The officer appointed by a US court to oversee the bankruptcy of former Anglo Irish Bank chief executive David Drumm has sued the bank, claiming that it fraudulently transferred a loan in January 2009 he used to buy shares in the bank.
Mr Drumm attended his first public hearing in Boston today after he filed for bankruptcy last month following the failure of negotiations to settle the bank’s action against him over unpaid loans.
Dressed in a dark suit, navy tie and striped shirt, Mr Drumm arrived at the JW McCormack Post Office and Court House in downtown Boston at 2.06pm local time (7.06pm Irish time) for a meeting of his creditors.
He refused to answer any questions to waiting reporters. “I am not going to comment to the media at all today,” he said before entering the building.
Mr Drumm has excluded his €5.4 million pension from assets he will surrender to the bank which is owed €8.5 million, according to a new filing to the US bankruptcy court in Massachusetts.
Anglo, Mr Drumm’s largest creditor which is owed €8.5 million, had sought to appoint its own trustee, Michael Epstein of New York-based restructuring firm CRG Partners, to the case to manage the bankruptcy.
The move was challenged by Kathleen Dwyer, the interim trustee appointed last month by the court to manage Mr Drumm’s bankruptcy who filed a lawsuit against the State-owned bank.
She has sought to “extinguish” the bank’s claims against Mr Drumm “because of wrongful conduct of the bank”, claiming that it had received fraudulent transfers.
Lawyers for Ms Dwyer filed a lawsuit, claiming that Anglo changed a share loan of €7.65 million advanced in January 2008 which was non-recourse — secured only on the shares in the bank — into a recourse loan a year later leaving him fully liable.
Ms Dwyer has claimed in her suit that this amounted to a “fraudulent transfer” and imposed an obligation on Mr Drumm in the run-up to the nationalisation of the bank that was otherwise only recourse on “worthless stock”.
She claimed that towards the end of 2007 as banks were experiencing financial difficulties Anglo chairman Sean FitzPatrick “required” executive directors of the bank to buy shares in an effort to prop up the bank’s stock.
Ms Dwyer has also cited breaches of confidentiality around Mr Drumm’s financial arrangements with Anglo, naming articles published in The Irish Times in October 2009, and Mr Drumm’s €2.6 million counter-claims against the bank in her lawsuit.
As legal representative of Mr Drumm’s estate, Ms Dwyer has sought damages for any breach of confidentiality and the €2.6 million he claims to be owed.
Her lawyers argued at the meeting that Anglo should not be allowed to vote on the appointment of a trustee as it holds “a material adverse interest that should disqualify it”.
Given the dispute between Anglo and Ms Dwyer over her appointment as a trustee, the matter will be decided by the court.
The next meeting of Mr Drumm’s creditors will be held on December 7th at 10am in the offices of Ms Dwyer’s lawyers in Boston.