Anglo loans ‘overcharged by €500m’

Explosive allegations against Anglo Irish Bank of fraudulently overcharging the interest it charged on loans by as much as €500m are contained in papers filed to a US court.

The case involves an action taken by former property developer John Flynn in a Delaware court to prevent the liquidation of Anglo’s successor, the Irish Bank Resolution Corporation’s estimated €1bn assets in the US.

Mr Flynn has separately filed an action in a New York court against IBRC alleging that he was overcharged on loans he had with Anglo.

IBRC was set up by the Government to wind down the assets of both Anglo and Irish Nationwide.

To support his attempts to prevent the liquidation of IBRC, Mr Flynn filed a five-page document prepared by Belfast-based forensic banking analyst, Eddie Fitzpatrick, which supports his claims that he was defrauded by Anglo.

In the document, Mr Fitzpatrick, said he audited at 240 variable rate (Dublin inter-bank offered rate) DIBOR/EURIBOR (euro inter-bank offered rate) loan accounts held by 31 separate Anglo customers between 1990 and 2004. In every one of these loan accounts he found evidence of overcharging as a result of “loading” interest rates.

The scale of overcharging ranged from 0.5% in the early 1990s to between 0.03% to 0.05% in 2003 and 2004. He estimates that Anglo overcharged DIBOR/EURIBOR customers by as much as €500m over that period.

In the 70 accounts he audited in relation to Mr Flynn he found evidence of overcharging in excess of €7.7m.

“Although about 50% of the overcharging was as the result of disputed terms within the terms of agreements, the remaining $3.8m could not have been as a result of anything other than deliberate action on the part of personnel within Anglo Irish Bank,” he said.

“In my opinion the extent of the loading of rates and the lack of correlation in the amount by which rates were loaded by would lead me to conclude that the conduct of the Bank could have been nothing other than deliberate or to put it another way, an attempt to defraud its customers.”

The case will be heard by the Delaware court on Oct 8. Mr Flynn is one of a number of US plaintiffs attempting to prevent the liquidation of IBRC’s American assets.