Former Anglo directors to be sentenced on April 28
Conor Gallagher
The sentence hearing of former Anglo Irish Bank directors Pat Whelan and William McAteer will take place on April 28th following their conviction on charges of providing illegal lending to the Maple Ten for a share support scheme.
The jury foundformer Director of Finance Mr McAteer and former head of Irish lending Mr Whelan guilty of providing illegal loans to ten individuals to buy shares in the bank. The jury acquitted them of six charges each of lending money to the Quinn family
The jury returned the final verdicts after 16 hours and 53 minutes of deliberation over five days. Their co-accused, former Anglo Chairman Sean FitzPatrick, was acquitted on all ten charges against him on Wednesday.
The men made no reaction as the verdicts were read out. All guilty verdicts were unanimous.
Former Anglo chairman Sean FitzPatrick and ex-directors William McAteer and Pat Whelan, were charged at Dublin Circuit Criminal Court with breaching Section 60 of the Companies Act 1963 by lending money to investors to buy shares in Anglo.
Mr Whelan (52) of Malahide, Dublin and Mr McAteer (63) of Rathgar, Dublin were accused of 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 FitzPatrick (65) of Greystones, Co Wicklow, was charged with ten counts of loaning money to the Maple Ten.
All three denied the charges. Last week the jury were ordered to acquit Mr Whelan and Mr FitzPatrick of a series of related counts because of lack of evidence.
The Maple Ten deal was designed to unwind the 29.4 per cent control of the bank which businessman Sean Quinn had built up through investment tools known as Contracts for Difference (CFDs).
The ten investors were loaned a total of €450 million by Anglo to buy around 10 per cent of the shares which Mr Quinn controlled. Mr Quinn’s wife and five children were also loaned €169 million to buy nearly 15 per cent of the stock.
Few of the facts in the case were in dispute but the prosecution alleged different levels of involvement by the three accused.
The State said that Anglo’s former Head of Irish Lending Pat Whelan was most active in arranging the Maple deal. He approached the ten and drafted the associated documentation.
According to prosecuting counsel he was “up to his neck in it”, although Mr Whelan’s counsel insisted he was merely following the instructions of his CEO.
During his voluntary garda interviews Mr Whelan said that both he and Anglo were comfortable with the lending to the Maple Ten as it was “in the ordinary course of business” and the bank’s compliance department had raised no objection.
He told gardaí that the Financial Regulator was fully aware of the deal and supported it.
“They seemed to have a hotline with each other,” he told gardaí.
He said that the Maple Ten deal may seem unwise in hindsight but that it was required to “keep the bank alive” during a difficult period.
He said he believed the loans were made in the ordinary course of business and therefore not illegal.
The prosecution said that former Director of Finance William McAteer was slightly less involved in the deal.
On July 8, 2008 he told Chief Financial Officer Matt Moran about the Maple Plan and the next morning went through the details of the deal with Mr Moran and Head of Compliance Fiachre O’Neill.
He told investigators that he had limited involvement in the Maple deal but that he didn’t have an issue with the bank lending for the purchase of its own shares. He said he wasn’t sure if he signed off on the loans and that he might have been on holidays at the time.
He said he knew the Maple Ten were receiving loans from Anglo but that he was not aware Anglo was also funding the Quinn family’s purchase of the shares.
The accused said that then Anglo CEO David Drumm decided the candidates and that it would have been the director of lending who decided to loan to them.
The accused insisted that he “certainly wasn’t instrumental” but that he was “certainly involved in carrying out the transaction”. He said he travelled to the Middle East and spoke to Rabobank and the Financial Regulator when trying to find solutions to Mr Quinn’s control of the bank.
He said that he had no involvement in the lending to the Maple Ten and that there were meetings and phone calls that he wasn’t involved in.
When gardaí again asked if he instructed others in the transactions, Mr McAteer replied that he “certainly instructed people to make sure everything was done properly.”
Least involved was former Chairman Sean FitzPatrick, who was acquitted on all charges on Wednesday. He was aware of the Quinn issue from meeting Mr Quinn in September 2007 and from a second meeting in March 2008. As chairman of the bank he was present for all board discussions of the Quinn problem.
He was told over the phone by Mr Drumm about the Maple plan and informed that Anglo would be lending to ten wealthy customers to buy shares. Mr FitzPatrick told gardaí that Mr Drumm never told him the ten’s identities as he “was keeping it very very tight.”
Legal argument
A significant portion of the eleven week trial was taken up by sometimes heated argument in the absence of the jury focusing on the issue of legal advice taken by Anglo at the time of the Maple plan.
Evidence of the legal advice was a major feature of the trial until early March when the prosecution won a major victory in having it excluded.
In 2008 Anglo had recruited reputable solicitors Matheson Ormsby Prentice to guide them on the legality of the Maple deal. From the trial’s beginning it was a defence strategy to use evidence of this advice to show that the accused fulfilled their duties as directors in ensuring the deal was in line with the Companies Act.
Several witnesses testified that the law firm had told Anglo the deal was on the level. When taken alongside the Financial Regulator’s approval, the legal advice formed a convincing case that the men fulfilled their duties as directors.
However the prosecution successfully contended that legal advice does not make an illegal act legal. Its argument was that if a solicitor tells you you’re allowed shoot a man, that doesn’t make it any less a crime.
The defence teams responded that this logic placed an impossible burden on the men in their roles as directors. The 1963 Companies Act is 3000 pages long and section 60 alone contains 40 sub clauses. The defence asked how a company director can be compliant with such a vast amount of law without being able to rely on the advice of lawyers.
Judge Nolan sided with the prosecution, ruling that “such a defence would blatantly offend one of the core principles of our criminal justice system, namely ignorance of the law is no defence”.
Judge Nolan’s ruling on the matter led to the strange situation of the jury being told half way through the trial that it must ignore the issue of legal advice despite having already heard extensive evidence on the subject.
After the ruling, witnesses also had to be warned before giving evidence not to mention the subject of legal advice.
The prosecution won another vital victory in having the opinion of the Financial Regulator and the role played by Morgan Stanley discounted as a defence. The jury was told it did not matter that the regulator approved the deal and or that experienced investment bank Morgan Stanley was executing the plan.
Judge Nolan also told the jury that it was no defence for the men to claim they didn’t know they were committing a crime. “Ignorance of the law is no defence,” was a phrase often repeated during legal argument. Or “ignorantia juris non excusat” as the silks sometimes preferred to put it.
However the judge did take the unusual step of indicating, in the jury’s absence, that he would take the approval of the Financial Regulator as a mitigating factor if the men were convicted.
“I have no doubt the Financial Regulator knew there was going to be substantial lending into this scheme to effect it,” Judge Martin Nolan said during a legal ruling in the absence of the jury.
“I also take the view that the Financial Regulator took no steps to discourage the scheme or in anyway stop it. And it seems from regulator witnesses that they were somewhat relieved when the scheme went through and that the CFD issue was alleviated and regularised.”
The prosecution didn’t enjoy an unbroken run. The judge sided with the defence in several key areas and directed not guilty verdicts on a series of charges against Mr FitzPatrick and Mr Whelan.
Judge Nolan ruled that there was no evidence that Mr FitzPatrick knew about lending to the Quinn family to buy the Anglo shares. During the former chairman’s five garda interviews, he was never once asked by investigators if he knew of lending to the Quinns.
The judge also ruled that the seven charges that Mr Whelan fraudulently altered the date on loan letters were not supported by the evidence. This essentially came down to how the charges were phrased; Judge Nolan ruled that the evidence was that new loan letters were issued by Anglo as opposed to the original ones being altered.
Prosecuting counsel Úna Ni Raifeartaigh SC was taken by surprise by the rulings and argued that the prosecution should be allowed introduce substitute charges in the case of Mr FitzPatrick. Judge Nolan refused to be swayed.
The State also lost its case to have evidence of Mr FitzPatrick’s salary and shareholding in Anglo put before the jury. Ms Ni Raifeartaigh wanted to show that the former chairman was acting out of his own self-interest in saving the bank
Defence counsel Michael O’Higgins SC accused the prosecution of using “hand grenades”; throwing in explosive evidence at the last minute. Judge Nolan sided with the defence and ruled the evidence was irrelevant.
The trial involved five highly skilled senior counsel and this was reflected in the tactics used on both sides. Both the prosecution and defence employed extensive case law in their arguments, some of it hundreds of years old.
At times the arguments took a surreal turn. Cases involving pirates and French men duelling in England were put before the court. At one point Paul O’Higgins SC for the prosecution cited the 19th century trial of a Tipperary woman who had cooked her child because she thought it was possessed by demons.
At several points there appeared to be tension between Judge Nolan and Michael O’Higgins. Early in the trial Mr O’Higgins made an application that Judge Nolan should recuse himself because the judge had expressed an opinion on the legal advice that counsel felt was prejudicial.
When Mr O’Higgins continued to raise the legal advice issue throughout the trial Judge Nolan interrupted him, saying “I find it hard to stop you making the same point over and over again.”
“I take exception to the view that I’m making the same point over and over again,” Mr FitzPatrick’s counsel responded.
“I’m not interested in getting involved in a verbal argument because there are very few winners in a verbal argument with you,” the judge said.
Counsel said that the judge was “taking it personal” and “this actually isn’t personal to me.”
Despite these occasional run-ins, most of the trial was conducted smoothly. There was a large amount of agreement on the facts of the case, meaning the trial finished well before the initial outside estimate of six months.
The consensus on the evidence was reflected in the fact that the superintendent in charge of the entire Anglo investigation spent less than 30 minutes in the witness box.
One of more unusual incidents occurred at the end of the trial when Paul O’Higgins used part of his closing speech to ridicule the evidence of prosecution witness and Maple Ten developer Seamus Ross.
Counsel sarcastically suggested that Mr Ross was not entirely forthcoming in his evidence that he wasn’t focused on the Maple deal in July 2008.
This led to the strange situation of a judge criticising the prosecution for how it treated its own witness. In the absence of the jury, Judge Nolan admonished counsel for his “rude” and “unnecessary” comments which he said Mr Ross would have to read in the next day’s newspapers.
The judge later told the jury that he thought the Maple Ten were “remarkable men in some ways” and that they were acting to help the bank and the country.
Historic trial
The trial lasted 48 days and was a result of the biggest fraud investigation in Irish history. It was the first time anyone was tried for the offence and the first time an enlarged jury of 15 heard was used.
Judge Martin Nolan thanked the jury for their verdicts and their service and told them they were a credit to the jury system. He excused them from further service for ten years. He also thanked the three jurors who had started the trial before the final 12 were chosen.
Judge Nolan set a sentence date of April 28th next at 2pm. He said he would be unlikely to give a decision that day but would hear the evidence in the case.
There was no objection to Mr McAteer and Mr Whelan remaining on continuing bail until the sentence date.
Statement from the Quinn family:
We have been following the recent trial very closely and feel that it would be inappropriate to comment on this case, which specifically related to three individuals. The information that we have garnered will be of huge assistance to us in our forthcoming legal cases against IBRC (in Special Liquidation), Kieran Wallace, the Department of Finance, the Financial Regulator and the Board of Directors of Anglo Irish Bank.
As we are now in our fourth year since the invalid appointment of a Share Receiver to our companies and the Criminal trial has now concluded, we will now be looking for a hearing date as soon as possible.