Thursday 20 September 2018

'Shower of clowns': what Drumm called the Central Bankers

Former Anglo CEO's tirades revealed in court as recordings lift veil on bank's failed bid to survive

Former Anglo Irish CEO David Drumm arrives at the Circuit Criminal Court. Photo: Collins Courts
Former Anglo Irish CEO David Drumm arrives at the Circuit Criminal Court. Photo: Collins Courts

Andrew Phelan

Former Anglo Irish Bank CEO David Drumm described the financial regulator as "f**king Freddie f**king Fly" and the Central Bank as a "shower of clowns" before getting emergency funding during the financial crisis, a jury has heard.

In phone recordings made at Anglo in 2008, Mr Drumm told a colleague he would go to the Central Bank and: "Keep asking the thick question: when is the cheque arriving?"

He also described as a "death warrant" a letter to the financial regulator stating Anglo was in breach of a condition of its licence.

The tapes were played yesterday in the trial of Mr Drumm, who denies taking part in a €7.2bn conspiracy to defraud and false accounting.

Mr Drumm (51) is pleading not guilty to conspiring to defraud Anglo investors in 2008 by dishonestly creating the impression that the bank's customer deposits were larger than they were.

The case centres on circular transactions from Anglo to Irish Life and Permanent (ILP), routed through Irish Life Assurance (ILA) back to Anglo.

Detective Sergeant Michael McKenna told Paul O'Higgins SC among the phones recorded in Anglo for business purposes was John Bowe's.

Mr Bowe, one of the people Mr Drumm is alleged to have conspired with, was treasury director.

On September 18, the two discussed money leaving the bank and how, if it was downgraded by the ratings agencies, Anglo could lose another €2bn.

Mr Bowe read out to Mr Drumm a letter he had prepared for the financial regulator about Anglo's breach of the regulatory liquidity ratio under the bank's licence.

The jury had heard earlier this was in advance of Anglo seeking emergency funding.

"The bit about the licence is signing a death warrant," Mr Drumm said.

He said it meant the regulator could force Anglo to stop lending, but said they could do that anyway. Mr Bowe said Anglo was beholden to them.

In a call on September 19, 2008, Mr Bowe told Mr Drumm about the bank's position "deteriorating more slowly than our worst-case scenario".

Mr Drumm asked that if they got €6bn from IL&P, did they have to "cash back" and asked if Anglo had the cash. Mr Bowe replied that they did not have the cash.

"We can't take it off f**king Freddie f**king Fly down there, the financial regulator because it will appear on the balance sheet," Mr Drumm said.

He told Mr Bowe they had to make their best attempt to get the balance sheet looking in reasonable health.

Mr Drumm spoke of what they would say to the Central Bank, referring to Anglo being under stress.

"We'll be saying, 'Yeah, a stress because HBOS were f**king sold and Lehman's went bust and f**king Bank of America f**king took over Merrill's and other f**king non-normal things happened'," Mr Drumm said.

"We need the f**king loan because we are running out of money," he said.

He said he was going to keep it "stupid simple".

"I'm going to keep asking the thick question: 'When, when is the cheque arriving?'," he said, adding: "If we say it in their language, nothing will happen.

"You have it, so you're going to give it to us and when would that be? We'll start there," he said.

"If they don't give it to us on Monday they have a bank collapse - if the money keeps running out the door, the way it has been running out the door."

Mr Drumm also spoke about being "relaxed" before agreeing to meet the following morning for a "pep talk and then off we go". Mr Bowe suggested 10am.

"Ten o'clock it is. You the man," Mr Drumm said.

In the next phone call, on September 22, the two men again discussed the bank's situation and Mr Drumm at one point asked about what would happen if they got "€4bn or whatever from that f**king shower of clowns down on Dame Street".

Mr Drumm asked Mr Bowe to "come in for the CEO's review" for the next board meeting.

He said he thought they "just need a ladybird-type thing", "something we can hand out to them". Mr Drumm said they would say "this is the real world here" at the meeting, "this is what could happen, this is what we think will happen, even with the six billion fixes, which Mr f**king Denis confirmed for me this morning".

"We're f**ked," Mr Drumm said, adding that the bank had "depleted our liquidity by €14bn".

He said the question would be asked: "Who was in charge when that was going on? Whose f**king can was that?

Mr Drumm also spoke about the "snapshot" of its finances Anglo would have to show to the market at its year end, on September 30.

Snapshot

"The snapshot, the family photo, is not going to be any better than that no matter what we do," he went on to say.

"The balance sheet looks shot," Mr Drumm said at one point before asking: "Are you going to be able to bloat the balance sheet on the right hand side?"

"If this photo is ever going to be published on f**king Bebo, it's not going to look that great," Mr Drumm said. He said it did "not look doable" that you could "fix the poxy balance sheet over the year end".

He continued to say it needed to be got into the minds of the board members that "we have lit a fuse here and it's not going to go away".

Mr Drumm was asked on the call about a meeting he had had with "Gillian and Denis".

The jury heard earlier that a possible merger between Anglo and ILP had been discussed.

"Gillian was listening but this man had a f**king brick wall built in front of him," he said.

"He is just mind numbingly blocking it," he said.

He suggested getting back to Gillian and saying "one party, ie your f**king chief executive is not receptive".

Mr Bowe asked if Mr Drumm thought they "can be turned."

"I do," he replied, adding: "It's the last f**king roll of the dice."

"Keep whacking our heads off that wall and see if we can eventually split it open," he said.

On September 29, Mr Drumm said in a phone call the transactions had become an "academic exercise".

Mr Bowe said: "Permo came back and said they couldn't do it. They basically said they couldn't do any more without collateral."

"But we are sorted anyway," Mr Drumm said.

Mr Bowe said of getting money back in time from ILP: "it's very tough to do but we are picking away at it."

"F**king journal entry would do it an awful lot quicker," Mr Drumm said, adding with laughter that Anglo's finance director Willie McAteer might be auditing the books himself.

The trial continues.

Irish Independent

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