Drumm trial hears of executive ‘crying’ over Lehman losses

Court told ‘all bets were off and no bank was safe’ after collapse of US institution in 2008

Former  Anglo Irish Bank chief executive  David Drumm  arrives at the Dublin Circuit Criminal Court  where he is charged with conspiracy to defraud. Photograph:  Collins Courts.
Former Anglo Irish Bank chief executive David Drumm arrives at the Dublin Circuit Criminal Court where he is charged with conspiracy to defraud. Photograph: Collins Courts.

A former senior employee at Anglo Irish Bank said he saw a banker at a foreign investment meeting crying because he had invested in Lehmans and "now there was just nothing".

Declan Quilligan agreed with lawyers for the bank's former chief executive David Drumm (51) that following the collapse of the US bank in September 2008 "all bets were off and no bank was safe".

The former head of Anglo’s UK devision agreed that there was effectively “a corporate run on the bank”.

Mr Drumm of Skerries, Co Dublin, has pleaded not guilty to conspiring with former bank officials Denis Casey, William McAteer, John Bowe and others to defraud depositors and investors at Anglo by "dishonestly" creating the impression that deposits in 2008 were €7.2 billion larger than they were.

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He has also pleaded not guilty to false accounting on December 3rd, 2008, by furnishing information to the market that Anglo’s 2008 deposits were €7.2 billion larger than they were.

Mr Drumm accepts that multi-million euro transactions took place in between Anglo and Irish Life & Permanent (ILP) in 2008 but disputes that they were fraudulent or dishonest.

‘The final straw’

On day 43 of the trial at Dublin Circuit Criminal Court, Mr Quilligan said that in September 2008 he was at a meeting in Amsterdam when "a guy came into the room crying".

Mr Quilligan said the banker had invested in Lehmans, a US investment bank, a few days previously and the bank had just gone bust.

“After Lehmans went in September that was the final straw. Everyone was falling over,” he said.

The witness told Brendan Grehan, defending, that as well as Anglo's funding initiatives falling away at this time, the "real market" was also worse as a result of Lehman's demise.

“It was about the survival of the bank, not the year end because nobody knew where this was going to end,” he said.

He agreed with Mr Grehan that there was effectively a corporate run on the bank with money being withdrawn.

Mr Quilligan said there was heightened sensitivity at the bank’s year end, and additional work was put in to make the balance sheet look stronger for the year end balance sheet.

He agreed with Mr Grehan that up to 2007, Anglo was an extraordinarily successful bank and held the accolade of being one of the best banks in the world.

Mr Quilligan said during the credit crisis even good actions could be interpreted negatively. He said ILP's ECB funding in 2007 had been perfectly legitimate but they "got a carpeting" from the Central Bank because it made them look weak.

‘Green jersey agenda’

He agreed with Mr Grehan that this was “the genesis of ILP looking to Anglo” and that banks were protecting their own patch.

Mr Grehan then asked what Mr Quilligan understood from Mr Drumm’s March 2008 email about Irish banks helping each other.

He said it meant the Governor of the Central Bank had asked Irish banks to work together to ensure that they all came through the credit crisis safely. Mr Quilligan agreed with Mr Grehan that he was aware of the term “green jersey agenda”.

Earlier, the witness told Paul O’Higgins SC, prosecuting, that said he understood the ILP “supports” to have come about because ILP’s December 2007 results had gone down badly with the markets due to their dependence on ECB Funding.

In other evidence the jury listened to a recording of a phone conversation from the summer of 2008 between Anglo bankers Mike Darcy and Vincent Hibbert.

The two men discussed the mechanics of the September transactions, and Mr Hibbert asked about the rationale of the transaction, which would take place over the bank’s year end.

Mr Darcy replied: “Do you want the answer to tell the auditor or do you want the answer?”

In evidence, Mr Darcy agreed with Mary Rose Gearty SC, prosecuting, that this was absolutely more of a joke than anything.

The trial, nearing the end of its seventh week, continues before Judge Karen O’Connor and a jury of ten men and four women.