THE FAMILY of Seán Quinn are claiming in their legal action against Anglo Irish Bank over the validity of €2.34 billion in loans that the bank advanced €500 million in December 2007 under the “false guise” of property lending.
They allege the loans were in fact provided to “tidy up” loans advanced to meet losses on Mr Quinn’s investment in Anglo shares through contracts for difference, a type of leveraged bet on the bank’s share price.
The loans were provided after conversations between Mr Quinn and Anglo chief executive David Drumm in December 2007 following falls in the bank’s share price, the family claim.
The €500 million loans were given under the “false guise” of gearing up on property at one of their companies, Quinn Finance, but were in reality used to clear up loans to meet margin calls on the Anglo contracts, they allege.
The family have made further submissions in their case against the bank in recent days, outlining further details of their legal claim.
Mr Quinn’s wife and five children, shareholders in the Quinn Group, the business he founded, are suing the State-owned bank, claiming that the loans advanced in 2007 and 2008 were “unenforceable”, unlawful and invalid.
They maintain the loans were advanced to manipulate the market to support the share price.
Anglo’s lending was “tainted with illegality” and “intended to support an illegal purpose” in breach of EU market abuse rules, the family claim in the action.
The family owes Anglo almost €2.9 billion, of which the €2.34 billion relates to loans to cover the losses on Anglo shares as a result of the 2008 financial crash.
The family are also claiming that the appointment of the share receiver by Anglo, which took control of the business, and the subsequent removal of executives from the group, damaged the business.
The Quinn are seeking to overturn the appointment of the receiver, Kieran Wallace of KPMG, who was appointed by Anglo in a restructuring which led to the bank taking 75 per cent of ownership of the Quinn Group.
The documents in the proceedings include details of the roles of named senior executives at Anglo and the Quinn Group in the lending to the Quinn family to meet margin calls on their Anglo CFD investments.
The family claim Anglo agreed to continue lending to them to meet margin calls on Mr Quinn’s losses on Anglo CFDs following the collapse in the share price in the so-called St Patrick’s Day massacre in 2008 and that the bank advanced about €350 million over a six-day period around this time.
The proceedings will outline how Mr Quinn started investing in Anglo CFDs in 2005 and that over a 10-day period in September 2007 the bank advanced €100 million to meet margin calls as the share price declined.
CFDs are structured so that investors pay down a deposit or margin on their investment, but if the share price falls, they have to pay further sums to maintain the margin at an agreed level.
The family’s proceedings were entered into the Commercial Court list last month.
