Claim Anglo ‘shovelled’ loans into Quinn firms

Anglo Irish Bank unlawfully tried to prop up its share price by “shovelling” about €2.34bn loans into companies in the Quinn Group after learning in Sept 2007 of a “towering” Quinn shareholding in Anglo that could collapse the bank.

That is according to Sean Quinn’s wife and children. The claims were made during the opening session of a case before the Commercial Court by the family to avoid liability for the loans.

When told by Mr Quinn in Dec 2007 a €400m loan was needed to pay off Quinn companies’ loans to avoid having to disclose the extent of the shareholding, Anglo CEO David Drumm said the bank would provide €500m “to tidy up matters”, according to the senior counsel for the family, Brian O’Moore.

That could be understood “in no other way than to tidy up issues concerning CfDs [contracts for difference] and Anglo’s shares,” he said.

The bank sought to have the loans disguised as property and other loans but knew they were to fund margin calls on CfD positions taken out in Anglo by Mr Quinn via Madeira-registered company Bazzely. This was to avoid the 24% Quinn shareholding being made public, he said.

The bank engaged in “very serious illegal activity” on a “persistent, ongoing basis”, involving an “egregious” and “almost deliberate” breach of laws carrying penalties of €10m and/or a maximum 10-year jail sentence.

Anglo (now Irish Bank Resolution Corporation) was not entitled to recover €2.34bn from Patricia Quinn or her children, who owned but did not manage Bazzely, under various guarantees and share pledges provided by them over loans tainted with illegality, Mr O’Moore said.

“Illegality was central to this — there would have been no loans without a desire to manipulate the market.”

The bank provided about €300m over three days around St Patrick’s Day in Mar 2008 to meet margin calls when its share price plummeted, he said.

Reflecting on the bank’s “wild willingness” to do this, the knowledge of the purpose of those loans was “striking”.

Mr O’Moore said: “No one in the bank seems to have stood back and asked, ‘Why are we shovelling all this money into our own shareholding?’”

The preliminary hearing is expected to last at least three days. A full hearing is unlikely to be held before October.