Former bank chief secretly borrowed €129m

Controversial former Anglo-Irish Bank chief Sean FitzPatrick secretly borrowed €129m from the lender, it was revealed tonight.

The personal loans were used to buy shares, fund property deals and invest in pensions and film projects, shareholders were told at an emergency meeting in Dublin.

Nine hundred investors demanded the sacking of the board hours after the Government aborted a planned €1.5bn bail-out in order to take full state control of the ailing bank.

Newly-appointed chairman Donal O’Connor revealed directors’ loans were given a ’no-risk’ bill of health and were not closely monitored.

“I apologise on behalf of myself and the board. I am really sorry that this has happened,” said the veteran accountant, flanked by board members, as he tried to reassure investors.

Shareholders claimed their holdings are now worthless and called for High Court inspectors or the Criminal Assets Bureau to investigate the lender’s top bankers.

Billionaire entrepreneur Sean Quinn, property magnate Sean Dunne and broadcasters Eamon Dunphy and Gay Byrne were among the 20,000 shareholders whose personal finances have taken a hit in the nationalisation plan.

Half a dozen official inquiries have been ordered into the loans fiasco sparked by Mr FitzPatrick’s scheme to hide millions in loans from the bank’s balance sheet every year between 2000-2007 as annual results were audited.

The accounts for 2007 show he had loans worth €129m but only disclosed €7m to shareholders at the time.

Other directors have arranged loans worth €95m, the bank said today.

The Government attempted to quash fears that account holders were rushing to withdraw money with Finance Minister Brian Lenihan insisting: “Some people took some money out, but there was no run on the bank.”

And Mr Lenihan, who announced the takeover last night, said such talk would damage Ireland’s international reputation and possibly the economy.

Mr O’Connor backed the minister’s assessment.

The Government has appointed an independent assessor to devise a compensation scheme for the bank’s 20,000 shareholders who own a total 760 million shares worth €4bn.

Even though Irish law allows for payouts to investors, most economists believe that they will receive virtually nothing for their stakes.

Mr O’Connor acknowledged the near-collapse of the bank has been traumatic and painful for staff and shareholders and made a unreserved apology.

But he repeated that the annual ’refinancing’ of massive directors’ loans did not breach company law.

Anglo Irish is carrying out a governance review into the scandal alongside external probes by the Financial Regulator, the Irish Stock Exchange and the Director of Corporate Enforcement.

“The directors have the highest ethical standards and it is unfortunate they have been tainted by this,” Mr O’Connor said.

The chairman pointed out that the Government would replace the present management in coming months and he encouraged customers to continue to deposit money into the bank.

“We would be delighted if people put more deposits into the bank. This would be in the mutual interest of shareholders and taxpayers,” Mr O’Connor said.

The Government placed two ’public interest’ directors on the 12-person board last month – former Opposition leader Alan Dukes and former Revenue Commissioners chairman Frank Daly.

Auditors at leading consultancy firm Ernst and Young have been criticised for not spotting the money moves and hidden loans.

But in a statement the group said: “Until late 2008, Ernst and Young was unaware of the refinancing transactions undertaken by the former chairman of the bank, which concealed the extent of his loans with the bank during previous years.”

Many big-name investors enjoy large stakes in the lender as 15,000 shareholders hold less than 5,000 shares each including developers, entertainment moguls and traders.

After share trading was suspended in Dublin and London, Taoiseach Brian Cowen claimed the bank would operate business as usual.

Mr Cowen, who oversaw the nationalisation plan by phone during a trade mission to Japan, maintained the bank was in good stead and solvent as his officials finalise plans to bring in legislation next Tuesday to complete the nationalisation.

The Government has refused to give details on the state of Anglo-Irish’s loan book as questions remain over the decision to cancel the €1.5bn bail-out in favour of nationalisation. It will now press ahead with recapitalisation for the other major banks.

Once the flag bearer of the Irish economy, shares were worth €17 in 2007, but yesterday closed at just 22 cents.

The loans scandal has seen four Anglo-Irish executives step down and also claimed the scalp of Financial Regulator Patrick Neary, who was kept in the dark on the controversy for almost a year.

The European Commission will be investigating the nationalisation plan.