A director at Anglo Irish Bank was left “speechless” after a representative from the financial regulator suggested the bank consider releasing the Quinn Group from a €250m guarantee.
Michael O’Sullivan, who was divisional lending director at the bank from 2005, told the trial of three former Anglo directors that he didn’t think it was “total coincidence” that the suggestion came six days after Seán Quinn had made a similar request to the bank.
Seán FitzPatrick, William McAteer, and Pat Whelan, have pleaded not guilty to all charges at Dublin Circuit Criminal Court.
Mr O’Sullivan said that he learned of the Contracts For Difference (CfD) situation in November 2007 when David Drumm, then Anglo CEO, told him the Quinn Group had built up a 28% share position in the bank, through CfD and shares.
He said his reaction was “one of complete shock”.
At this point, the Quinn Group were looking to replenish funds. He said they were able to provide the group with €150m.
On May 8, 2008, he and Mr Whelan met with Con Horan, the financial regulator’s prudential director. He said there was a discussion about reducing the exposure of the bank in relation to the Quinn Group loans.
He said before the meeting ended, Mr Horan asked about a €250m guarantee the bank had from Quinn Group as loan security.
Mr O’Sullivan said that six days earlier, Mr Quinn had asked him to release the group from the same guarantee. Mr O’Sullivan said he refused the request.
He said when he heard the same matter being raised by Mr Horan, he and Mr Whelan “were speechless”.
“We left the regulator’s office and walked back and we both expressed an element of surprise that such a request could be made.”
The court heard Anglo did later release the company from the guarantee after satisfying itself that the bank had taken the Quinn family shares as loan security in March.
Mr O’Sullivan also gave evidence about his role in the unwinding of the CfD position through the setting up of 10 €60m loan facilities for 10 high net worth investors.
He said that he signed off on the 10 loan facilities in July 2008 and the loans were drawn down. On October 11, 2008, he said Mr Whelan approached him with a mocked up letter and asked him if the original facility could be amended to give the borrowers “more time”.
He said he asked Mr Whelan why they were sending out the new letter and Mr Whelan told him Mr Drumm and the board approved it. He agreed to sign off the new letters.
Mr O’Sullivan testified he later formed the opinion the board were not aware of the amendments to the loans.
He said he went to Mr Whelan’s office, testifying: “I was annoyed that the board weren’t aware of the facts as presented to me”.
Mr O’Sullivan said he raised the issue again with Mr Whelan on December 19. On December 21, he said Mr Whelan telephoned him and there was a “very heated exchange”.
“I said I had been compromised by what had taken place. In my 26 years working in financial services, that hadn’t happened before.”
He said the next day, Mr Whelan agreed to prepare amended letters to reinstate the original 25% personal recourse on the Maple 10 loans and 10 letters were duly sent out.
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