Anglo Irish Bank went to the Central Bank seeking €1 billion in emergency funding at the same time staff members were allegedly processing €7.2 billion in a conspiracy to mislead investors, a court has heard.
Four senior bankers, including former Irish Life and Permanent (IL&P) chief executive Denis Casey and Anglo's former group finance director Willie McAteer, are accused of conspiring to mislead investors by using interbank loans to make Anglo appear €7.2 billion more valuable.
Mr McAteer (65) of Greenrath, Tipperary Town, Co Tipperary; Mr Casey (56), from Raheny, Dublin; IL&P's then group finance director Peter Fitzpatrick (63) of Malahide, Dublin; and John Bowe (52), from Glasnevin in Dublin, who had been Anglo's head of capital markets, have all pleaded not guilty at Dublin Circuit Criminal Court to four charges.
The four are alleged to have conspired together and with others to mislead investors, through financial transactions, to make the bank appear €7.2 billion more valuable than it was between March 1st and September 30th, 2008.
The jury has been sent home until Monday at the earliest, as a legal issue has arisen.
On the second day of the trial, Anglo's former director of treasury Matt Cullen told prosecuting counsel Una Ní Raifeartaigh SC that on September 25th, 2008 he and his bank colleague, Ciaran McArdle, began to implement a funding initiative to raise "€6-7 billion" in corporate deposits for the bank.
Mr Cullen said the transactions began on September 25th when stg£900m from Anglo Isle of Man was routed by Anglo to IL&P.
‘Blocked’
They continued on September 26th, but on September 29th Anglo did not have enough money to make its ordinary payments and could not continue with the transactions. Mr Cullen said this was the first time Anglo had been “blocked” in this way.
He said Mr McArdle then went to the inter-bank markets to try to get funds to make the payment but the market was “extremely difficult” and all banks were slow to put money out in case they found themselves short later that day.
“I’d never seen the likes of it,” Mr Cullen said. He described asking David Gantly in IL&P for funding but it refused as Anglo was not offering any security.
Mr Gantly told him it had gone “up the line” to Mr Fitzpatrick who was waiting for an answer from Mr Casey. On the fourth call Mr Gantly said IL&P wouldn’t give them the money because “you have no collateral”, the witness said.
He agreed that Anglo was seeking “€300 or €400 million” with no collateral, stating: “That was the norm for ‘inter-day’ requests like this. On a regular basis banks would request for you to give them funds on a short basis.”.
He said funds eventually came into the inter-bank market and the bank was able to make their “normal course of business payments” but by the close of business on September 29th they realised they would not have enough to meet the next day’s payments.
Mr Cullen said he told Mr Bowe Anglo didn’t have money to meet its commitments the next day. A conference call was set up with Michael Maher, who Mr Cullen said was his daily contact at the Central Bank.
‘Up the line’
Mr Maher said he would bring the request for funding “up the line” and emergency funding of “€1.2 or €1.3 or €1.4 billion” was released to the bank, the witness said. He said the purpose of the funding was so the bank could make their ordinary payments and was not connected in any way with the IL&P transactions.
The court heard that during the early hours of that night the government guaranteed all deposits of all banks in Ireland and this had an “extremely positive” effect on the funding climate. He said the next day “€3 or €4 billion (in deposits) was coming in”.
He said he went to Mr Bowe to ask if they were still to complete the transaction with IL&P and Mr Bowe said they were. He said he rang Mr Gantly in IL&P and was told again that IL&P was looking for collateral.
“I asked him does the guarantee make a difference. He said he’d go and check and came back and said we would do it,” Mr Cullen said. He said he went and spoke to Mr Bowe and, after this, Mr McArdle contacted his opposite number in IL&P to start the transaction.
Mr Cullen said he also met Martina Whelan and informed her.
The trial, which is scheduled to run for up for five months, continues before Judge Martin Nolan and a specially enlarged jury of eight men and seven women.