Thursday 20 September 2018

Former Anglo CEO David Drumm facing unlimited maximum jail term as he's found guilty of conspiracy to defraud and false accounting

Former Anglo Irish CEO David Drumm leaves the Criminal Courts of Justice after the guilty verdict.
Photo: Tony Gavin
Former Anglo Irish CEO David Drumm leaves the Criminal Courts of Justice after the guilty verdict. Photo: Tony Gavin
Former CEO of Anglo Irish Bank, David Drumm. Photo: Collins Courts

Andrew Phelan

ANGLO Irish Bank’s former CEO, David Drumm has been found guilty of conspiracy to defraud and false accounting in a €7.2bn “confidence trick” on the markets during the 2008 financial crisis.

A jury on Wednesday delivered its verdict on both counts, after one of the longest-running criminal trials in the history of the State.

Drumm, who had denied the charges, stared impassively but open-mouthed at the jury as the verdict was read out, but showed no other reaction.

Judge Karen O’Connor remanded him on bail for sentencing on a date later this month, after his defence made a bail application on “humanitarian” grounds.

Former Anglo Irish CEO David Drumm leaves the Criminal Courts of Justice Photo: Tony Gavin
Former Anglo Irish CEO David Drumm leaves the Criminal Courts of Justice Photo: Tony Gavin

The gardai had objected, saying they considered Drumm a “flight risk.”

He faces an unlimited maximum potential jail term on one charge and 10 years in prison on the other.

The three women and nine men of the jury reached their unanimous verdicts after deliberating for 10 hours and 32 minutes, following a trial that lasted 87 days.

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

He conspired with Anglo’s former Finance Director Willie McAteer and head of Capital Markets John Bowe, as well as Irish Life and Permanent’s then-CEO, Denis Casey, and others.

The case centred on a series of interbank deposits which circulated between Anglo and ILP.

Drumm had also denied false accounting, by providing misleading information to the market.

Shortly after 3pm today, after more than a week since the jurors retired to begin deliberations, their minder told the court registrar: “We have a verdict.”

Minutes later, at 3.12pm, the jurors filed back into the courtroom and the registrar asked the forewoman if they had reached verdicts.

She replied that they had and handed the registrar the issue paper on which the verdicts had been recorded.

“You say the accused, David Drumm is guilty on count number one,” he said, and the forewoman confirmed that this was unanimous.

The verdict on the second count was the same.

Drumm, dressed in a black suit with an open-necked blue shirt remained seated and looked at the jury as the verdicts were read out.

Mouth slightly open, he showed no emotion and looked down at one point before moving his gaze to Judge Karen O’Connor as she began to address the jury.

Judge O’Connor thanked the jurors for the time and commitment they had given and excused them from further jury service for life.

She said they had continued with their work on the jury despite “some personal difficulty” and added that one of them had had to attend the funeral of a “very very close family member.”

Judge O’Connor said it was not an easy task to go into a jury room and to deliver a verdict, and she imagined they were all tired at the end of the trial.

After the jurors had left, Prosecutor Paul O’Higgins SC said he was “in a position to call evidence” for sentencing should the court wish to proceed.

However, Brendan Grehan SC, defending, asked for time to consult Drumm in light of the verdict.

His “immediate family aren’t in the country,” Mr Grehan said.

“He may be looking for the matter to go back for some little time, he has been here since his return to the country.”

The case was let stand and when the judge returned, Detective Sergeant Michael McKenna gave evidence of his objections to continued bail.

He said Drumm had enjoyed a presumption of innocence during the trial but had now been found guilty of two serious offences.

He had been under strict bail conditions since he was arrested in March 2016, having been extradited from the US. Drumm was “acutely aware” that the individuals whom he had been found guilty of conspiring with “have received substantial terms of imprisonment” for their roles in the conspiracy.

“I firmly believe he poses a serious flight risk,” Det Sgt McKenna said.

Drumm was in custody in the US for a number of months but “did ultimately agree to come back,” he said.

It was a significant fact that Drumm had consented to return to this jurisdiction, Mr Grehan said.

He had now been here for over two years and had abided by bail conditions at all times.

His wife had returned here from Boston during that time but because of the length of the trial, she was now back there at the graduation of one of their children.

Mr Grehan’s application for bail was “on humanitarian grounds” because his wife and children were not in the country and also to give him time to access documents before sentencing.

He was seeking “the indulgence” of the court for two weeks.

He had already spent five months in custody in a federal penitentiary in the US.

Judge O’Connor observed that the court had taken a break over Easter and Drumm’s signing on conditions had been reduced.

Because he had adhered to his bail conditions, she remanded him on bail to June 20, for sentencing. Conditions are that he signs on daily at Balbriggan Garda Station, does not apply for a new passport and is contactable by phone at all times.

During the course of the trial, the jury heard how Anglo, as the country’s biggest property lender had been  particularly badly affected by the 2008 global financial crisis.

With money to pay for its loans running out and the Central Bank asking it to look at how “the Irish banks can help each other”, it entered into a series of circular transactions with ILP, aimed at bolstering Anglo’s customer deposits figure on its year-end balance sheet.

This, the prosecution said, was aimed at making Anglo look stronger and more stable than it really was and was and convincing depositors and investors to keep their money in the struggling bank.

The deal involved Anglo placing cash with ILP, which then passed the money through its non-banking subsidiary Irish Life Assurance back to Anglo.

Because ILA was an assurance company rather than a bank, Anglo was able to re-categorise the cash as having come from a corporate customer. This would be seen by the markets as a better source of funding than interbank lending.

Anglo placed an initial €1.2bn with ILP but after that, the prosecution said, the money merely “went around in a circle.” The timing of the deal was designed so that rather than cancelling each other out, the transactions would be recorded. Over the course of three days, the figures eventually added up to €7.2bn, which was disguised as customer deposits.

When the year end results had to be reported to the markets on December 3, Anglo included the €7.2bn in its total €51.5bn customer deposits figure, but did not disclose where it had come from. Drumm was among the signatories.

Anglo’s external auditors Ernst & Young signed off on the accounts as being “true and fair.”

However, the only prosecution expert witness in the trial said it had been “inaccurate and misleading” for Anglo to include the €7.2bn in the deposits figure.

That accountant, Dan Taylor, said the transaction had “no commercial substance.”

The defence maintained that the deals were viewed as “legitimate balance sheet management,” Drumm had “togged out for Ireland” and was acting “in good faith” in trying to save the bank.

“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,” defence barrister Brendan Grehan said.

Although Anglo was "one of the most reviled institutions in recent living memory in this country”, the trial was “not about all the ills that had been attributed to or were perceived to have been caused by Anglo, real or otherwise to this country,” he said.

It was about specific transactions and Drumm had never denied anything that he did in 2008 in relation to them. He admitted everything but dishonesty.

The case was missing “all the hallmarks of conspiracy” with “no trickery, deception, skullduggery or secrecy,” the defence argued.

Neither the bank’s own audit committee, the external auditors, the Financial Regulator or the Central Bank had raised “any red flag” about the transactions before they were reported to the market.

However, the prosecution said what Drumm had taken part in was a “massive con” and Drumm as the “man who called the shots” in Anglo knew “full well” that the customer deposit figure was false.

He chaired and drove the bank’s funding initiative meetings and was heard discussing the ILP transactions on a series of taped phone calls played to the jury.

In one, the circular nature of the deal was explained to Drumm and he replied: “I know how it works.”

Judge O’Connor told the jury anything the auditors, audit committee or banking authorities knew was irrelevant as they could not condone a crime.

The scheme did not have to succeed and as long as the intent to defraud was there, nobody had to actually lose or gain anything from it to prove conspiracy.

If Drumm knew the account was false, misleading and deceptive when he signed off on it, he was also guilty of the second charge, the jury was told.

Trying to “save the bank” did not exonerate him any more than stealing bread for a hungry child exonerated a thief, prosecutor Mary Rose Gearty said, and Drumm was involved in was “monumentally” fraudulent.

Today, the jury agreed and found him guilty.

After Mr Drumm had exited the court  Detective Superintendent Gerard Walsh of the Garda National Economic Crime Bureau (GNECB) addressed the press.

Det Supt. Gerard Walsh said the verdict emphasised the ‘importance of corporate responsibility’ and the need to conduct business ‘with honesty and integrity’. 

He said the investigation had been highly complex and involved members of the National Garda Economic Crime Bureau combing through hours of phone calls and hundreds of thousands of files. 

He said: “the verdict today is the culmination of a criminal investigation which commenced over nine years ago and a criminal trial that began almost five months ago.

“I would like to thank the jury for their patience and perseverance they showed throughout the court process. A previous trial in 2016 saw three other individuals convicted in the same set of circumstances.

“This investigation was one of the more complex investigations under taken by An Garda Siochana and was conducted by a dedicated investigation team from the Garda National Economic Crime Bureau which was formerly the Garda Bureau Fraud Investigation.

“During the course of the investigation detectives listened to tens of thousands of telephone calls and uplifted almost one million files which required detail analysis.

“Thousands of other enquiries were conducted by this team both in Ireland and other jurisdictions including the United Kingdom and the United States of America.

“Over 400 interviews were conducted during the course of the investigation and I would like to personally thank many witnesses who assisted in the investigation and gave evidence in court.

“Statistics show that economic criminals are increasingly targeting business, however business needs to be aware that wrong doing can come from within.”

“Today’s verdict emphasises the importance of corporate responsibility at all levels, and the very real obligation to conduct business with honesty and integrity at all times.”

“Finally I would also like to thank the office of director public prosecutions, the courts services, and council for preparing this case for trial and their expertise in presenting this evidence.”

Online Editors

Editor's Choice

Also in Irish News