Sean Quinn raised Anglo stake despite unease of bankers
Sean Quinn was the eternal optimist when it came to his belief in Anglo Irish Bank shares, a jury was told.
The Dublin jury in the trial of three former Anglo Irish Bank directors was told how the one-time tycoon's indirect stake in the bank got as high as 28% or 29% in March 2008.
Falling share prices in 2008 and 2007 meant the Quinn Group was forced to borrow more and more from Anglo Irish Bank to fund the bet – but Fermanagh businessman Mr Quinn (right) remained convinced the shares would eventually recover.
"How low can they go?" was Mr Quinn's attitude, the former chief executive of Quinn Group told the Republic's Criminal Courts of Justice.
"He had an underlying belief the shares would recover," Liam McCaffrey added.
Mr McCaffrey was giving evidence on the second day of the trial of three men charged with permitting the former Anglo Irish Bank to illegally provide financial aid to investors to fund the purchase of shares in the bank.
He outlined how Mr Quinn's bet on Anglo Irish Bank shares through so-called 'contracts for difference' (CFD) led the Quinn family to ultimately pledge all of the shares in the Quinn Group to the bank in exchange for loans of hundreds of millions of euro made to the group.
The CFD holding was built up outside the main Quinn Group as part of a strategy to provide members of the Quinn family with independent wealth, he said. The strategy "went fatally wrong in the end".
A jury in the trial of Sean FitzPatrick (65), from Greystones in Co Wicklow; 51-year-old Patrick Whelan, of Malahide in Dublin; and 63-year-old William McAteer, of Rathgar in Dublin, heard evidence from the first witnesses, including Mr McCaffrey, for the first time yesterday.
The three accused men have pleaded not guilty to 16 charges of unlawfully providing financial assistance to individuals for the purpose of buying shares in Anglo Irish Bank in 2008.
Mr McCaffrey told the court that he and Mr Quinn met Anglo Irish Bank boss David Drumm and the bank's chairman Sean FitzPatrick in Navan in September 2007 where the main topic of discussion was the CFD holding.
"Sean (Quinn) told David and Sean that it was at 24%. They were concerned at the level of it. Sean (FitzPatrick) seemed quite surprised." Mr Quinn's stake in Anglo Irish Bank had risen to 28% by the following March, Mr McCaffrey said.
By then the brokers were making "margin calls" on Mr Quinn because the Anglo share price was falling, Mr McCaffrey said. These were around the magnitude of "two, three hundred million, a significant amount of money", Mr McCaffrey said.
Money to fund the calls was coming from Anglo.
A plunge in share prices in March 17, 2008 led to it being referred to as the "St Patrick's Day Massacre".
It was then suggested Mr Quinn would get out of CFD holding. Some shares would be bought under the "Quinn umbrella" and the rest sold. But Mr Quinn did not agree to it, Mr McCaffrey said.
Then at a later meeting it was agreed 15% of what at that stage was a 25% CFD holding would be purchased outright by the Quinn family and 10% "placed" or sold in the market.
Mr Quinn "reluctantly agreed" to that, the court heard.
It is alleged that Fermanagh businessman Sean Quinn made a massive bet on Anglo Irish Bank shares using 'contracts for difference', and had to borrow heavily to fund the bet. Investing in CFDs instead of in shares is like betting on a horse rather than owning it. If shares rise, the investor can make money, but if they fall, brokers make "margin calls", meaning they demand more money upfront to keep the bets open.