Monday 19 March 2018

Legal implications of unwinding ‘on agenda before sale’

Sean Quinn
Sean Quinn

Dearbhail McDonald and Sarah Stack

MORGAN Stanley placed the potential market abuse implications of unwinding businessman Sean Quinn's stake in Anglo Irish Bank in 2008 on the agenda for a legal call - days before a transaction selling a stake in the bank to 10 borrowers.

Morgan Stanley also prioritised the potential market impact of the settlement structure on the agenda for the legal call between Anglo, solicitor Robert Herron - an equity partner in Matheson Ormsby Prentice solicitors who advised Anglo - and Morgan Stanley, the Circuit Criminal Court has heard.

A former senior manager at Anglo Irish Bank who prepared "pitches" for the bank to use when approaching investors, has confirmed the contents of an email from Morgan Stanley employee David Churton, outlining the issues to be discussed with Mr Herron before the transaction took place.

Issues to be "squared off" included legal sign off on the transaction being in place in relation to the Maple Ten investors.

Dermot Kieran told the court that he understood that Anglo bank took legal advice on "Project Maple" the name given to the unwinding of Mr Quinn's Contracts for Difference position and that and that Morgan Stanley had completed full legal due diligence on the transaction.

Mr Kieran, who says he provided "logistical support" for Anglo when the bank sought, in 2008, to unwind a stake held by businessman Sean Quinn, has told the Circuit Criminal Court he was not involved in sourcing the 10 borrowers to invest in the bank's shares.

Mr Kieran, a chartered accountant who was involved in producing Anglo's annual reports, is giving evidence  in the trial of Sean FitzPatrick, 65, from Greystones in Co Wicklow, 51-year-old Patrick Whelan of Malahide in Dublin and 63-year-old William McAteer of Rathgar in Dublin.

The men have pleaded not guilty to 16 charges of unlawfully providing financial assistance to individuals for the purpose of buying shares in Anglo Irish Bank in 2008.

Mr Whelan has also denied seven charges of being privy to the fraudulent alteration of a loan facility letter.

One of the so-called Maple 10 said he was told he would be "a friend to the bank" if he took part in the loan-for-shares deal.

Property developer Brian O'Farrell said former chief executive David Drumm also claimed Anglo would be "gone in a week" if the hole in the bank was not plugged immediately.

"He told me that you will probably make no money in this transaction, but you will be a friend to the bank," Mr O'Farrell told the trial.

He said Mr Drumm - who is in the US and not on trial - and Mr Whelan came to his Malahide home on Monday, July 14 2008, and explained the plan in detail for more than an hour.

They said the bank was "under attack" by hedge funds because an unnamed investor had amassed a 25pc holding of the bank through contracts for difference, he added.

The developer said he was assured that Anglo had legal advice from MOPs and was satisfied everything was above board.

"I asked who knew about it and he told me the Financial Regulator, Central Bank and Department of Finance were aware," he added.

Mr O'Farrell, of Headland Property Holdings, said all his loans were performing at the time, but that if that bank went, he went. He also believed he would have to depend on Anglo for future loans.

"David Drumm told me that if this hole wasn't plugged immediately that Anglo would be gone within a week and that after they would probably drag down AIB (Allied Irish Banks) and Bank of Ireland," said Mr O'Farrell.

"I made the decision there and then," added the sixth member of the Maple 10 to give evidence.

"I signed the acceptance form at that meeting."

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