Executive refused to sign Anglo loan letter
Giving evidence at the trial of three former Anglo directors, Lorcan McCluskey said he was not comfortable signing the altered loan facility letters.
The first loan facility letter sent in July 2008 set the security on the loan as a personal recourse of 25%. This meant the lenders would be personally liable for a quarter of the amount borrowed.
A second letter shown to the court added a line which said recourse could be to the value of the shares at the end of the loan period.
Mr McCluskey said he believed that this change “created a situation where if the share price went to zero there was no recourse”.
He said he had been asked to sign the letters by his line manager in the bank, Michael O’Sullivan.
The letters were based on copies of the original July 10 letters but had hand- written amendments. After he refused to sign the letters, he said they were signed by the accused Pat Whelan and Mr O’Sullivan, who is not before the court.
Asked by prosecuting counsel Paul O’Higgins SC to describe his reaction to the second letter, the witness replied: “Initially refusal... It was an instruction given to me by Michael. I voiced my discomfort to Michael. I had never met or dealt with the Maple Ten. When I read it in isolation, I felt it was weakening the banks position.
“Michael told me that he had been told by Pat that it had been agreed by the CEO and the board of the bank. I said that’s ok but I basically refused to sign it.”
The court heard that Mr McCluskey said he believed that Mr O’Sullivan asked him to sign the amended loan letters in October 2008. Copies of the letters shown to the court are dated July 17, 2008.
He said that his next dealing with the Maple Ten loans was in January 2009 when he said “rectification letters” were issued. Following a “high-level review” of large loan facilities, Mr O’Sullivan was uncomfortable, he said.
“I gave Michael back the written instruction that he had given me to issue the second facility letter. I had retained that as evidence that it was not something of either Michael’s or my creation,” said Mr McCluskey.
He said letters issued in January 2009 set the recourse on the loans back to the original recourse set out in the first July 2008 letter.
Describing that initial process in early July 2008, of putting together the €600m loan facilities for Maple Ten, the witness said that it was unusual to prepare 10 identical loan facility letters.
He said that on July 18 he was contacted by Mr Whelan who told him to prepare the 10 facility letters. He said Mr Whelan gave him the names of the 10 individuals and told him that he and Anglo CEO David Drumm had to meet these people.
“Never happened before, never happened since, so it’s very unusual,” he said.
Earlier yesterday, one of the Maple Ten told the trial he was on holidays in Faro, Portugal, when Mr Drumm and Mr Whelan travelled there to ask him to buy a 1% stake in a “major shareholding” position.
Developer and builder Joe O’Reilly, Kerrymount Avenue, Foxrock, Co Dublin said the two bankers told him the shareholding had to be unwound as it was causing turbulence in the markets and driving down the share price. He immediately agreed to buy the shares and said he was told they had legal advice and the Financial Regulator was on board.
Mr O’Reilly said he had no qualms about the legality of the loan to buy Anglo shares. He said he believed the bank had “as good a team as you could get” in terms of reputable legal advice and the company carrying out the transaction, Morgan Stanley.
During cross-examination, he said he got the impression another body was aware and he believed that to be the Department of Finance but he said he “could have got that wrong” and that it could have been the Central Bank.
