Thursday 21 June 2018

Former Anglo Irish Bank CEO David Drumm took part in 'massive con', jury told

Former CEO of the Anglo Irish Bank, David Drumm. Photo: Collins Courts
Former CEO of the Anglo Irish Bank, David Drumm. Photo: Collins Courts

Andrew Phelan

FORMER Anglo Irish Bank CEO David Drumm took part in a “massive con” when the bank sent its own money “around in a circle” and disguised it as a €7.2bn customer deposit, a jury has been told.

Prosecutor Mary Rose Gearty said Mr Drumm knew “full well” when the bank’s financial results were released in 2008 that the figure was false and he took part in a criminal conspiracy or "confidence trick" on the markets.

Ms Gearty was delivering her closing speech for the prosecution today in the trial of Mr Drumm.

She also told the jurors they may “have views on financial institutions” but they must leave “all bias outside the jury room.

The trial has lasted four months so far and is now in its final stages after the prosecution’s evidence concluded last week.

Mr Drumm (51) is pleading 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 is alleged to have 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 centres on a series of interbank deposits which circulated between Anglo and ILP.

The transfers were routed through Irish Life Assurance (ILA), returning to Anglo where they were then treated as customer deposits, which are a better indicator of a bank’s health.

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

Before Ms Gearty began her closing speech, Brendan Grehan SC, defending, said the defence would not be going into evidence.

“What we say very briefly but I hope accurately and succinctly, is that David Drumm was the Chief Executive Officer of Anglo Irish Bank at the time when that bank presented figures to the market and we say one of those figures, the customer deposit figure was clearly a false figure,” Ms Gearty said.

“We say that not only was that a false account but it was done on his part deliberately, knowing full well when he was doing it,” Ms Gearty.

The prosecution was saying it was done dishonestly and was preceded by months of arrangements and discussions “that culminated in an agreement to do this.”

“This was a criminal conspiracy and Mr Drumm was part of that criminal conspiracy,” she said.

Ms Gearty said it was important for the jury to try Mr Drumm on the evidence and “not bring anything else into your deliberations.”

“You may have views on financial institutions and some of the language used”, she said, but she asked them to “leave all bias outside the jury room.”

It was a criminal trial and it was “extremely important that that criminal trial proceeds fairly.” This meant the jurors were to consider the evidence they had heard and not any emotional reaction or bias.

They had to consider whether they were satisfied beyond reasonable doubt on each of the two counts.

She said Mr Drumm was “the only person on trial here” and while she would be telling the jury briefly about what a conspiracy involves, the essence of the trial was “we only have one accused and to a large extent you will be confining yourselves to that.”

Mr Gearty asked the jurors to imagine if someone on the jury passed one euro to another, who then passed the one euro back, taking a careful note. If this was done six times and “if you add it up you have €7 on your note” but “in reality you only have €1 - that is what we say happened here.”

“That is a very good analogy for what happened,” she said.

The jury had evidence that money never went from ILA’s account until it came in from Anglo in the first place.

The whole purpose of accounting was to show what is happening in a bank or company, Ms Gearty said.

If instead it hides what is happening, that is “not only dishonest but it’s not true and it’s not fair.”

Ms Gearty said the jury had heard of a large amount of money being put into banks in England at the time but “that was real money” and there was a “massive difference” between that and “what was done, we say by Mr Drumm.”

Ms Gearty referred to building up market confidence.

“If it’s about confidence at all, it’s about confidence in the sense that this was a confidence trick,” she said. “This was a massive con, that is what the prosecution says about these transactions and the way they were presented to the market.”

Ms Gearty said the jury must reach its decision on each count beyond reasonable doubt, and that Mr Drumm is presumed innocent. She said if the jury held two views and one was consistent with innocence, it must acquit Mr Drumm.

A large number of witnesses in the case had been employed either by Anglo or the ILP group. Ms Gearty invited the jury to consider that in assessing the evidence and whether it is reliable.

She was not saying anyone was a liar but just “what is common sense.”

“We all present our best selves,” she said. “A person isn’t necessarily lying when they remember an event putting themselves in the best light.”

The jury was entitled to accept or reject her own remarks or the defence’s, she said.

The prosecution was saying anyone relevant had been called as witnesses, but if the jurors found there was a “massive gap somewhere” and they felt they needed to hear from someone else, that was the prosecution’s problem and they “must visit it on us and acquit Mr Drumm.”

The jury could not speculate, she said.

There seemed to have been a thread going through the defence that the system was under severe pressure and the bank “was going down anyway - that feeling of doom.”

If it was suggested that this “somehow exonerates” those who acted to keep the bank “limping on”, it did not exonerate them, if the jury found the transactions were entered into dishonestly.”

Witnesses who worked in Anglo’s finance department had described the accounting treatment as technically sound, and what was required by the accounting standards.

The prosecution said this was not correct.

“These transactions did not require a certain accounting treatment, they were designed to attract a certain accounting treatment,” Ms Gearty said.

The “whole point” was that they did not have to be netted, or cancelled out and the transactions were designed for this.

“This was a dishonest scheme, it was a fraudulent scheme and the figures produced at the end of it were false,” Ms Gearty said. “Neither Anglo nor ILP had €7bn to spare.”

On one of the very days the transactions were occurring, the jury heard, there was a phone call referring to ILP being asked by Anglo for a much smaller €100m loan, which was “real money as opposed to this paper journal entry.”

“ILP said no, not without collateral,” Ms Gearty said.

“The inevitable inference is, why would they give them €7.2bn if they wouldn’t give them €100m?” she said. “The answer is, they didn’t, the money was Anglo’s and it went around in a circle and it was disguised as a customer deposit.”

Ms Gearty turned to the issue of conspiracy, which she said could be verbal, unspoken or inferred. In this case, there were recordings and “a huge amount of evidence” in relation to the agreement element of the charge.

Conspiracy must be with at least one other and in this case, it was allegedly with three named people and others.The three were John Bowe, “effectively head of Treasury” in Anglo, Willie McAteer, “effectively the most senior financial officer” and ILP’s CEO Denis Casey.

She said she could truncate this by looking at one phone call between Mr Drumm, Mr Bowe and Mr McAteer on September 29, 2008.

She said it was a good example of inference and she said it was clear, reliable evidence that the three men were discussing a criminal conspiracy.

“Are we still doing that?” Mr Drumm said on the call.

“So, what happens is the money goes round in a circle,” Mr Bowe said, then later: “what’s happening is we give the money to them and the dance here is that we actually get it back in time and that is becoming very very tough to do. We have to pay it into the bank and the bank has to give it to the assurance company and the assurance company has to give it to us.”

Ms Gearty said they all referred to “it”, or the money and there was no question but that this was the same sum circulating.

“Yeah, I know how it works,” Mr Drumm said on the call.

“It has to go through a lot of different hands, it’s actually very hard to do but we are picking away at it.”

“F**king journal entry would do it an awful lot quicker,” Mr Drumm said. “Willie might be auditing the books himself this year.”

This showed “very clearly they knew what was going on,” Ms Gearty said.

Anglo’s Head of Treasury Risk Mike Nurse had said the credit limit for the bank’s March transaction with ILP had been increased by 400pc, but when it came to September there was a retrospective sign off which Mr Nurse and Mr McAteer signed.

Mr McAteer had also co-signed Anglo’s preliminary statement in December 2008, which contained the figure the prosecution said was false.

Denis Casey had been named by ILP employees as the preson who authorised the transactions on that side.

ILP Treasury Director David Gantly had given evidence of conversations he had with Mr Casey about the transactions being on a “need to know basis.”

There was evidence that ILP kept the transactions “tight to senior management” and a number of very senior people were never told, Ms Gearty continued.

In a phone call in September, Mr Drumm was heard saying “Mr f**king Denis” had agreed the “€6bn fixes” and “that tells us a lot about what the parties intended,” she said.

Others were involved in the mechanism of the transactions.

The jury had heard there were other transactions that were perfectly legal but they were different and involved “a cost.” The September transactions were “quite different to what has been referred to as normal window dressing.”

The were at least 17 to 18 recipients of mails that were routinely sent around in Anglo with spreadsheets setting out how things were going, Ms Gearty said.

She told the jury who else was involved was “not an issue for you, don’t be sidetra

cked wondering why it’s only Mr Drumm who is on trial, that is not relevant, you are considering the guilt or innocence of one person.”

Another example she gave was a September 2008 call between Anglo dealer Mike D’Arcy and Vincent Hibbert in the bank’s Isle of Man division.

He told Mr Hibbert in respect of “an identical transaction”: “do you want the answer or the answer for the auditors”, Ms Gearty said.

Mr D’Arcy had explained to the jury that was a joke but later in the call, he said they “cannot say any of this to the auditors.” Ms Gearty said it was a matter for the jury whether they found the comment was a joke.

She said the actions and words of others in the same enterprise could be considered by the jury in considering Mr Drumm’s guilt or innocence.

The prosecution did not have to prove there was any actual economic loss made by anyone but that there was an agreement to risk economic loss.

There must also be an intention to defraud and dishonesty.

The prosecution was saying a false account was published in the December financial statement to mislead.

If the jury decided the scheme and set of figures were dishonest and that Mr Drumm deliberately released them to the market, then they should convict, Ms Gearty said.

Ms Gearty also said the figures were materially misleading because €7.2bn was a “very large sum”, and because of the labelling of that sum as a customer deposit when it wasn’t one, but was “Anglo’s own money” and was “circled around the houses.”

Her speech was continuing this afternoon and the defence is expected to present its closing statement later. The trial is being heard by Judge Karen O’Connor and an enlarged jury of 10 men and four women at Dublin Circuit Criminal Court.

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