Friday 19 January 2018

Scapegoat for politicians and regulators knew trial was always on the cards

Back in January 2009, Sean FitzPatrick realised charges were inevitable. Tom Lyons and Maeve Sheehan trace the events leading to him to court

Tom Lyons and Maeve Sheehan

At 5.37am last Tuesday, Sean FitzPatrick was arrested by arrangement at Dublin Airport.

He had taken an all-night flight home from Boston, where his son lives, knowing the gardai were waiting for him.

Unlike other central figures in Ireland's bust, the former non-executive chairman of Anglo Irish Bank chose to face the music and return home.

FitzPatrick must have suspected since not long after his bank was nationalised in January 2009 that he faced being charged with offences in relation to Anglo Irish Bank.

He was the bank's high-profile chairman and as the then Fianna Fail government sought to affix the blame for Anglo's collapse and divert attention from the wider domestic banking crisis, he was a useful scapegoat.

Politicians and regulators, seeking to deflect from their own mistakes in allowing Ireland's property bubble get out of control, found it useful to have a pantomime villain.

That is not to say that sitting on a walnut bench facing Judge Cormac Dunne, FitzPatrick did not have serious questions to answer about his role on the board of Anglo.

Looking tired, FitzPatrick listened to the 16 charges being brought against him under Section 60 of the Companies Act.

This rule prohibits a company from using its own funds to financially assist purchasing its own shares. Conviction for such an offence comes with a jail sentence of up to five years as well as a fine.

Anglo had struggled to deal with a colossal gamble by Sean Quinn, who had built up a 28.5 per cent exposure in the bank through a financial instrument called contracts for difference (CDF).

It was a bet that Quinn simply couldn't pay when the credit crunch kicked-off in 2008 and two of America's biggest banks -- Bear Stearns and Lehman Brothers -- collapsed. Quinn's stake had left the bank easy prey for overseas hedge funds, which placed big bets against it, causing its share price to tank.

In turn this led to a run against the bank's deposits at the same time as the world's credit markets dried up, threatening its very survival.

The bank spent all of 2008 desperately trying to assist Quinn with his efforts to reduce his exposure by selling it on to existing shareholders or institutional investors, but nobody could be convinced to bite. It went to the Middle East, London and Boston, but to no avail.

On July 14, the Quinn family would buy 15 per cent of the bank while 10 long-standing clients, who later became known as the Maple 10, took on 10 per cent. The remaining 3.5 per cent was sold into the market over several months.

The bank would ultimately lend six members of the family of Sean Quinn €2.34bn while another €451m was loaned to the Maple 10.

The 16 charges facing FitzPatrick related to the manner in which the share purchases were financed by the Maple 10 and the Quinn family.

At that point in time, there was a global climate of mistrust in banking as well as the growing realisation among investors that Ireland was likely to go bust as its property bubble burst.

Anglo would have collapsed entirely, possibly dragging other Irish banks with it, if Sean Quinn hadn't managed to close his CFD position.

(Ironically, as we now know, Anglo was doomed anyway, as, like Ireland's other banks, it was overexposed to property.)

Numerous meetings and contacts took place between Anglo and the Financial Regulator, led by Patrick Neary and his right-hand man Con Horan.

These contacts started at the end of 2007, continued the week before the deal took place on July 14, and carried on into the summer months.

(In his report into Ireland's economic collapse the governor of the Central Bank, Patrick Honahan, cited the Quinn crisis as one of the reasons the Financial Regulator was too preoccupied to grasp the dangers facing the country. It failed to spot the scale of the crisis and allowed the State, under pressure from various banking insiders, to rush into blanket guaranteeing its toxic banks.)

FitzPatrick, who was in the south of France at the time of the deal on July 14, continued on his travels in Europe and only arrived back in Dublin a few days later.

He was preoccupied at the time with trying to help his executives sort out other problems in the bank -- not least an ongoing run on its deposit base -- as well as trying to deal with his complicated personal finances.

Four years on to the month of the Maple 10 transaction, last Monday, Willie McAteer, 61, the long-serving former finance director of Anglo Irish Bank, and Patrick Whelan, 50, its former managing director in Ireland, were both charged with 16 offences under the Companies Act. McAteer was arrested first at 9.50am on the N7 in Rathcoole. Whelan was arrested later at 12.25pm at his home in Malahide.

They appeared at separate hearings and were later that day released on bail. Both men, who were little known outside financial circles before the crisis, appeared the following day on the front page of the Irish Independent. The following day, last Tuesday at 11.17am, FitzPatrick appeared in the same courts as his ex-colleagues.

Heavy rings circled FitzPatrick's eyes, which were visible despite his tan from being abroad. He wore a pink tie and dark navy suit and said only "good morning" during the eight minutes he was in court.

He folded his arms and looked grim-faced at the judge, not at the packed courtroom, filled with people awaiting charges for petty crime and the media.

About 15 yards away, in the public part of the courtroom, sat his older sister, Professor Joyce O'Connor. The former president of the National College of Ireland, in Dublin's docklands, was there to support her brother and later post his bail of €10,000.

FitzPatrick left the courts at noon accompanied by his solicitor, Michael Staines, to be greeted by a media scrum. There was a scrabble as photographers rushed to picture him when he got into a taxi and went home to Greystones, Co Wicklow.

FitzPatrick was, for the short walk down the granite ramp of the courts to his taxi, again in the media glare.

Then he was back in his private world.

FitzPatrick was vilified over the summer for flying to Poland to watch a soccer game in the European Championships, where he was pictured wearing an Irish beret and scarf.

His day-to-day reality over the past three years, however, has been far from a holiday.

He has been publicly bankrupted and now must account for every penny he spends.

A man who once ate and drank business on the boards of Aer Lingus, Greencore and the Dublin Docklands Development Authority, as well being feted as a prolific private investor in numerous businesses, now has little to do with dealmaking.

He still works with his court-appointed bankruptcy official assignee on unravelling his own personal affairs but this has died down as everything is gradually sold.

There is little the official assignee can do with FitzPatrick's most potentially valuable asset -- a stake in a Nigerian oil find which has reserves of up to $1bn -- which in 2009 he had hoped to sell to avoid bankruptcy.

His stake in the well is now under the control of his assignee, and a sale drifts ever further away. Its drilling platform was recently shelled by unknown forces in the pirate-infested Niger Delta, making it even harder to shift. There is little to do with it, other than to hope a buyer eventually emerges.

At home FitzPatrick keeps a low profile, frequenting only places he knows. He plays golf with old friends and stays in touch with his school pals.

His circle of friends has reduced but a number of his old clients are still in touch with him. Only Denis O'Brien, the telecoms billionaire, has publicly supported him.

In an interview for the FitzPatrick Tapes, a book I [Tom Lyons] co-authored with Brian Carey, he described his day-to-day reality:

"I have done everything that I can do to make sure that the stress does not get on top of me. By and large it hasn't, but that doesn't mean there aren't dark days or there aren't dark nights or dark mornings or dark weeks.

"But it was never so dark that there wasn't a light somewhere around the place. Friends have been very good to me, ex-colleagues have been very good to me, people I don't know have been very good to me. My family have been incredible. All of that has helped me get through it.

"I don't feel ashamed, but I do feel regret, very serious regret, and I am sorry that it is going to cause people losses. Anyone who has suffered on that, I really am sorry. But that is it. I have got to get on and live my life."

As he signs in weekly at his local garda station and awaits his next courtroom appearance, FitzPatrick realises the wait is over.

He has faced many tribulations, now he faces trial.

Sunday Independent

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