Belfast Telegraph

Saturday 27 December 2014

'Discomfort' over Anglo share deal

No concerns were raised over a loans-for-shares deal to unwind Sean Quinn's secret stake in Anglo Irish Bank, the court heard
No concerns were raised over a loans-for-shares deal to unwind Sean Quinn's secret stake in Anglo Irish Bank, the court heard

A senior regulator in Ireland's financial watchdog has told a court there was initial discomfort over a deal to unwind Sean Quinn's secret shareholding in Anglo Irish Bank.

The fraud trial of three former executives at the lender heard Irish and British regulators did not raise red flags over the loans-for-shares plan to dilute the former tycoon's 2.4 billion euro stake in 2008.

Con Horan, prudential director at the financial regulator at the time, said he did not know the full scale and value of the stock being offered to the Quinn family and the so-called Maple 10 investors until Good Friday in 2008, March 21.

"Certainly our initial reaction to that was that we were uncomfortable with that and we expressed that," Mr Horan said.

"There were clearly a lot of problems in the Quinn Group, they had liquidity problems and we did not want to see Anglo increasing their lending to the Quinn Group at that time."

Former Anglo executives Sean FitzPatrick, 65, former chairman and one-time chief executive, former chief risk officer Willie McAteer, 63, and former managing director of lending Pat Whelan, 51, have pleaded not guilty to 16 charges of providing unlawful loans for clients to buy shares in the bank.

Mr Horan, a chartered accountant who has worked with the Central Bank and regulator since 1979, told the Dublin Circuit Criminal Court the watchdog only needed to sign off on the deal if it was an "acquiring transaction" which Anglo denied.

The lender had initially said international bank Credit Suisse would fund the transaction for the Quinns.

Mr Horan said initial concern centred on the Quinns needing to borrow 460 million euro to buy half of Sean Quinn's 28% stock holding but said the regulator was glad something was being done.

The accountant said initially the Quinn Group did not give a detailed breakdown of the extent of the Contracts for Difference (CfD) holding built up by the former billionaire business tycoon in the mid-2000s.

Mr Horan said the watchdog was told by Sean Quinn at a meeting in late February that his investments were in stock that he was familiar with, "those in banking and building".

It was another month before the regulator learnt the extent of the single secret holding.

Also giving evidence at the trial was David Churton, a compliance director with investment bank Morgan Stanley in London in July 2008, who took part in phonecalls involving Anglo chiefs and regulators as the loans-for-shares plan was being put together.

He said it was unusual for banks to advise financial watchdogs in both London and Dublin about plans such as the attempt to unwind the massive stock holding.

"For us to be speaking to both the Irish regulator and the British regulators that was unusual, that does not happen," he said.

"If they had raised red flags we would not have executed the transaction, if they could not have mitigated."

The plan involved a deal to undo 2.4 billion euro (£1.99 billion) of secret CfD trades built up through spectacular but doomed punts by Sean Quinn.

Mr Churton, giving evidence via video link from a London court, said it had been his understanding that the Irish regulator encouraged the unwinding of the CFD position.

He said that was "unusual".

"It's not often you would talk to a regulator in advance of a transaction," Mr Churton said.

The three accused pleaded not guilty to providing unlawful financial assistance to individuals in July 2008 for the purchase of shares in the bank, contrary to Section 60 of the Companies Act.

Whelan has also pleaded not guilty to a further seven charges of being privy to the fraudulent alteration of loan facility letters to seven individuals.

FitzPatrick, of Whitshed Road, Greystones, Co Wicklow; McAteer, of Auburn Villas, Rathgar, south Dublin; and Whelan, of Coast Road, Malahide, Co Dublin, are on bail. The trial, which began in February, is expected to last for another several weeks.

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