Former Anglo Irish Bank chief executive David Drumm could face further legal action from creditors pursuing debts and criminal charges for lying to a US court, following a damning judgment against him.

Mr Drumm has lost the protection of the US bankruptcy court, exposing him to litigation for recovery of €10.5 million he owes, after Massachusetts Judge Frank Bailey denied him a declaration of bankruptcy that would have allowed him to avoid repaying his debts.

In a ruling after hearing six days of evidence at trial last summer, the judge found that Mr Drumm (48) was “not remotely credible”, his conduct was “fraudulent” and his court statements replete with “outright lies”.

Discharge denied

He denied him a discharge from bankruptcy based on 30 counts including false oaths and attempts to hinder or impede creditors.

Mr Drumm and his lawyers did not respond to requests seeking comment on the judge’s ruling or whether he would appeal the denial of discharge within the legally allotted 14 days.

The accusation of lying to court could result in Mr Drumm facing criminal action for making false oaths to a US federal court, though such actions arising from bankruptcy trials are said to be rare.

The decision to pursue such an action rests with the Office of the US Trustee, which oversees bankruptcy cases, and the Department of Justice, said one US legal source.

It is possible that the bankruptcy judge can refer his findings against Mr Drumm to the US attorney general’s office with a view to a legal action being brought over his false statements under the US criminal code.

The prospect of further court actions by his creditors is certainly likely after Mr Drumm lost his four-year-long bid to be declared bankrupt, preventing him from earning a fresh financial start free of debt.

His largest creditor, State-owned Irish Bank Resolution Corporation, formerly Anglo, which is owed about €8.5 million, can now take legal action in Ireland or Massachusetts, either in a US federal or state court, to obtain a judgment against him and seek repayment of its debt.

If the judgment is obtained in Ireland, where most of Mr Drumm’s debts arise, IBRC could seek to have the judgment recognised in the US. This would allow the bank to pursue Mr Drumm for money in the country where he lives and earns a living and where he and his wife have assets.

The former banker, whose family home is located outside Boston, has been working as a consultant from the New Jersey offices of scaffolding company Safway Atlantic near New York City. Any income he makes in this capacity could be targeted by the bank to repay Mr Drumm's debts.

Future income

The bank could pursue future income by way of a court order of garnishment that, under US law, allows a plaintiff creditor to collect debts from a defendant. The money could be obtained from an attachment of assets or a garnishment of wages, forcing an employer to withhold pay from an individual and send it directly to the creditor owed money.

His creditors could also pursue him for any assets he acquired since October 2010 when he filed for bankruptcy in the US after failing to agree a settlement of a legal action taken by Anglo in Irish courts over his debts.

Mr Drumm's loss of a declaration of bankruptcy and discharge from his debts hinged on his failure to disclose the transfer of more than €800,000 in cash along with substantial interests in properties in the US to his wife Lorraine in the two years from September 2008.

Concealed assets

Ordinarily, following a ruling such as Judge Bailey’s judgment, a creditor might seek to claw back the transfer of concealed assets to recoup debts and would have a strong case in doing so based on his conclusions.

In Mr Drumm's case, the bank's ability to recover these assets is complicated by the fact that the trustee, the court-appointed official appointed to liquidate his assets and oversee his bankruptcy estate for creditors, agreed a settlement with Lorraine Drumm in April 2012.

Under that agreement, the trustee, Boston bankruptcy lawyer Kathleen Dwyer, and Mrs Drumm settled any claims against her that she fraudulently benefited from assets transferred to her by her husband.

She agreed to pay almost €1 million to the trustee and retains a share of the remainder of the assets owned jointly with her husband.