Bank stripped all personal recourse on €450m loans

Anglo Irish Bank stripped out all personal recourse on €450m worth of loans to the Maple Ten group of investors because they had come to the bank’s aid during a difficult time.

Pat Whelan, the former head of lending in Ireland, told gardaí the personal recourse on the loans was reduced from 25% to 0% after Anglo chief executive David Drumm said he felt the bank had an obligation to the investors.

Mr Whelan, one of three former executives on trial, told investigating gardaí the letters were never meant to be sent out to the investors but “a clerical error” led to six being posted.

Mr Whelan said the letters were “an error in judgement”. He agreed with investigators that they significantly increased the bank’s risk. He said he was following the CEO’s instructions as he believed Mr Drumm was going to seek board approval for the new terms.

“You don’t question the CEO,” he said.

The Maple Ten were 10 property developers recruited by Anglo to buy a total of 9.4% of the bank’s shares. This was part of a deal to unwind businessman Sean Quinn’s 29.4% control of the bank based on contracts for difference, financial instruments that allow an investor to gamble on a share price without purchasing the share itself.

The trial also heard evidence of interviews with another accused, William McAteer, who was Anglo’s director of finance. He told gardaí he knew Anglo was lending to the Maple Ten so they could buy the shares but that he was unaware it was also lending to Mr Quinn’s children to enable them buy a 15% stake in the bank.

Mr McAteer, Mr Whelan, and former Anglo chairman Sean FitzPatrick are charged under section 60 of the Companies Act 1963 with providing funding for the purchase of Anglo’s own shares.

They have been charged at Dublin Circuit Criminal Court with 16 counts of providing unlawful financial assistance to 16 individuals — the Maple Ten and six members of the Quinn family — in July 2008 to buy shares in the bank.

Mr Whelan has also been charged with being privy to fraudulent alteration of loan facility letters to seven individuals in October 2008.

Mr FitzPatrick, aged 65, of Greystones, Co Wicklow; Mr McAteer, aged 63, of Rathgar, Dublin; and Mr Whelan, aged 51, of Malahide, Dublin, have pleaded not guilty to all charges.

The trial continues.