A high-ranking official at the Financial Regulator's office was "very, very, very positive" about a plan for 10 wealthy clients to borrow up to €60 million from Anglo Irish Bank to buy the bank's shares, Dublin Circuit Criminal Court has been told.
Brian Gillespie, who in 2008 was head of compliance (Ireland) at Anglo, told the trial of three former bank directors yesterday that he was tasked with helping ensure the mechanics of the so-called Maple 10 transaction were carried out efficiently in July 2008.
“Project Maple” was a code used to refer to the plan, which involved unwinding businessman Seán Quinn’s large contract for difference positions on Anglo shares partly by inviting 10 individuals to each buy 1 per cent of the bank’s shares.
Contracts for difference, the court previously heard, are investment products based on share price, and the size of Mr Quinn’s holdings was seen as destabilising the bank’s share price.
Mr Gillespie told the court that, on the weekend of July 12th-13th, 2008, he and colleagues Fiachre O'Neill and Matt Moran listened in on two conference calls involving representatives of the investment bank Morgan Stanley, who were executing the transaction.
One was between Morgan Stanley and Con Horan, prudential director at the Financial Regulator, and the other was between Morgan Stanley and Robert Heron of Matheson Ormsby Prentice Solicitors.
Mr Gillespie said it was his understanding the calls were part of Morgan Stanley’s “due diligence” process as it prepared to execute the transaction.
Tone of call
Asked by prosecuting counsel Úna Ní Raifeartaigh SC whether he formed any impression of the tone of the call between Morgan Stanley and the regulator, Mr Gillespie said Mr Horan was "very, very, very positive".
Asked for his overall view of Mr Heron’s stance on the transaction, based on the phone call, Mr Gillespie said he was “pro”. As far as he understood, there was “no question” of Morgan Stanley being dissatisfied.
Seán FitzPatrick (65), William McAteer (63) and Pat Whelan (51) have been charged with 16 counts of providing unlawful financial assistance to 16 individuals in July 2008 to buy shares in the bank. Mr Whelan has also been charged with being privy to the fraudulent alteration of loan facility letters to seven individuals in October 2008.
Mr FitzPatrick, of Greystones, Co Wicklow; Mr McAteer, of Rathgar, Dublin; and Mr Whelan, of Malahide, Dublin have pleaded not guilty to all charges.
The court also heard evidence from developer John McCabe, who said he had had dealings with Anglo since the late 1980s. Mr McCabe told the court that in July 2008 he received a call from Mr Whelan, who said he had a "proposition" to make and was anxious to see him. The next morning, Mr McCabe, accompanied by his son, met Mr Whelan and David Drumm, then Anglo's chief executive, at the bank's office on St Stephen's Green in Dublin, the court heard.
The witness said Mr Drumm told him a “major investor” held 25 per cent of the bank’s shares and was only willing to redeem 15 per cent. “They were looking for four-five long-term clients at the bank to help in buying a portion of the 10 per cent. So they wanted me to buy 1 per cent,” Mr McCabe said.
'Anxious' to finish
Mr McCabe said he asked "all the relevant questions" and was told the transaction was "totally legal". He was told the Financial Regulator, the Central Bank, the Department of Finance and solicitors Matheson Ormsby Prentice were aware of it, and that the regulator was "anxious to get this done".
“I made all the inquiries I could and was happy with what I heard from those two gentlemen, who I had known for 15 years,” he told counsel.
Mr McCabe said his main reason for getting involved was that he wanted to co-operate with the bank and to keep doing business with it.
“I was anxious to help when I was asked,” he said. “The bank had been very good to me.”
After a meeting that he thought may have lasted about an hour, he agreed to the proposal and signed a facility letter. He said he signed a second facility letter on July 17th.
Under cross-examination from defence counsel Brendan Grehan SC, for Mr Whelan, Mr McCabe agreed that he gave his statement to the Garda in late 2011 – over three years after these events occurred – and he had to rely on documents for a lot of the details. He agreed "absolutely" that his memory of the details was hazy.
Profile: John McCabe
John McCabe dealt with Anglo from the late 1980s and drew down about €500 million in loans from the bank over the years for developments in Ireland and the UK. These loans were typically at interest rates of between 1.5 and 3 per cent.
Mr McCabe told the court his main contact at Anglo was Pat Whelan, whom he knew for more than 15 years.
Asked by senior counsel Brendan Grehan, defending Mr Whelan, for his opinion of the banker, Mr McCabe said: “He was 100 per cent as far as I was concerned.”
The developer said Mr Whelan rang him in July 2008 and told him he had a proposition to make and was anxious to see him. The next day Mr McCabe met Mr Whelan and Anglo chief executive David Drumm at Anglo’s offices on Stephen’s Green in Dublin.
Mr Drumm told him a major investor controlled 25 per cent of Anglo’s shares and was only willing to redeem 15 per cent. He was told the bank was looking for four or five long-term clients to buy the remaining 10 per cent of the stock, and they wanted Mr McCabe to take a 1 per cent stake.
He was told the financial regulator, the Central Bank and the Department of Finance were aware of the deal. “I was told it was totally legal. The regulator was anxious to get this done,” he said.
“The bank were very good to me over the years and to my business and I was anxious to help . . . I wanted to co-operate with the bank, who I intended to continue doing business with,” he said.
