Anglo Trial: Ex-directors set to be sentenced on April 28

The sentence hearing of former Anglo Irish Bank directors Pat Whelan and William McAteer will take place on April 28 following their conviction on charges of providing illegal lending to the Maple Ten for a share support scheme.

Anglo Trial: Ex-directors set to be sentenced on April 28

The jury found Mr McAteer, former director of finance, and Mr Whelan, the former head of Irish lending, guilty of providing illegal loans to 10 individuals to buy shares in the bank. The jury acquitted them of six charges each of lending money to the Quinn family

The jury returned the verdicts after 16 hours and 53 minutes of deliberation over five days. Their co-accused, former Anglo chairman Seán FitzPatrick, was acquitted on all 10 charges against him on Wednesday.

The men made no reaction as the verdicts were read out. All guilty verdicts were unanimous. Outside court neither accused made any comment.

The trial lasted 48 days and was a result of the biggest fraud investigation in Irish history. It was the first time anyone was tried for the offence and the first time an enlarged jury of 15 was used.

Judge Martin Nolan thanked the jury for their verdicts and their service and told them they were a credit to the jury system. He excused them from further service for 10 years. He also thanked the three jurors who had started the trial before the final 12 were chosen.

He set a sentence date of April at 2pm. He said he would be unlikely to give a decision that day but would hear evidence in the case.

There was no objection to Mr McAteer and Mr Whelan remaining on continuing bail until the sentence date.

Mr FitzPatrick and former directors William McAteer and Pat Whelan, were charged at Dublin Circuit Criminal Court with breaching Section 60 of the Companies Act 1963 by lending money to investors to buy shares in Anglo.

Mr Whelan, aged 52, of Malahide, Dublin and Mr McAteer, aged 63, of Rathgar, Dublin, were accused of 16 counts of providing unlawful financial assistance to 16 individuals in July 2008 to buy shares in the bank. The 16 individuals are six members of the Quinn family and the Maple Ten group of investors.

Mr FitzPatrick, aged 65, of Greystones, Co Wicklow, was charged with 10 counts of loaning money to the Maple Ten.

All three denied the charges. Last week the jury was ordered to acquit Mr Whelan and Mr FitzPatrick of a series of related counts because of lack of evidence.

The Maple Ten deal was designed to unwind the 29.4% control of the bank which businessman Seán Quinn had built up through investment tools known as Contracts for Difference.

The 10 investors were loaned a total of €450m by Anglo to buy around 10% of the shares which Mr Quinn controlled. Mr Quinn’s wife and five children were also loaned €169m to buy nearly 15% of the stock.

The main difference between the Maple and Quinn lending, was that the Quinn loans were made on the basis of 100% personal recourse. The loans to the Maple Ten were only 25% personal recourse, meaning they would have to repay around €12m of the €45m they borrowed.

In October 2008, Mr Whelan was involved in drafting new loans letters for seven of the Maple Ten which reduced their personal recourse to zero. Under these provisions, the borrowers would have to repay nothing if the shares became worthless.

The 25% personal recourse was reinstated in January 2009 after Anglo board members became concerned about the risk to the bank.

Towards the end of the trial, the prosecution called former Ulster Bank official Tom Reid as an expert witness.

Mr Reid said he believed the Maple Loans were abnormal partly because they were subject to 25% recourse.

Mr Reid agreed with the defence that “conceptually” he wouldn’t have a problem with a bank lending money to clients on commercial terms for share purchases as long as they are on a 100% recourse basis.

Anglo Trial Q&A

By Ed Carty

The landmark Anglo Irish Bank fraud trial wasn’t quite the anticipated six-month legal slog but thanks to its limited scope, the public may well be forgiven for wanting more answers...

Q. Where do we go from here?

A. Patience is a virtue. It’s only been five years since Anglo went bust.

Prosecutions are pending over directors’ loans at the bank and the €7bn so-called B&B transfers between Irish Life & Permanent and Anglo in 2008. And there’s also a parliamentary banking inquiry, due to start within months, looking at the controversial bank guarantee of September 30, 2008, the regulatory regime and the workings of bailed out banks. No former banker can be forced to attend. There will also be industry disciplinary hearings for Anglo directors once the criminal trials are done and dusted.

Q. What are Contracts for Difference (CfD)?

A. Legendary investor Warren Buffett called them weapons of mass destruction. And that’s the effect the trades — a unique, unregulated, trading derivative — had on Seán Quinn and Anglo. Essentially he signed deals with nine brokers taking a secret gamble with 25% of Anglo’s stock that the share price would rise. Using CfDs you never own the share but you could profit by multiples of your initial investment if the value goes up. It didn’t.

Q. Why did Anglo lose so much on it?

A. As Mr Quinn’s stake became known in late 2007, the bank pumped hundreds of millions his way to cover brokers’ demands to pay for losses because the share price was tanking. He also needed money as the losses were bleeding parts of his business empire dry. It totalled €2.4bn.

Q. We heard lots of people knew about this deal so why was no one else on trial?

A. Two Anglo directors got immunity — Matt Moran, the chief financial officer at the time, &and Fiachre O’Neill, appointed head of compliance in 2007 despite, he said, telling his bosses he had no experience on that front. The author of the deal, David Drumm, is in America.

Q. Did the judge have a pop at anyone?

A. Not really. On the flip side though, Judge Martin Nolan went as far as to praise the band of elite customers who agreed to take loans to help unwind Mr Quinn’s stake — the Maple 10. He described the developers as remarkable men who wanted to help the bank and genuinely thought the deal was good for the country.

Q. Did I hear talk of a sleeve and the dribble?

A. Yes, you did. Project Sleeve and the Dribble Mechanism to be precise. Two of the plays tried by Anglo in 2008 to unwind the Quinn CfDs by offering stakes to blue chip banks in Holland, sovereign wealth funds in the Middle East, and US venture capitalists, as well as considering drip feeding the shares onto the market.

Q. Right, and all through the trial there was an elephant in the room?

A. That would be Mr Drumm. He was the author of the deal and instructed his lieutenants to carry it out. He is awaiting a bankruptcy trial in the US and it’s not likely he will ever be back here to face the music.

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