THE former head of the Financial Regulator did not know the scale of Sean Quinn's control of Anglo Irish Bank until six months after the firm found out, a court has heard.
Pat Neary also said at the trial of three former Anglo executives that he was not told in 2008 that the bank was planning to loan money to the Quinn family as part of a deal to unwind Mr Quinn's stake in the bank.
Former Anglo directors Sean FitzPatrick, William McAteer and Pat Whelan are accused of providing funding in contravention of the 1963 Companies Act.
They are on trial at Dublin Circuit Criminal Court on 16 counts of providing unlawful financial assistance to buy shares in the bank.
Mr Whelan has also been charged with being privy to the fraudulent alteration of loan facility letters to seven individuals.
Mr FitzPatrick (65) of Greystones, Co Wicklow, Mr McAteer (63) of Rathgar, Dublin, and Mr Whelan (51) of Malahide, Dublin, have pleaded not guilty.
Mr Neary told Brendan Grehan SC, defending Mr Whelan, that in 2007 there were market rumours Mr Quinn had built up a large stake in the bank.
Mr FitzPatrick and the then Anglo CEO David Drumm met him on September 11, 2007 to find out the truth and Mr Quinn admitted owning 24pc of the shares. Mr Drumm passed this information to the Anglo board, who instructed him to tell the Financial Regulator.
Yesterday, Mr Neary agreed with counsel that Mr Drumm came to see him on September 12. He said they discussed the rumours, but Mr Drumm never disclosed he knew Mr Quinn's share was 24pc.
He said he took no notes of the meeting as he believed it would be about a personal matter and that Mr Drumm wanted to keep it "low-key". He denied that there was a second meeting that September.
The former regulator said Mr Quinn had two opportunities to tell him about the size of his share but chose not to.
He admitted having a meeting with Mr Quinn in January 2008 in which Mr Quinn admitted building up contracts for difference (CFD) – an investment tool that involves betting on a share without buying it – in Ryanair and Anglo, but he did not intend to hold onto them.
Asked why he did not question him about the extent of his CFDs, Mr Neary said Mr Quinn was a private citizen and could have all the investments he wanted.
Mr Neary said it was not until March 21, 2008 that Anglo executives told him about Mr Quinn's position, which by that date stood at 28pc.
Mr Whelan's lawyer, Brendan Grehan, made reference to a letter Mr Neary sent to Mr Drumm on June 25, 2007 stating the regulator was concerned about the level of Anglo's lending to the Quinn Group.
Mr Grehan suggested the letter was "a posterior-covering exercise" by Mr Neary as he knew Anglo would have to keep lending to the group or both bodies could collapse.
Mr Neary said that the letter reflected the views of the regulator's office at the time.
The trial continues.