Sunday 24 June 2018

Ex-Anglo boss described the Financial Regulator as 'f*****g Freddie f*****g Fly', court hears

Former CEO of Anglo Irish Bank, David Drumm Picture: Collins
Former CEO of Anglo Irish Bank, David Drumm Picture: Collins

Andrew Phelan

Former Anglo Irish Bank CEO David Drumm described the Financial Regulator as “f*****g Freddie f*****g Fly” and the Central Bank as a “shower of clowns” before getting emergency funding during the financial crisis, a jury heard.

In phone recordings made at Anglo in 2008, Mr Drumm was heard telling a colleague he would go to the Central Bank and “keep asking the thick question: when is the cheque arriving?”

Mr Drumm also described a letter to the Financial Regulator stating that the struggling bank was in breach of the liquidity conditions of its banking licence as a “death warrant.”

The tapes were being played today in the trial of Mr Drumm, who denies conspiracy to defraud and false accounting charges.

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.

Detective Sergeant Michael McKenna, who was involved in the investigation, agreed with Paul O’Higgins SC, prosecuting, that it had emerged there were certain telephone recordings.

Calls were recorded in Treasury and other areas that were kept and were still in existence, he said.

One of the phones that was taped belonged to a senior Treasury department official John Bowe, and some of the calls on that phone became relevant to the proceedings.

The jury first heard a calls between Mr Bowe and officials in the Financial Regulator, on September 18, 2008, followed by a call with John Cronin of McCann Fitzgerald Solicitors.

“I should have been a solicitor you know, instead of that, I’m a banker,” Mr Bowe said to Mr Cronin.

This was followed by a call between Mr Bowe and Mr Drumm in which Mr Drumm said “the rumour is going around that they are trying to merge,” referring to other financial institutions.

He then said: “It would never be allowed politically.”

They had 30-40,000 employees between them and for half of them to lose their jobs was “not palatable” for the country.

“William didn’t give me any confidence this morning but he didn’t tell me anything that I didn’t expect,” he said.

Mr Drumm and Bowe spoke about Anglo being a “hard sell” and Mr Drumm said he did not know “what you would describe it as...a f*****g stallion.”

Mr Bowe read out to Mr Drumm a letter he had prepared for the Financial Regulator about Anglo’s breach of the regulatory liquidity ratio under the bank’s licence.

The jury had heard earlier this was in advance of Anglo seeking emergency funding.

“The bit about the licence is signing a death warrant,” Mr Drumm said.

In a call on September 19, 2008, Mr Bowe told Mr Drumm about the bank’s position “deteriorating more slowly than our worst case scenario.

They then discussed getting cash - €6bn - from ILP.

“We can’t take it off f*****g Freddie f*****g Fly down there, the Financial Regulator because it will appear on the balance sheet,” he said.

Mr Bowe said they did not have “the spare cash.”

Mr Drumm spoke of what they would say to the Central Bank.

He referred to ratings agencies and the bank being under stress.

"We'll be saying, 'Yeah, a stress because HBOS were f*****g sold and Lehman's went bust and f*****g Bank of America f*****g took over Merrill's and other f*****g non-normal things happened,” Mr Drumm said.

“We need the f*****g loan because we are running out of money,” he said.

He said he was going to “keep it simple.”

“I'm going to keep asking the thick question: 'When, when is the cheque arriving?',” he said, adding: “if we say it in their language, nothing will happen.”

“You have it, so you're going to give it to us and when would that be? We'll start there," he said.

"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."

Mr Drumm also spoke about being “relaxed” before agreeing to meet the following morning for a “pep talk and then off we go.”

Mr Bowe suggested 10am.

“10 o’clock it is. You the man," Mr Drumm said.

In the next phone call, on September 22, the two men again discussed the bank’s situation and Mr Drumm at one point asked about what would happen if they got “€4bn or whatever from that f**king shower of clowns down on Dame Street.”

Mr Drumm asked Mr Bowe to “come in for the CEO’s review” for the next board meeting.

He said he thought they “just need a ladybird-type thing”, “something we can hand out to them.”

Mr Drumm said they would say “this is the real world here” at the meeting, “this is what could happen, this is what we think will happen, even with the 6bn fixes, which Mr f*****g Denis confirmed for me this morning.”

“We’re f****d,” Mr Drumm said, adding that the bank had “depleted our liquidity by €14bn.”

He said the question would be asked: “who was in charge when that was going on? Whose f*****g can was that?”

“The snapshot, the family photo is not going to be any better than that no matter what we do,” he went on to say.

“The balance sheet looks shot,” Mr Drumm said at one point before asking: “are you going to be able to bloat the balance sheet on the right hand side?”

He asked Mr Bowe: “what will get us up into to the teens?”

“If this photo is ever going to be published on f*****g Bebo, it’s not going to look that great,” Mr Drumm said.

He said it did “not look doable” that you could “fix the poxy balance sheet over the year end.”

He continued to say it needed to be got into the minds of the board members that “we have lit a fuse here and it’s not going to go away.”

Mr Drumm was asked on the call about a meeting he had had with “Gillian and Denis”.

“Gillian was listening but this man had a f*****g brick wall built in front of him,” he said.

“He is just mind numbingly blocking it,” he said.

He suggested getting back to Gillian and saying “one party, ie your f*****g Chief Executive is not receptive.”

Mr Bowe asked if Mr Drumm thought they “can be turned.”

“I do,” he replied, saying “it’s too compelling for them.” He added: “it’s the last f*****g roll of the dice.”

“Keep whacking our heads off that wall and see if we can eventually split it open,” he said.

On September 29, Mr Drumm said in a phone call the transactions had become an "acedemic exercise."

Mr Bowe said "Permo came back and said they couldn't do it. They basically said they couldn't do any more without collateral."

"But we are sorted anyway," Mr Drumm said.

In another call on the same day, Mr Drumm referred to "Permo - that 6bn fix. Are we still doing that?"

Mr Bowe replied "we are doing bits every day", adding later: "it's very tough to do but we are picking away at it."

"f*****g journal entry would do it an awful lot quicker," Mr Drumm said.

The trial continues.

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