ANGLO TRIAL: Directors say Drumm was told to inform Financial Regulator that Quinn owned 25% of their shares

By Conor Gallagher

Three former directors of Anglo Irish Bank have given evidence that they instructed the bank’s CEO to immediately inform the Financial Regulator that Sean Quinn controlled 25 per cent of their shares.

One of the directors, Gary McGann, said it was his recollection that the board informed Anglo CEO David Drumm to go to the regulator with the information in late 2007 or early 2008. The trial has previously heard this occurred in September 2007.

Mr McGann, who is the current CEO of Smurfit Kappa, said that he understood the regulator was then informed by Mr Drumm and was “equally exercised” about the situation.

The regulator at the time, Pat Neary, told the court on Tuesday that he wasn’t told about the size of the Quinn stake until March 21, 2008. He said he did meet with Mr Drumm in September 2008 but the Anglo CEO did not tell him the extent of the Quinn position.

Sean Quinn had built up the control of the bank in secret through Contracts for Difference (CFDs), which are investment tools that gamble on a share price rising or falling. The court heard these CFDs, which eventually accounted for 29 per cent of Anglo shares, had the potential to impact the stability of the entire banking system.

Two other former non-executive directors gave evidence yesterday (Wednesday) about their knowledge of the regulator’s involvement. Lar Bradshaw and Ned Sullivan both said that they instructed Mr Drumm to tell the regulator in 2007 about Mr Quinn’s CFDs.

Mr Bradshaw said that from when the CFD issue first came to light he constantly repeated that the regulator should be kept informed of all issues.

Former Anglo Director Sean FitzPatrick and fellow ex-directors William McAteer and Pat Whelan, are accused of providing funding for the purchase of Anglo’s own shares in contravention of the 1963 Companies Act. 

The three men have been charged at Dublin Circuit Criminal Court with 16 counts of providing unlawful financial assistance to 16 individuals in July 2008 to buy shares in the bank. The 16 individuals are six members of the Quinn family and the Maple Ten group of investors.

Mr Whelan has also been charged with being privy to the fraudulent alteration of loan facility letters to seven individuals in October 2008.

Mr FitzPatrick (65) of Greystones, Co Wicklow, Mr McAteer (63) of Rathgar, Dublin and Mr Whelan (51) of Malahide, Dublin have pleaded not guilty to all charges.

The jury were shown an email exchange between Mr McGann and Mr Drumm from July 10, 2008, four days before the Maple plan went through.

Mr McGann wrote in the first email that he had been speaking to Mr FitzPatrick about the plan’s execution. He wrote that Mr Drumm and his team “were doing a fantastic job in very trying circumstances” and that “they are all rooting for him”.

He sent a later email to Mr Drumm stating that they should have a 'credible explanation' in place in the event that the 'worst case scenario' occurs and the transaction becomes public knowledge.

Mr McGann told the court he used the expression 'worst case scenario' because “total disclosure is always challenging”.

The witness told prosecuting counsel Una Ni Raifeartaigh SC that Mr FitzPatrick called him shortly after the deal went through to tell him “the good news”. He said there was no mention on this phone call of funding to the Maple Ten or to the Quinn family.

Mr McGann’s colleague on the board, Lar Bradshaw, told the court that he was also not aware of lending to the investors when the deal went through in the first half of July 2008.

He said he first heard of lending when Mr FitzPatrick called him in late July or early August to complain that the loans had been given at 25 per cent personal recourse to the investors, which he believed was too low.

Mr Bradshaw said this was the first he heard of any lending whatsoever to the investors.

Prosecution evidence is nearing completion in the case. The trial continues before Judge Martin Nolan and a jury of seven men and seven women.