Seanie's protege was 'soaked in the ethos' of bad bank
AT 9.59am Boston time yesterday, lawyer Pamela Harbeson of law firm Looney and Grossman clicked online and registered a voluntary bankruptcy petition for David K Drumm, the exiled former CEO of Anglo Irish Bank.
The skeletal petition, used for urgent filings, did not contain substantial documents supporting Drumm's bankruptcy bid.
Within 45 minutes, lawyers in Dublin representing the disgraced, nationalised lender were in the High Court complaining about the "quite extraordinary turn of events".
The drastic Chapter 7 bankruptcy bid by Mr Drumm opens up another potentially drastic chapter for Anglo: if his assets are divested to the Trustee in Bankruptcy in Boston, the bank's €8m lawsuit against him could be rendered futile and Mr Drumm will continue to draw down his lucrative pension.
Mr Drumm was a surprise candidate to replace Sean FitzPatrick as Anglo's CEO in 2005. But the rank outsider, appointed as CEO at the relatively tender age of 39, was -- according to Seanie -- "soaked in the ethos" of Anglo.
It was an ethos that drove both men to bankruptcy.
When he took over as CEO, Drumm, a qualified accountant renowned for his "relationship management" techniques with borrowers, promised to double Anglo's profits within five years.
Seanie was never far away, having seamlessly settled into the role of chairman of Anglo, a move that flew in the face of good corporate governance.
To "show confidence" in Anglo, the newly anointed CEO, who already had 37,000 shares in the bank, got a €1.2m loan from Anglo to buy an extra 50,000 shares at €20.08 per share.
But by November 2007, with the bank's share price tanking, he was paying €30,000 a month to service his Anglo loan account, according to court filings.
By January 2008, the global credit crunch had tightened its grip: Northern Rock had been nationalised, Bear Stearns had collapsed and Anglo found itself at the centre of an aggressive short- selling storm.
To show confidence in the bank, Mr Drumm and other executives boosted their loans to buy bank shares and Mr Drumm got a non-recourse €7.6m loan for the bank to fund a new share purchase.
The loan, now classified as a recourse facility, was later renewed in January 2009 following the high profile resignations in December 2008 of Mr Drumm and Mr FitzPatrick.
Gardai are investigating three main phenomena at Anglo and want to question Mr Drumm, who they planned to question next week when he arrives home for his civil action.
They include the €7.45bn in back-to-back deposits between Anglo and Irish Life and Permanent; the €450m loan support scheme to the so-called Maple/Anglo 10 -- this is the golden circle of 10 investors who bought bank shares to buy out Sean Quinn's shareholdings -- in an apparent share-support scheme, and the issue of director's loans at Anglo.
Mr Drumm's bankruptcy petition deprives gardai of the opportunity to speak to him in the absence of a formal extradition request.