Thursday 14 December 2017

Maple 10: Regulator raised 'no red flags'

Anglo trial hears from Morgan Stanley employee

Dearbhail McDonald Legal Editor

THE office of the Irish Financial Regulator did not "raise any red flags" or "any particular concerns" around the structure of the so called Maple 10 transaction to unwind businessman Sean Quinn's stake in the former Anglo Irish Bank, a court has heard.

The trial of three former Anglo executives has also heard that Con Horan - previously described as the "second in command" at the office of the financial regulator  - was "effectively comfortable with the stock lending leg" of the transaction to unwind Mr Quinn's stake which had been built up through Contracts for Difference, if this was necessary.

This morning Morgan Stanley employee David Churton told the Circuit Criminal Court that he believed that Mr Horan, former prudential director at IFSRA, had no objections to the stock lending element of the transaction.

Mr Churton said that Morgan Stanley would not have executed the transaction if any regulatory red flags had been raised.

Mr Churton said that during a "courtesy call" in advance of the transaction, Mr Horan asked for the identity of the so called "Maple 10"

Group of investors who borrowed from the former Anglo Irish Bank to buy shares in the company.

Mr Churton is giving evidence in the trial of former Anglo chairman Sean FitzPatrick (65), from Greystones, Co Wicklow; former head of risk William McAteer (63), of Rathgar in Dublin; and Patrick Whelan (51), of Malahide, Co Dublin.

The three men have been charged at Dublin Circuit Criminal Court with 16 counts of providing unlawful financial assistance to 16 individuals in July 2008 to buy shares in the bank.

The 16 individuals are six members of the Quinn family and the Maple 10 group of investors.

The three men deny the charges.

Mr Whelan, Anglo's former head of lending in Ireland, also denies seven charges of being privy to the fraudulent alteration of a loan facility letter.

Mr Churton was an executive director in Morgan Stanley's legal and compliance division in July 2008, serving as head of European sales and trading compliance.

This morning (MON) he gave evidence about a phone call that took place on Saturday July 12, 2008, days before the transaction was executed.

Mr Churton prepared hand written notes in advance of the call, the trial has heard.

Mr Churton said that the call was part of MorganStanley's due diligence procedures as well as a "regulatory courtesy" to inform the Irish Financial Regulator of "the latest iteration of the trade".

Those who took part in the call included Mr Churton and two Morgan Stanley colleagues; Con Horan of the Irish Financial Services Regulatory Authority (IFSRA) as well as Matt Moran and Fiachre O'Neill, then two senior Anglo employees.

Mr Horan is due to give evidence later today.

Mr Churton told barrister Lorcan Staines, representing Mr Whelan, that he was anxious that the English and Irish regulators be made aware of the transaction, whether or not this was mandatory.

Mr Churton said that Morgan Stanley was not seeking formal approval from the Irish Regulator, but said the company wanted want to give the regular the opportunity to raise any concerns it had at that time.

"It is not often that you would speak to a regulator in advance of a transaction," said Mr Churton whose notes recorded that the financial regulator needed to be aware of "the final plan".

Last week a former in house lawyer for Morgan Stanley told the trial that the English financial regulator deferred to the Irish regulator in relation to the so called "Maple Transaction" in July 2008.

Harry Eddis told barrister Paul Anthony McDermott BL, for the prosecution, that he was executive director of the legal and compliance department at Morgan Stanley at the time that the investment bank were hired by Anglo to act in an intermediary role in the purchase of Anglo shares by the "Maple Ten" and Quinn family.

 Mr Eddis told the trial that the English Financial Services Authority

(FSA) indicated that they would be comfortable if the Irish Financial Regulator was happy.

"The English regulator effectively deferred to the Irish regulator, if they were happy, given they were the main regulator of the shares concerned, they (FSA) would be comfortable," he said in his evidence.

The trial, which has now entered its sixth week, continues before Judge Martin Nolan and a jury of eight women and seven men.

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