Anglo duo avoid jail despite convictions

Two former directors of Anglo Irish Bank will not be jailed following their conviction for engaging in an illegal share support scheme.

Judge Martin Nolan adjourned the sentencing of former director of finance William McAteer and former head of Irish lending Pat Whelan until July 31 to assess their suitability for community service.

Referring to the role of the financial regulator’s office in the Maple Ten scheme, the judge said: “It would be most unjust to jail these two men when I feel that a State agency had led the two men into error and illegality.”

McAteer, aged 63, and Whelan, aged 52, were convicted by a jury on April 17, following a 48-day trial, of providing the loans to the group known as the Maple Ten.

Judge Nolan imposed sentence at 4pm yesterday following a hearing in the morning. The men had faced up to five years in prison under the legislation.

The pair appeared to tear up when the sentence was read out. They did not make any comment as they left court.

In addition to community service, the men will also be forbidden from acting as company directors for five years.

During his sentencing remarks, the judge sternly criticised the financial regulator’s role in the offence, which he said had considerably complicated the sentencing process.

He said the regulator “must have known” that Anglo intended at some stage to lend to investors, and that it seemed “incredible” that the regulator had not taken some advice on the legality of this.

Referring to the regulator, Pat Neary, and his second in command Con Horan, Judge Nolan said: “I find it incredible that red lights didn’t go off.”

He said the regulator seemed more anxious to solve the problems at Anglo rather than ensure the law was complied with.

He said their “overarching concern” was to save the bank and save the system, but that by not taking action and warning Anglo, they gave a green light to lending for the purpose of buying shares.

“Anyone in Anglo could have, and probably did, come to the conclusion that there was no legal bar to the bank lending for the purposes of acquiring its own shares,” Judge Nolan said.

“I’m totally surprised that the regulator did not give some warning to Anglo.”

He praised Mr Horan’s testimony given in court, but noted Mr Neary’s “limited recall” and “difficulty recalling vital events”.

Judge Nolan said he was not sure if the regulator “didn’t know” there was a breach of Section 60, or “chose to disregard it”, but he said he would give him the benefit of the doubt.

Judge Nolan said a serious crime had been committed but that it would be unjust to jail the men when they acted in the full belief that what they were doing was legal.

He noted that it was not a victimless crime and said that Anglo “had intruded on the market for their own purposes”. He said that people investing in Anglo could have been misled at the time and might have lost their money.

Judge Nolan said he does not believe there was any greed or avarice on the part of the men and that if there had been, he would have no difficulty in jailing them.

“It was a genuine if misguided attempt to save the bank,” he said. “Nonetheless, it was against the law.”

Two weeks ago, the jury found the two men guilty on 10 charges each of breaching Section 60 of the Companies Act 1963 by lending money to investors to buy shares in Anglo for a share support scheme.

The jury acquitted them on six further charges each of lending money for the same purpose to members of former billionaire businessman Sean Quinn’s family.

Their co-accused, former Anglo chairman Seán FitzPatrick, was found not guilty on all 16 counts.

Whelan, of Malahide, Dublin, McAteer of Rathgar, Dublin, and Mr FitzPatrick from Greystones, Co Wicklow denied all charges against them.

The sentencing hearing consisted of a summary of the evidence against the two men followed by pleas in mitigation.

‘It’s not a victimless crime’

A selection of quotes from Judge Nolan’s sentencing remarks.

* “They [Whelan and McAteer] had an obligation to ensure the bank behaved in a lawful manner. Both men knew and they had a duty to stop this scheme. This scheme was an affront to Section 60. It should have been stopped.”

* “The serious problem was not caused by the defendants or by Anglo Irish Bank but by Sean Quinn’s, quotation marks, ‘investment strategy’ in Anglo.”

* “David Drumm was the instigator and author of the scheme in question, that is the lending to the 10 — both defendants played their party in the execution.”

* “I find it incredible that red lights didn’t go off someplace in the regulator’s office and the appropriate legal advice was not sought. [The regulator, Pat Neary, and his second in command Con Horan] were more anxious to solve the problem than to comply with the law. Their overarching purpose was to save the bank and the banking system.”

* “It seems to be by not taking action and not warning the bank, they [Office of the Financial Regulator] gave a green light to lending for the purposes of buying shares... Anybody in the bank could have, and probably did, come to the conclusion there is no legal bar to the bank lending for purpose of buying shares”

* “I am totally surprised that the regulator did not give some warning to Anglo Irish Bank. In March, it became apparent there would be huge lending to the Quinn family for buying of shares. The principle is the same — it seems the regulator didn’t realise there was a breach of Section 60 or choose to disregard it. I’m not sure which is the case.”

* “The vital issue is what Mr McAteer and Mr Whelan thought. Other witnesses did perceive they had been given a green light by [law firm] MOPS. I cannot be certain they [McAteer and Whelan] knew what they were doing was in contravention of Section 60.”

* “I do not believe there was any venal motive on the part of Mr Whelan or Mr McAteer. It was a genuine if misguided attempt to save their bank. Necessity does not give parties the right or privilege to break the law.”

* “There has been a serious crime. Market in shares depends on transparency. In July 2007, there was not an open and fair market. Anglo intruded on the market. People who brought Anglo Irish shares around that time were misled and could have lost as a result of that. Therefore, it’s not a victimless crime.”

— Declan Brennan