A former director of
Anglo Irish Bank
told the Dublin Circuit Criminal Court yesterday he understood in July 2008 that former chief executive David Drumm had told then chairman Seán FitzPatrick about the Maple 10 deal.
Declan Quilligan, who was head of Anglo in the UK in 2008, said he was “pretty clear” that Mr Drumm was proposing the bank would lend to the Maple 10 to buy shares in Anglo when he spoke to him on the phone on July 8th.
He also said he “got the impression that David had obviously spoken to Seán [FitzPatrick]”.
“And my assumption would have been that Seán would have spoken to the other non-executive board members,” Mr Quilligan said.
Investment products
The deal involved 10 businessmen borrowing €45 million each to buy shares in the bank and unwind Seán Quinn's contracts for difference (CFDs), investment products based on share price.
Mr Quilligan said although he could not be clear if it was “explicitly said” at a board meeting, he understood the Maple 10 would be borrowing from the bank. They would not have had the money available to invest in the bank themselves at that time, he said. He also said the option of lending to investors “had always been kind of there”, but it was seen as the least preferred option.
Mr Quilligan told the court Mr Drumm phoned him on July 8th and told him he would be meeting the financial regulator the next day and would go through a “proposition that would lead to us lending to a number of high net worth individuals in the bank”.
An email from Mr Drumm dated July 9th to Mr Quilligan contained no content, the court heard, but the subject line read “regulator squared”.
“Excellent! Hope he was grateful!” was Mr Qulligan’s response.
“Excited I would say. I think he is lying awake at night like the rest of us,” Mr Drumm answered.
Asked by Lorcan Staines, for Mr Whelan, what he meant by “grateful”, Mr Quilligan said there were “massive benefits for the regulator” in ensuring the Maple 10 deal got done. It would avoid a calamity, not just for Anglo.
Mr Quilligan also agreed that since the deal was done in July 2008, people had been “backing off from it”. He said reports of the deal “sounded like we had acted alone” but he had understood everybody knew about it. Mr Quilligan was quite surprised at the reaction, he said.
“It was held out as an example of poor governance of a bank. I never felt that.”
Mr Quilligan also told Mr Staines that “with the benefit of hindsight”, he wished everyone had signed off on the Maple 10 deal. He said “the reason we were doing this was for the benefit of the Irish banking system” and he wished he had “got it all in writing”.
The deal would stabilise Anglo and deal with the Quinn CFD problem “brought to our door”, Mr Quilligan said. And it would stabilise the Irish banking system.
If they were to do nothing to deal with the Quinn CFDs they would have been “unwound in an uncontrolled way”, it would have meant a risk to the banking system and the results “would have been catastrophic”.
“Doing nothing was never an option,” he said. If Quinn Insurance, a regulated entity, brought down another regulated entity it would have a “calamitous effect” on funding for the entire banking system.
Mr Quilligan agreed he would have been prepared to meet some of the Irish investors as part of the deal “on the understanding it was supported by the regulator”.
He also told the court he was “quite relaxed” about the deal and did not feel he needed to see the loan documents. The deal had gone through “external advisers” to ensure the transaction was compliant, he said.
Personal recourse
The court had heard that the loans to the Maple 10 all had 25 per cent personal recourse, meaning that if the loan was defaulted on the bank could pursue the borrowers for up to a quarter of the value of the money outstanding. Mr Quilligan said he thought this was a good result.
Mr Quilligan also spoke of the difficulties Anglo faced in 2008 when rumours were being spread about it. He said the markets at the time were “very easy to unnerve”.
The case continues.
