Sunday 25 February 2018

Former Anglo director tells trial he was acting under former CEO David Drumm's direction when he approached Irish Life about loan

Left to right, William McAteer, Denis Casey, John Bowe, and Peter Fitzpatrick
Left to right, William McAteer, Denis Casey, John Bowe, and Peter Fitzpatrick

Declan Brennan

A former Anglo director has told the trial of four senior bankers accused of conspiring to mislead investors that he was acting under the direction of his former CEO David Drumm when he approached Irish Life about an interbank loan of €7bn.

The four men, including former Irish Life and Permanent (ILP) CEO Denis Casey and Anglo Irish Bank's former Head of Finance Willie McAteer, are accused of conspiring to mislead investors by using interbank loans to make Anglo appear €7.2 billion more valuable than it was.

Mr McAteer (65) of Greenrath, Tipperary Town, Co. Tipperary and Mr Casey (56), from Raheny, Dublin are on trial alongside Peter Fitzpatrick (63), from Malahide, Dublin, who had been ILP’s former director of finance and John Bowe (52), from Glasnevin in Dublin, who had been Anglo's head of capital markets .

They have all pleaded not guilty at Dublin Circuit Criminal Court to conspiring together and with others to mislead investors through financial transactions to make the bank appear €7.2 billion more valuable that it was between March 1st and September 30th, 2008.

The trial resumed in evidence before the jury today after six days of legal argument when Diarmaid McGuinness SC, defending Mr Bowe, continued his cross-examination of Matt Cullen, the former director of treasury at Anglo.

Mr Cullen said that during a meeting with David Drumm, the then CEO of Anglo, Mr Drumm asked him if he would approach ILP “to ask Irish Life for six or seven billion for us in September”.

He said he was sitting beside Mr Drumm and he was specifically asked to approach David Gantley, his counterpart at ILP. Asked if he was “acting under Mr Drumm's direction” the witness replied “absolutely”.

Mr Cullen previously testified that the scheme to raise “six or seven billion” in corporate deposits involved money being transferred by Anglo to ILP. It would then be put back on deposit by Irish Life Assurance (ILA), the non-banking entity owned and managed by ILP, so it would appear in Anglo's accounts as a corporate deposit.

He said the money had to come from ILA so that it would show up as a corporate deposit as opposed to an interbank loan. Non-banking deposits, from the likes of life assurance and pension funds, have a greater value than inter-bank loans from the point of view of the markets as they were considered “stickier” or more long term, the trial has heard.

The corporate deposits figure was for publishing in the bank's full year accounts, when the money would be seen as deposits coming in from ILA.

The trial continues before Judge Martin Nolan.

Mr Cullen also gave evidence about a similar “back to back” transaction between Anglo and ILP which took place in the run up to Anglo's half year accounts on March 30.

He said he had not been given instructions to conceal the deposits of €750mn and €1bn from either within Anglo or from the financial regulator. He agreed that the transactions were real transactions.

He said he didn't think there was anything improper about Anglo placing the money with ILP or with them taking the deposits.

Counsel asked him about the practice of “trying to fine tune” a balance year for the year end account, asking: “Is there anything wrong in your view of the bank trying to look it's best on the day”?

Mr Cullen replied: “I assume not”. Counsel compared it to Mr Cullen asking his wife and children to go out looking their best on an important day, to which Mr Cullen replied: “I want to go home tonight”.

The jury were also shown an email sent on March 16, 2008 by Mr Drumm to Mr Bowe and Mr McAteer and Matt Moran, the bank's then Chief Financial Officer.

In the email, with the subject “Central Bank”, Mr Drumm writes: “John, will you put some thought into what the governor asked us to look at? How the Irish banks could help each other.”

“Who are we talking about? AIB, Anglo, ILP, EBS? How could this work and how could it be structured so to be equitable and get support from all banks?

“Would you list the interbank takings and placings of each of the above and then figure out how much each bank could take out of the short term market and then pool with the other Irish banks in a facility to be shared by all. “

“Would this work? Is there a better way? I want to get into dialogue with CB (Central Bank) and other CEOs.”

The jury also heard evidence of a “liquidity call” conference call with Mr Cullen, his colleague, Ciaran McArdle and Mary Elizabeth O'Donoghue, the senior regulator for Anglo in the Financial Regulator's office on April 2, 2008.

During the telephone call Mr McArdle tells Ms O'Donoghue: “The focus for our half year end is trying to manage balance sheets, trying to tick as many boxes as we possibly can...knowing that it is just a one day number”.

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