US court hears former Anglo chief David Drumm engaged in ‘classic fraudulent transfers’

David Drumm was accused of engaging in "classic fraudulent transfers" during the first day of his bank-ruptcy trial in Boston yesterday.

The former chief executive of Anglo Irish Bank was in the stand giving evidence at the US bankruptcy court in downtown Boston.

He underwent a gruelling day of examination from the lawyer of one of the plaintiffs, the state-owned Irish Bank Resolution Corporation — formerly Anglo — which, along with Kathleen Dwyer, the bankruptcy trustee who is a court-appointed officer liquidating Drumm’s estate, is challenging Mr Drumm’s attempt to discharge himself from bankruptcy in the US due to money transfers made to his wife, Lorraine.

In his opening arguments John Hutchinson, for IBRC, set out its case against the former banker, saying that Mr Drumm had made a “staggering number of mistakes and mis-statements” which belied the “sophistication and training and experience” he had acquired during his career.

Mr Hutchinson told Judge Frank J Bailey the prosecution intended to show Mr Drumm was obstructive of the trustee’s attempts to work through the bankruptcy process with the defendant, claiming he was “dribbling out information slowly as he pursued his private agenda to make a deal”.

He said Mr Drumm acquired a US visa by way of investing $250,000 (€182,000) in a new business called Harborlight, but he never put “the capital at risk and never engaged in meaningful business”. The money used to capitalise his business venture was, Mr Hutchinson argued, used as Mr Drumm’s own “personal piggy bank” for “legal fees ... rent payments [and] interior consultants for the couple’s $5m vacation home”.

If IBRC and the other creditors are successful, Mr Drumm could end up being forced to hand over a share of his income for the rest of his career in order to repay the €10.5m owed to his creditors, €8.5m of which is owed to IBRC.

It is claimed he transferred over €830,000 to his wife, including €250,000 in cash transferred just four days before he resigned as chief executive of Anglo on December 19, 2008.

The plaintiffs say in the two years before Drumm filed for bankruptcy, Lorraine opened 15 accounts in her sole name.

Speaking for the defence, attorney David Mack accused the plaintiff’s case of being “rife with invective”, “full of hyperbole”.

“They claim Mr Drumm will lie at the drop of a hat. Using catchy quotes for the media in the room.”

Mr Mack urged Judge Bailey to focus on the “testimony that will be in this room” and to limit the examination of transactions to one year prior to bankruptcy in October 2010.

Mr Drumm returns to the witness box for day two of his five-day trial set to end next Wednesday due to a public holiday on Monday.