Belfast Telegraph

Thursday 25 December 2014

Anglo Irish bank: Ex-directors Pat Whelan and William McAteer found guilty of hatching Sean Quinn loans-for-shares plot

Pat Whelan and William McAteer  face a maximum of five years in jail for each offence
Pat Whelan and William McAteer face a maximum of five years in jail for each offence
Sean FitzPatrick, the former chairman and one-time chief executive of Anglo Irish Bank, talks to the media outside the Circuit Criminal court, Dublin, as he has been cleared of all fraud charges over a loans-for-shares scheme months before the bank collapsed in January 2009.
Former Anglo Irish Bank executive Pat Whelan leaves the Circuit Criminal Court, Dublin, during the fraud trial of former Anglo Irish Bank executives.
Former Anglo Irish Bank executive Willie McAteer, arrives at the Circuit Criminal court, Dublin, during the trial of former Anglo Irish Bank executives.

Two former directors of Anglo Irish Bank, the rogue lender that crippled Ireland's economy, have been found guilty of hatching a multi-million euro loans-for-shares plot months before the bank's collapse.

Former chairman Sean FitzPatrick was yesterday cleared of all charges linked to the 619 million euro (£509m) scheme in July 2008.

Pat Whelan, of Malahide, Co Dublin, who turned 52 today, and William McAteer, 63, of Rathgar, Dublin, had denied providing unlawful financial assistance to a select group of clients to buy Anglo shares from a doomed investment by former billionaire industrialist Sean Quinn.

But the pair were found guilty by unanimous decision on ten counts of providing 450 million euro loans.

The jury acquitted the ex-bankers of providing loans to six members of the Quinn family.

The 12 jurors returned the verdicts after an 11-week landmark trial and almost 17 hours of deliberation at Dublin Circuit Criminal Court - the first prosecution following the bank collapse in January 2009 that brought Ireland's economy to its knees.

The ex-bankers face a maximum of five years in jail for each offence.

Judge Martin Nolan thanked the seven women and five men on the jury for their work and exempted them for further jury service for 10 years.

Whelan and McAteer have been remanded on continuing bail pending a sentencing hearing on April 28.

The landmark case of a boom-to-bust bank was the first time anyone has been prosecuted under section 60 of the Companies Act in Ireland.

The state's case against the bankers was that the loans were extraordinary business and in contravention of that law.

The verdict draws to a close just one aspect of complex fraud investigations focusing on the turbulent months before Anglo was nationalised in January 2009 at a cost to Irish citizens of about 30 billion euros.

KEY QUESTIONS IN ANGLO IRISH TRIAL

The landmark Anglo Irish Bank fraud trial wasn't quite the anticipated six month legal slog but thanks to its limited scope the public may well be forgiven for wanting more answers.

Where do we go from here?

 Patience is a virtue. It's only been five years since Anglo went bust. Prosecutions are pending over directors' loans at the bank and the seven billion euro (£5.8bn) so-called B&B transfers between Irish Life & Permanent and Anglo in 2008. And there's also a parliamentary banking inquiry, due to start within months, looking at the controversial bank guarantee of September 30 2008, the regulatory regime and the workings of bailed out banks. No former banker can be forced to attend. There will also be industry disciplinary hearings for Anglo directors once the small matter of criminal trials are done and dusted.

What are Contracts for Difference (CfD)?

Legendary investor Warren Buffett called them weapons of mass destruction. And that's the effect the trades - a unique, unregulated trading derivative - had on Sean Quinn and Anglo. Essentially he signed deals with nine brokers taking a secret gamble with 25% of Anglo's stock that the share price would rise. Using CfDs you never own the share but you could profit by multiples of your initial investment if the value goes up. It didn't.

Why did Anglo lose so much on it?

 As Quinn's stake became known in late 2007 the bank pumped hundreds of millions his way to cover brokers' demands to pay for losses because the share price was tanking. He also needed money as the losses were bleeding parts of his business empire dry. It totalled 2.4 billion euro (£1.8bn).

We heard lots of people knew about this deal so why was no-one else on trial?

Two Anglo directors got immunity - Matt Moran, the chief financial officer at the time. You might remember his colourful language from the Anglo tapes controversy when recorded calls at the bank were published by Independent News & Media. And Fiachre O'Neill, appointed head of compliance in 2007 despite, he said, telling his bosses he had no experience on that front. The author of the deal David Drumm is in America.

Did the judge have a pop at anyone?

 Despite admonishing a state prosecutor for ridiculing a witness, not really. On the flip side though Judge Martin Nolan went as far as to praise the band of elite customers who agreed to take loans to help unwind Quinn's stake - the Maple 10. He described the developers as remarkable men who wanted to help the bank and genuinely thought the deal was good for the country. The judge said Drumm was "a man who knew his own mind and a dynamic man".

Did I hear talk about a sleeve and the dribble?

You sure did. Project Sleeve and the Dribble Mechanism to be precise. Two of the plays tried by Anglo in 2008 to unwind the Quinn CfDs by offering stakes to blue chip banks in Holland, sovereign wealth funds in the Middle East and venture capitalists in the US, as well as considering simply drip feeding the shares on to the market.

Right, and all through the trial there was an elephant in the room?

That would be chief executive Drumm. He was the author of the loans-for-shares deal and instructed his lieutenants to carry it out. He is awaiting a bankruptcy trial in the US and it's not likely he will ever be back in Ireland to face the music, unless he gets deported.

 

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