Quinn's Anglo dealings detailed
Banking regulators and an international law firm did not raise concerns over a deal to undo 2.4 billion euro of secret trades in Anglo Irish Bank shares by Ireland's one-time richest man.
The fraud trial of three former executives at the lender heard it paid 1.975 billion euro over nine months to cover the cost of spectacular but doomed punts by Sean Quinn.
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.
Dublin Circuit Criminal Court was told six payments were made to Mr Quinn's business empire from November 2007 to July 2008 as his secret investment sank and he owed money to brokers.
The financial regulator at the time, Patrick Neary, was consulted about a plan by Anglo to unwind his investments in Contracts For Difference (CFD).
No concerns were raised, the court heard.
Liam McCaffrey, Quinn Group chief executive at the time, held talks with the regulator and bankers and revealed that no-one questioned the legality of borrowing to unwind the CFD trades.
"I was told by Anglo that they had taken legal advice," he said.
"I was also aware that the financial regulator was aware of the transactions and again they raised no concerns over the legality."
Mr Quinn held about 29% of the bank's stock. Anglo's proposal from March 2008 involved selling 72 million shares, 9.4%, on the open market while separately the Quinn family would buy 151 million shares, 14.9%, and another 5% would stay in CFD.
The court heard Anglo assured the Quinn Group it had legal advice from law firm Matheson Ormsby Prentice and that the regulator was "full square behind it".
International bank Morgan Stanley was brought in to find buyers for the shares and one of the aims was to ensure Anglo's share price was not destabilised. No buyers could be found and the deal did not go through.
Former governor of the Central Bank of Ireland John Hurley was at one of the meetings when the Quinn CFD issue was discussed, the court was told.
Minutes were read to the court of another meeting on February 20 2008 when Mr Quinn met Mr Neary over concerns about the finances in Quinn Insurance.
Mr Quinn apologised sincerely and said anything else the regulator would be told would be 100% true.
Losses in the Quinn Group as a result of the CFD trades were about one billion euro at this time, the court heard.
A second meeting with the regulator about a week later recorded: "Sean Quinn explained that he deeply regretted the situation and believed that 'Sean Quinn needed to be reined in' and had been greedy."
The court was told Mr Quinn told regulators that he had lost money in tech shares in 2001 and had vowed not to go back into the markets but ultimately opted to invest in banks and building companies.
He agreed to put 100 million euro cash into Quinn Insurance. He was fined 3.5 million euro and forced to stand down from that company in September 2008 over regulatory breaches.
Mr Quinn believed all through the first half of 2008 that it would be a mistake to sell his Anglo stake.
The bankrupt tycoon was in court with his son-in-law Niall McPartland as the evidence was given. He is due to give evidence on Monday.
Mr Quinn's CFD trades - effectively a bet on the performance of Anglo shares without owning the stock - were arranged by his Portuguese-based Bazzelly company through nine brokers as he built a 29% stake in the bank. It was intended as an inheritance for his family.
The court heard that he paid on average 14 euro a share over two years and continued to invest even as the deals tanked and he lost hundreds of millions.
Anglo made eight payments to the Quinn Group to cover the losses - 150 million euro in November 2007; 510 million euro the next month; 330 million euro the following March; 151 million euro in May 2008; 547 million euro the next month; and 286 million euro in July 2008.
"He paid a very high price for investing in that bank," Mr McCaffrey said.
The first three days of the trial, which is due to run until the end of May, have heard about Mr Quinn's shareholding in Anglo and efforts by the bank to unwind it.
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.
Lawyers for FitzPatrick and Whelan have said they accept the loans were made but they deny any illegality.
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.