By Declan Brennan
Lawyers for the former Anglo Irish Bank CEO David Drumm have said that he was trying to resolve a problem entirely created by Cavan businessman Sean Quinn.
Drumm (51) of Skerries, Co Dublin is to be sentenced tomorrow for his role in an illegal scheme to lend money to businessmen to buy shares in the bank in July 2008.
He pleaded guilty last month to ten counts of authorising or permitting Anglo Irish Bank to give unlawful financial assistance for the purchase of bank shares to the so-called Maple Ten group of developers and businessmen between 10 and 17 July, 2008.
The loans were part of a scheme designed to unwind a secret 28 per cent stake Sean Quinn had built up in the bank using financial instruments called contracts for difference (CFDs).
This morning Drumm was transferred to court from Mountjoy Prison where he is serving a six-year prison term imposed last month after he was convicted of conspiring to carry out a €7.2bn fraudulent loan scheme.
The former banking executive appeared in court wearing an off-white Polo shirt and dark blue jeans. After evidence of the offending and a plea of mitigation were heard Judge Karen O'Connor adjourned her sentencing to tomorrow.
In his plea Brendan Grehan SC, defending, asked the court to consider that the whole issue developed as a result of the growing financial speculation by Ireland's richest man, Mr Quinn, on Anglo shares using CFDs.
The court heard that CFDs were effectively a financial instrument that allowed the buyer to gamble or speculate on whether share prices will rise or fall. The buyer stands to make major potential gains if the share price increases but loses if the share price declines, with the payments due each month.
The bank's share price peaked in May 2007 and after this the share gradually began to decline resulting in Mr Quinn having to pay out each month on his losses.
Outlining how instead of pulling out Mr Quinn bought more CFD positions Mr Grehan said: “He kept hoping if he bought more he’d recover on loses he made”.
This culminated in Mr Quinn having a position, by mid 2008, of 28% of the bank's shareholdings and a need to deal with this.
Mr Grehan said that there was no question but that “the Financial Regulator had a very serious and, dare I say it, noble interest in ensuring Mr Quinn’s position be unwound”.
“This was a problem entirely of creation of Sean Quinn,” he said. Mr Grehan said it was done in secret and the bank was being placed in an incredibly vulnerable position at the worst time.
He said Mr Drumm had moved heaven and earth to try to resolve the problem in conventional terms.
Drumm was jailed last month after a jury returned unanimous verdicts of guilty on a charge of conspiracy to defraud and false accounting, following an 87-day trial.