Anglo Irish Bank’s former chief financial officer has begun giving evidence under immunity at the trial of three of the bank’s former executives.
Matt Moran told the jury that he was granted immunity from prosecution following discussions with the Director of Public Prosecutions and his lawyers.
He went on to say that in July 9, 2008 he was told by one of the accused, William McAteer, that Anglo was lending money to ten investors to buy shares in the bank.
Mr McAteer is accused, along with fellow ex-directors Sean FitzPatrick and Pat Whelan, of providing funding for the purchase of its own shares in contravention of the 1963 Companies Act.
The trial also heard evidence today from former Anglo board member Declan Quilligan who told the jury that the plan to lend to the investors, known as the Maple Ten was designed to save not just Anglo but the entire Irish banking system.
He said that no one complained about the plan while it was happening and it was only after the bank’s nationalisation that people began to criticise it.
“The whole story wasn’t being told,” Mr Quilligan said.
The three accused have been charged at Dublin Circuit Criminal Court with 16 counts of providing unlawful financial assistance to 16 individuals in July 2008 to buy shares in the bank.
Mr Whelan has also been charged with being privy to the fraudulent alteration of loan facility letters to seven individuals in October 2008.
Mr FitzPatrick (65) of Greystones, Co Wicklow, Mr McAteer (63) of Rathgar, Dublin and Mr Whelan (51) of Malahide, Dublin have pleaded notguilty to all charges.
At the start of his prosecution evidence prosecuting counsel Paul O’Higgins SC put it to him that: "You're giving evidence in specific circumstances in which, after discussion between your legal representatives and the DPP, you've been granted immunity against prosecution for the purpose of this trial, matters with which this trial is concerned and also in respect of other matters in respect of which prosecutions may be taken.
“I'm not suggesting you are guilty or not guilty of anything but the circumstances in which you come to give evidence are ones in which you've been given immunity,” counsel added.
Mr Moran agreed with this before going on to detail his role within the bank and how he “directly reported to Willie McAteer” since joining in 2002. He said he was involved in two equity raising exercises in the mid-2000s which raised €900 million for the bank.
In September 2007 he discovered that businessman Sean Quinn controlled a large portion of the bank’s shares through investment tools known as Contracts for Difference (CFDs).
The court has heard there could be catastrophic consequences for the bank if the CFDs were not reduced in a controlled manner.
Mr Moran said the bank went through several plans before landing on the idea to loan money to ten trusted and high-net worth bank customers so they could buy the shares.
The witness told counsel that he was working on one of these alternative plans on July 8, 2008 when Mr McAteer called him into his office and said “the executives” had decided to approach ten clients about the deal.
When asked who he meant by executives, he said he meant David Drumm, Pat Whelan, Declan Quilligan and Tony Browne.
He said the next day he and Anglo head of compliance Fiachre O’Neill met Mr McAteer again.
The terms of the deal were discussed and it was mentioned that the ten investors would be lent money by Anglo with 25% personal recourse.
Mr Moran said that later that day, Anglo CEO David Drumm came to his office and said that he had spoken to the Financial Regulator about the deal before giving a “thumbs up” gesture.
Earlier Mr Moran agreed with the prosecution that he was himself a shareholder in Anglo along with Bank of Ireland and AIB. He said he had borrowed from his employer on three occasions to buy Anglo shares.
He said it was his own decision to buy the shares but that on one occasion he was “strongly encouraged” to purchase them as a sign of confidence for the markets. In the summer of 2007 he sold all this bank shares except for Anglo’s.
He said he had been requested not to sell the Anglo shares by Mr Drumm because the market would find out.
During the first half of the day the jury heard from Mr Quilligan who ran Anglo’s UK operations and also had a seat on the board.
Mr Quilligan detailed how he and Sean FitzPatrick discussed the Quinn situation in September 2007. He said the former Anglo chairman described the problem as “not of their making.”
He said that the Maple Ten deal was for the benefit of the Irish banking system, not just Anglo, and he thought the Financial Regulator should have been grateful for this.
He said that “doing nothing was never an option” and that the risk to the Irish banking system “would have been catastrophic” if the Quinn position was unwound in an uncontrolled way.
“If one regulated agency (Quinn Insurance) brought down another regulated agency (Anglo) in Ireland, a pension fund manager in Germany wasn’t going to hang around and see what happened,” Mr Quilligan said. “He would just press a button and the money’s gone.”
He said that people were comfortable with the Maple Ten deal at the time and that he didn’t hear criticism until after the bank bailout.
He said that after 2008 “people seemed to be backing off from it”. He said reports of the deal “sounded like we had acted alone”.
He told the jury that quite surprised with the reaction: “It’s being held out as an example of poor governance of a bank. I never felt that.”
Asked what he would change about the transaction, he said: "With the benefit of hindsight I'd like to have gotten it all in writing.”
He continued: “It was dealing with the problem Quinn had brought to our door. I wish with the benefit of hindsight we had got everyone signing off on that.”
The jury were shown a copy of an email sent from David Drumm to Mr Quilligan on 9 July, days before the Maple transactions were executed, with the subject title “Regulator Squared”.
Mr Quilligan's one line reply was also shown in which he wrote “excellent hope he was grateful.”
Explaining this email in court, he said: “That probably reflects the benefit to the regulator of what was being done here now.”
Mr Quilligan said that he understood that the bank was going to lend money to fund the Maple Ten deal and that he assumed the board also knew, although he agreed this aspect wasn’t mentioned in the final board meeting before the deal went through.
The trial continues with Mr Moran’s evidence before Judge Martin Nolan and a jury of seven men and eight women.