Monday 20 August 2018

State bank guarantee scheme met with 'near euphoria', court hears

David Drumm has denied conspiring to defraud. Photo: Collins Courts
David Drumm has denied conspiring to defraud. Photo: Collins Courts

Andrew Phelan

The Government's bank guarantee scheme at the height of the 2008 financial crisis was met with "near euphoria" by the market, the trial of former Anglo CEO David Drumm has heard.

On the day the State stepped in, Irish Life and Permanent agreed to increase the value of a multi-billion euro "circular" deal with Anglo Irish Bank because all deposits were by then "copper-fastened" by the guarantee anyway.

ILP's then group treasurer David Gantly was giving evidence yesterday in Mr Drumm's trial.

Mr Drumm (51) has pleaded not guilty at Dublin Circuit Criminal Court 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.

The jury was played a taped phone call between Mr Gantly and Anglo's head of liquidity Ciaran McArdle on March 28, 2008, in which they discussed how the transaction that month would work.

"I don't know, Ciaran, whether we need to make a few different payments just so it doesn't look very obvious," Mr Gantly said at one point in the call.

Mary Rose Gearty SC, prosecuting, asked to whom it was not "to look obvious".

"Just to junior staff," Mr Gantly replied.

He told Ms Gearty he considered it to be a circular transaction.

The evidence moved on to the September transactions.

The jury heard a September 16, 2008 phone call between Anglo's head of treasury Matt Cullen and head of capital markets John Bowe.

In it, Mr Cullen said he had spoken to Mr Gantly, who had told him four or five billion was "not going to be a problem".

"So look, if we ask for six, I think they will do it," Mr Cullen was heard saying.

He said Mr Gantly's "exact words" had been: "You might as well be hung for a sheep as a lamb."

Ms Gearty asked Mr Gantly if he had used that expression.

"It was a flippant, throwaway remark but I did use it," he said.

He explained that he was talking in the context of having to go and get the amount approved.

In cross-examination, Mr Gantly told Brendan Grehan SC, defending, that the 2008 global financial crisis was a "systemic event the like of which had never been seen". There was "near euphoria" in the Irish market when the Government's guarantee scheme covering deposits in six financial institutions was announced on September 30, Mr Gantly said.

When Anglo asked to increase the deal to €7bn, this was done as all deposits were "copper-fastened" anyway.

A statement by Irish Life Investment Managers (ILIM) fund administrator Gillian Farrell was read out by Diana Stuart BL, prosecuting.

Ms Farrell said the September transactions involved "electronic matching" of figures and not making "actual physical payments" because another bank, Citibank, was not involved.

"I have never seen a transaction like this before... I acted on instructions and followed procedures," she said.

Gerry Keenan, ILIM's then CEO, said the credit limit for Anglo had been €100m and had to be changed for the transactions.

The trial continues.

Irish Independent

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