Sunday 15 September 2019

What Sean FitzPatrick might be charged with

Former banker's actions may not land him in trouble, but any concealment of his behaviour might, says Leo Sharkey

WHAT actions of Sean FitzPatrick might give rise to potential criminal liability?

The three actions that may give rise to a criminal charge and prosecution are the concealment of loans for eight years, the Anglo 10 investment scheme (to prop-up the shares of Anglo Irish Bank), and the so-called "circular" transactions totalling some €7bn.

The basis for any criminal charges may arise not so much from these actions themselves, but the concealment of this behaviour from the market. What might he actually be charged with?

He has been arrested under the 2001 Criminal Justice Act, which is relevant act governing fraud and theft offences.

However there is quite a number of other general and specific offences he may be charged with in relation to the collapse of Anglo Irish Bank.

Basic theft and fraud offences

These would encompass primarily a form of fraud and its derivative offences, which are defined in Ireland as not just depriving someone of something they own, but interfering with any rights of ownership they have in any asset or income stream in a way detrimental to them in a fraudulent manner.

The main statute here would be the Criminal Justice (Theft and Fraud Offences) Act, 2001 which defines fraud in several ways and proscribes the inducement of another into similar activity as a ancillary or alternative offence.

Such charges might include: making gain or causing loss by deception -- acting dishonestly with the intention of making a gain for themselves or causing a loss to another and false accounting -- making an untrue or dishonest statements in furtherance of the purpose of the above offence, or indeed altering or destroying any document for this purpose.

What other charges might be laid against him?

Company Law and other regulatory offences

Apart from different variations of fraud, potentially myriad company law offences may have been committed by Sean FitzPatrick, such as insider trading, market manipulation, false accounting, conspiracy, concealment of an offence, competition law offences, criminal offences under UK law and EU law and possibly revenue offences.

Under the 1990 Companies Act Section 197, there is a hybrid company law offence of false accounting that carries a criminal sanction.

There is also a duty on directors under section 202 of the 1990 Companies Act to 'cause to be kept proper books of account', which 'correctly explain the transactions of the company' that 'will at any time enable the financial position of the company to be determined with reasonable accuracy' and 'will enable the accounts of the company to be readily and properly audited'.

Further to these specific Companies Act offences, Ireland has signed up to several international and European conventions and directives that have become law in Ireland -- the Market Abuse Directive now in law under the Investment Funds, Companies and Miscellaneous Provisions Act 2005 and subsequent regulations define two main offences of insider trading and market manipulation.

Insider trading

Insider trading occurs when a trade has been influenced by the possession of corporate information that has not yet been made public.

This is not about personal gain per se rather the use of this information to gain an unfair advantage.

Market manipulation

Market manipulation is any action that causes manipulation of the market, for example, where someone (not necessarily an insider) acts to distort the price of a share or other financial instrument by misleading the market or by engaging in artificial transactions or disseminating false and misleading information.

This is quite a widely drafted provision and the nature of the Anglo 10 arrangement may fall foul of it.

General Directors duties and disclosure of loans

There are a number of general common law and statutory duties on the directors of a company to act in good faith, and to disclose all relevant dealings with the company which are enforced with a criminal sanction.

For example, Sections 41 to 43 of the Companies Act of 1990 require disclosure of all loans that are made to directors.

Section 43 specifically refers to loans made to directors of licensed banks and the requirements concerning this disclosure.

Finally, though, one can't successfully speculate on any criminal prosecution as all the facts are never known beforehand.

Leo Sharkey is a barrister

Sunday Independent

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