A senior accountant for Anglo Irish Bank has told the trial of four former senior bankers that it wasn't a good moment for him when the bank's auditors contacted him in 2009 about the accounting treatment of a billion-euro deal.
Four men are accused of conspiring to mislead investors by setting up a €7.2bn circular transaction scheme to bolster Anglo's 2008 balance sheet.
Peter Fitzpatrick (aged 63) of Convent Lane, Portmarnock, Dublin, John Bowe (aged 52) from Glasnevin, Dublin, Willie McAteer (aged 65) of Greenrath, Tipperary Town, Co Tipperary and Denis Casey (aged 56), from Raheny, Dublin have all pleaded not guilty at Dublin Circuit Criminal Court to conspiring together and with others to mislead investors through financial transactions between March 1 and September 30, 2008.
On day 46 of the trial, Ciaran Cunningham, who was senior manager with Anglo's Treasury Finance department, continued giving evidence about his department team's role in putting together the bank's balance sheet and final year accounts.
The jury has heard that Anglo's treatment of the €7.2bn deal was disputed later by ILP.
The dispute centres around the financial practices of settling net or netting, which would link the loans from Anglo to the deposits placed by ILP with Anglo.
The evidence is that ILP insisted before the transactions took place that they would be netted.
They did this in order to protect ILP in the event of Anglo closing down and their liquidators going after Anglo's debtors, the trial heard.
In a telephone call on October 1, 2008, Anglo traders in the bank's Treasury section discussed how they could treat the deals from the previous month.
The jury heard that Mr Cunningham was brought into the conference call to advise the traders. He told them: “I think it’d be our preference to show them grossed, to be honest”.
Settling the transactions gross would mean the €7.2bn in short term deposits from ILP could be included in the bank's balance sheet figure for customer deposits, which is what ultimately happened.
Mr Cunningham told the traders: “The risk is if we do settle them net, we could be forced to net them in the accounts. That’d be a bit of a disaster”
He told Úna Ní Raifeartaigh SC, prosecuting, that by “disaster” he was referring to the fact that the intention of the transactions was balance sheet management and that netting them would have failed to achieve this.
Michael O'Higgins SC, for ILP's former CEO Denis Casey, put it to the witness that after ILP released a press release in February outlining their version of the transactions Anglo's auditors contacted Ciaran McArdle, the main trader behind the deals.
Counsel said Mr McArdle told the auditors the transactions were settled net. The auditors then contacted him, “presumably hopping”, Mr O'Higgins said.
Mr Cunningham then “got on to” Mr McArdle who confirmed the deals were settled net.
Counsel put it to the witness: “That must have been a pretty awful moment. The ground would have opened up. That's a moment you're never going to forget”.
Mr Cunningham agreed, saying: “It's wasn't a good moment”.
The trial continues before Judge Martin Nolan and a jury.