Former Anglo CEO David Drumm 'ready' for today's sentencing, accepts 'it must be custodial'
Mr Drumm is facing an unlimited maximum jail term having been found guilty of conspiracy to defraud and false accounting
ANGLO Irish Bank’s former CEO David Drumm made a “huge error of judgement” in his involvement in a €7.2bn conspiracy to defraud the markets during the 2008 financial crisis, a court heard.
Drumm, who is due to be sentenced later today, was the “driving force” behind the interbank deal at the centre of the conspiracy, the lead investigating garda said.
His defence barrister said Drumm was “ready for” sentencing today and accepted that “it must be custodial.”
Brendan Grehan SC asked presiding judge Karen O’Connor to take account of the fact the “notoriety” that Drumm was going to carry for the “rest of his days.”
He put no character references or testimonials before Dublin Circuit Criminal Court, which was told Drumm’s life was “an open book.”
Drumm’s sentencing hearing was taking place this afternoon, after he was found guilty two weeks ago.
Judge O’Connor is expected to pass sentence later.
A jury found Drumm guilty of both charges by unanimous verdict after a trial that lasted nearly five months, one of the longest in the history of the State.
He 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 plotted 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.
Drumm had also denied false accounting, by providing misleading information to the market in December 2008.
Today, Detective Sergeant Michael McKenna of the Garda National Economic Crime Bureau said the investigation began in March 2009 and went on for a number of years.
The gardai first had contact with Drumm in March 2010 and that continued sporadically but ceased in July 2013.
In all, it was a nine year investigation with around 16 detectives involved full time at its peak. Mr Drumm was eventually charged on March 14, 2016 having been extradited from the US, where he had spent time in custody.
Prosecutor Paul O’Higgins led Det Sgt Michael McKenna through the background to the offences in 2008.
That year, Anglo entered into a series of circular transactions with ILP, aimed at bolstering Anglo’s customer deposits figure on its year-end balance sheet, making Anglo look stronger than it really was.
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 not 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.
Drumm, the prosecution said, was the man who “called the shots” in Anglo at the time and authorised the deals. 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 link the two figures. Drumm was among the signatories.
Det Sgt McKenna agreed with Mr O’Higgins that at the time, Drumm was Chief Executive of Anglo and had been since the end of 2005, when Sean Fitzpatrick moved became Chairman.
He had joined the bank in 1993 and was asked to head up Anglo’s US arm in 1998, where he lived before returning to Dublin. He had no previous convictions.
He had left school 16 and did an accountancy apprenticeship with a firm before joining Anglo, where he “worked his way up.”
Drumm was a family man with two children and himself came from a large family from Skerries, Det Sgt McKenna said.
Mr O’Higgins asked where Mr Drumm had come in relation to the operation and driving of the scheme.
“Mr Drumm was the driving force behind the initiative,” he said.
His involvement had continued “right the way” from March 2008 until September in that he chaired weekly meetings in his office and individually asked people to pursue transactions, particularly with ILP.
There was evidence that he specifically asked Head of Treasury Matt Cullen to ask his counterpart in ILP, David Gantly, to increase the September transaction from €6bn to €7bn.
There was evidence he was in contact directly with ILP's Denis Casey and they discussed the transactions with each other.
Det Sgt McKenna said of the three co-conspirators sentenced in 2016, that McAteer was jailed for three and a half years, Bowe was sentenced to two years in prison and Casey was jailed for two years and nine months, with another portion suspended.
Det Sgt McKenna said Drumm did fight his extradition initially but ultimately consented to being returned.
Mr Grehan asked if Drumm had been a “happy man” returning and Det Sgt McKenna said he “appeared to be relieved to be coming home at the time.”
Mr Grehan said the transactions happened at the height of the financial crisis after the Central Bank had asked Irish banks to help each other in what became known as the “green jersey agenda.”
Although Drumm admitted authorising the transactions, the origin of the idea was “shrouded in mystery,” Mr Grehan said.
"The idea of this being a legitimate form of balance sheet management, that has never been got to the bottom of,” Mr Grehan said.
“Well we have got to the bottom of it now,” Det Sgt McKenna said, to laughter in the court.
Mr Grehan said there seemed to have been some awareness in the Financial Regulator’s office of the transaction in advance of September 2008.
“Not in terms of the specifics,” Det Sgt McKenna said.
The transactions were certified as “true and fair” by the external auditor, Ernst and Young, Mr Grehan said.
Mr Grehan said Mr Drumm was the fourth of eight children. His father had been a truck driver who died at the age of 64, when Drumm was 26. His mother only recently retired as a hairdresser.
Drumm had worked with a number of different accounting bodies after completing his Leaving Certificate and had been on the International Fund for Ireland for a short time.
He joined Anglo at the age of 26.
He was sent to the USA in 1998 and worked in the Boston area. He moved with his family and they put down roots, living there for seven years. When he returned to “somewhat unexpectedly” become CEO in 2005.
He resigned on December 19, 2008 following revelations about chairman’s loans at the bank.
The family returned to Boston in June 2009, where they still had a home. He worked and lived there until he returned in 2016 on foot of the extradition.
The case was already listed for trial in April last year and Drumm was ready to proceed at that stage but it did not go ahead then due to circumstances beyond everyone’s control, Mr Grehan continued.
Drumm had always complied with bail conditions.
Det Sgt McKenna agreed when Mr Grehan said “this matter has been marked, not surprisingly, by a large amount of media coverage and interest.”
Mr O’Higgins then told Judge O’Connor that the maximum possible sentence for false accounting was 10 years, while the penalties in the conspiracy charge were “at large” because it was a common law offence.
Drumm was “ready for” sentencing today and accepted that “it must be custodial,” Mr Grehan said.
He had not put forward any testimonials or character references on his behalf.
“His life has effectively been an open book since he became Chief Executive,” Mr Grehan said.
Beyond that, he did not want to have his extended family, who had supported him throughout, exposed to any further loss of privacy.
Drum had accepted that as CEO he authorised the transactions and took repsonisbility for thior execution in Anglo. “With the benefit of hindsight” he recognised it was a “huge error of judgement” on his part, he could not admit to having a subjective intention that he never had.
He believed he was involved in balance sheet management with the “tacit if not actual” approval of the regulatory authorities.
He accepted that it was not discussed in detail with the regulatory authorities but there seemed to have been an approach of “laissez faire from that quarter.”
In terms of his motivation, “it was assuredly to save the bank during the worst financial crisis in living memory.”
Sometimes it was easy to forget 10 years down the line just how chaotic it was for those who were trying to wrestle with decisions that had to be made, he said.
Unlike most frauds, the transactions were not conducted in secret, there were lots of people involved in the funding initiatives and there was a huge spread of different transactions throughout the year.
It had to be seen in the context that Anglo was “facing annihilation”. The transactions passed under the eyes of a lot of experienced professionals independent of Drumm and nobody raised a red flag.
There was no evidence that anyone actually suffered any loss or made any gain.
There was no evidence anyone was involved for personal gain, rather they were trying to save their institutions “full stop.”
It turned out to be a futile attempt for Anglo. Mr Grehan said the transactions did not cause Anglo’s collapse and the bank was overexposed to development loans during the crisis.
“From humble beginnings he rose to the dizzying heights of Chief Executive of what was at one stage described as one of the best if not the best bank in the world” to where he is today, facing sentence,” Mr Grehan said.
The sentence would “reverberate” not just in Ireland but abroad.
Drumm now had “very limited future options” and accepted the court was restricted in its sentencing options.
Mr Grehan said that as CEO, the case might be made that Drumm bore greater responsibility than others who had been sentenced.
He had already spent five months in a US federal penitentiary and should recieve credit for that, Mr Grehan said.
He asked the court to consider the “totality of the hardship” that had been visited on Drumm, and the “notoriety” that he was going to carry “not just today and tomorrow… but for the rest of his days.”
He asked the judge to be as lenient as she could in the circumstances.
The judge said she would deliver sentence later.