TOM LYONS
Businessman Seán Quinn was “eternally optimistic” about Anglo Irish Bank’s share price and continued betting on its recovery as the stock fell in 2008, the trial of three former Anglo directors has heard.
Mr Quinn's plan to leave his five children with independent wealth "went fatally wrong", Liam McCaffrey, a former chief executive of Quinn Group, told Dublin Circuit Criminal Court yesterday.
Mr McCaffrey said that at a meeting in Navan in September 2007, then Anglo chairman Seán FitzPatrick and chief executive David Drumm reacted with "concern" and "surprise" when Mr Quinn revealed he controlled 24 per cent of the bank's shares through contracts for difference (CFDs). CFDs allow investors to speculate on the price of shares without actually owning them.
Controlled 28% of bank
Mr McCaffrey said Mr Quinn continued to build up CFDs in Anglo and at one point controlled 28 per cent of the bank. Mr McCaffrey agreed Mr Quinn was "eternally optimistic" the share price would recover: "I think his view of the scale of the recovery changed, but 'how low can it go' was one comment I remember him making."
Mr Quinn received €650 million in loans from Anglo in November and December 2007 to meet the falling value of his CFDs. Mr McCaffrey said the demand for cash to meet the failing CFDs, the “margin calls”, became extreme in March 2008.
On March 17th, American bank Bear Stearns collapsed and some 30 per cent was wiped off Anglo's shares, the jury heard. The witness said Mr Quinn was faced with "two to three hundred million euro" in margin calls.
The former Quinn Group executive was giving evidence at the trial of Seán FitzPatrick, Pat Whelan and William McAteer, who have been charged with 16 counts of providing unlawful financial assistance to 16 individuals to buy shares in the bank. Each charge relates to a specific person, who allegedly received loans between July 10th and July 30th, 2008.
Mr Whelan (51) also faces seven charges of being privy to the fraudulent alteration of loan facility letters to seven individuals in October 2008.
Mr FitzPatrick (65) of Greystones, Co Wicklow; Mr McAteer (63) of Rathgar, Dublin; and Mr Whelan of Malahide, Dublin, have pleaded not guilty to all charges.
Family wealth
Mr McCaffrey said the Quinn Group was owned by Mr Quinn's children and that, by 2008, Mr Quinn didn't own any shares in the company. "The idea, which went fatally wrong in the end, was to provide the Quinn family with independent wealth," he said.
Brendan Grehan SC, for Mr Whelan, asked Mr McCaffrey had a "laying-all-one's-eggs-in
-one-basket type of situation" developed in relation to Anglo. "Yes," he replied.
Mr McCaffrey admitted the Financial Regulator had “concerns” at the start of 2008 when it emerged Mr Quinn had borrowed from his insurance firm to fund his Anglo position. He said Quinn Insurance had been fined for this.
Mr McCaffrey said the Quinn Group had borrowed €200 million from Anglo in June 2008 to prevent it breaching its agreements with other banks and bondholders.
He said if this loan had not been given it would not have been “terminal” for the Quinn Group.
