” Mr Drumm said in the mail.

“I would relish the opportunity to sit in front of Con and ask him to tell me to my face that he didn’t know about this,” he said.

He said IFSRA and the Central Bank were “fully aware of what we doing to protect ourselves.”

“I’ll go public if they deny it and try to protect themselves,” he added.

Mr McGann told Mary Rose Gearty SC, prosecuting, that he recalled the “customer accounts” discussion about the ILP transactions was among the “wrap up points” of an audit committee meeting of November 18, 2008.

Then Chairman Donal O’Connor was on conference call from Australia and questioned whether it was “window dressing” and Willie McAteer responded that it was “normal banking activity and the regulator and auditor had no issues with it,” Mr McGann said.

Mr McGann told Ms Gearty his understanding of the term window dressing was “making something more appealing than it normally is.”

Mr McGann said the ILP transactions were not raised at the next “proper” meeting on November 24, 2008.

There were e-mails between Mr McGann and Mr O’Connor about the minutes of the November 18 audit committee meeting, and Mr McGann said he would share them with Michael Jacob, another non-executive director who had been at the meeting.

The draft he was shown did not reflect his view of what happened as the transactions were not referred to, he said.

The minutes were later amended.

In cross examination, Mr McGann told Locan Staines BL, defending, that it was “difficult to conjure up” how fraught the time was.

It had felt like “the world was never going to be the same again,” he said.

The trial continues.

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