Day Four: Anglo Irish Bank TrialTuesday 11 February 2014 11.21
- Day four of the Anglo Irish Bank trial at Dublin Circuit Criminal Court
- Former chairman Seán FitzPatrick and former executives Patrick Whelan and William McAteer have pleaded not guilty to providing unlawful financial assistance to 16 people to buy shares in the bank
16:30 The trial ended for the day at 4pm.
The prosecution's seventh witness is Seán Quinn Junior. He has taken the stand and will continue giving evidence tomorrow.
Before the court rose for the day Mr Quinn Jnr said that he did not draft and does not remember signing a letter purportedly sent from him to Anglo dated 10 July 10 2008 and requesting a loan facility of €15,135,404 for the purpose of acquiring shares.
The letter reads, “It is my intention to acquire shares in Anglo Irish Bank Corporation plc as a long term investment” and goes on the request the loan.
Mr Quinn Jnr had told prosecuting counsel: “I certainly didn't draft or prepare this document. I'm not sure when this was created. I had no input in drafting it and no input in looking for the €15m.”
He said: “There was a standard practice since the company was given to us in 2002 for me to sign large volumes of documents.”
He said the signature page would be emailed to his secretary and printed off and he would then sign them.
15.50: Finishing his cross-examination of Mr Quinn, Mr Grehan told him: "Your account of events are coloured very much by your losses."
"Of course they are. If you lost €2.3 billion of course it would colour your view," Mr Quinn said.
"And moreover that they are coloured by the fact that you and your family are now in litigation with the remnants of the bank."
"Fine," said Mr Quinn.
Mr Quinn admitted he built up a CFD position "without any encouragement from Anglo" but refused to concede a proposition from Mr Grehan that it was also without the bank's knowledge.
Mr Grehan finally put it to Mr Quinn that, despite his contention that there was some "unwritten gentleman's agreement" between him and Mr Drumm the bank went to extraordinary lengths to secure the monies that they're lending.
A letter shown to court, written from Liam McCaffrey to Anglo, referred to various Quinn Group-owned properties around the world.
Mr Quinn said: "Some of these properties were geared up to four times their value. I'm just saying it was all a sham. This was to cover up the CFD position."
On a number of occasions during his testimony, Mr Grehan told Mr Quinn that he could not use the witness box for a case he is taking in the Four Courts.
Mr Quinn has now finished his evidence.
15.35 "They were running out of rope," Seán Quinn agrees with Mr Grehan that Anglo could not lend him any more money by July 2008.
He then explained his frustration at being forced to unwind his shareholding in Anglo in July 2008 to see the shares being sold at a record low on the market.
He said: "After throwing billions of pounds to support and then going and giving them away, it just didn't make any sense. I was furious and I'm still furious.
"Anglo had lent all of this money for the purchase of these positions. We lost €3.2 billion through the Anglo fiasco. I was a fool."
"I'm not here to see you beat yourself up," Mr Grehan said.
"I've got a right beating the last few years," Mr Quinn replied, half smiling, and to some laughter from the back of the court.
Mr Quinn said that Anglo, through David Drumm, had accepted his share position as a security against the loan. He agreed that there is no shred of paper to support this proposition.
"Are you suggesting that there might be a scrap of paper anywhere that you made that Mr Drumm gave you an undertaking or gentleman's agreement that the loans would be secured on the shares?" asked Mr Grehan.
Mr Quinn said: "I'm absolutely sure (this agreement was made)."
"I rang David Drumm in the first or second week in December 2007. He asked me what it would take to sort it out. I said €400m and he said he'd give me €500m. I gave a commitment to pay it all back."
Mr Quinn later told Mr Grehan: "We ran out of road the previous December (2007). He (David Drumm) ran out of road in July (2008)."
"If they hadn't given you the money in December?" asked Mr Grehan.
Mr Quinn replied: "I'd be a very happy man now".
After this was again followed by laughter from the court Judge Martin Nolan said: "Ladies and gentlemen, you're not allowed to react. Listen to the evidence, but don't react please".
14.40: Resuming his cross-examination of Seán Quinn at 2.15pm, Brendan Grehan SC for Pat Whelan went through a letter dated 18 March 2008, which was sent from Liam McCaffrey to Michael O'Sullivan in Anglo Irish Bank.
In the letter, Mr McCaffrey wrote that the Quinn family had made a pledge to support their personal guarantee by giving the bank physical custody of their shares in Quinn Group.
Mr Grehan asked Mr Quinn if he knew about this commitment.
Mr Quinn replied: "This is where I gave away the family silver? Those share pledges were never given or never required. Anything that is being prepared here is for the Department of Finance.
"At no stage did I ever believe they are going to be taking this security. I knew that it was never going to happen and it didn't happen.
"If Liam McCaffrey said I knew then I knew. If he says he told me about it then he told me about it.
"If I did, it was continuation of this whole Anglo story we have to prepare a situation whereby the regulator doesn't believe we're assisting CFDs in any way, we have to be seen to be very strict, we have to be seen you're going to sell property, you're going to hand over the keys. But that was all a pretence.
"I have never been involved in the administration of the business. I'm involved in spending money stupidly. I finished school at 15. I never got involved in this aspect of the business."
13.20: It has broken for lunch here. The defence barristers will continue to cross-examine Mr Quinn for the afternoon session.
Before the break, Brendan Grehan SC, defending Pat Whelan, asked Mr Quinn about a letter to Liam McCaffrey, former CEO of Quinn Group, committing to a target debt reduction of €500 million by the disposal of assets in Prague, Istanbul, Kiev and Russia.
Mr Quinn said: "That was never going to happen. It was never meant to happen."
He said that Anglo took security of the family's Anglo share interests and that the Quinn family intended to pay back any loans lent to them from Anglo.
"David Drumm told me that he was taking security of the shares. I gave him an undertaking that me and my family would pay every penny back to him, irrespective of the legality of the loans.
"He said he was in constant contact with the Governor of the Central Bank and that he had to do certain things and he couldn't be seen to be supporting the share price. If he wanted to impress John Hurley (Central Bank Governor) and show that he was on the game I wasn't going to interfere," Mr Quinn said.
"The bank loaned us the money in order that we wouldn't sell the shares," Mr Quinn added, telling the court that he believes the loans from Anglo to the Quinn Group were illegal and were there to stop him selling off their holdings.
"But Seán Quinn didn't want to sell the shares," Mr Grehan said.
"They didn't want them sold either," Mr Quinn said.
"They didn't want them dumped on the market," Mr Grehan said.
Mr Grehan asked Mr Quinn about the minutes of the meeting between him, Pat Neary and Con Horan in which it was recorded that "Mr Quinn explained that he deeply regretted the situation and believed that 'Seán Quinn needed to be reined in' and had been greedy in terms of his involvement in CFDs."
He said he did not remember that, but agreed he would sometimes speak in the third person at meetings and agreed that he would have held that opinion in 2007.
Mr Quinn said that he felt this meeting was a fishing expedition by the Financial Regulator.
They had concerns about the insurance company and his investment in Anglo, Mr Quinn said.
13.15: "Did you not take very great care in the manner in which Bazelly acquired its CFD in Anglo so that it would remain secret and under the radar," asked Mr Grehan about the build of the CFD position.
"Yes I think that would be fair. We'd always like to keep under the radar," Mr Quinn replied.
He said he had dinner with David Drumm in 2007 and told him he had invested in an interest in shares in Anglo. Mr Grehan told Mr Quinn that he has never referred to this dinner meeting before.
Mr Grehan said that at one stage Mr Quinn had nine different brokerage firms all buying CFD positions in Anglo on behalf of Bazelly and that these firms, including Merrill Lynch and Bear Stearns, had brought the stocks in which the CFDs were leveraged.
Mr Grehan asked Mr Quinn if he understood that the nine brokers were creating an artificial market. They could be keeping the share price up.
He said that if this situation became known to the market, hedge funds could force the holder of a vulnerable position to sell shares.
Mr Quinn said he understood this.
Mr Grehan asked that given this being the case why, after the Ardboyne hotel meeting in September 2007, did Mr Quinn invest in more CFDs instead of selling them?
Mr Quinn replied: "The logic in that was very clear. The share price had reduced by around 40%. The profits had increased by 46% in the year 2007. It was a phenomenal result. Where I come from those mathematics don't add up.
"You see the profits going up so much and the price coming down so much. These accounts were signed by the auditor.
"There were brokers left, right and centre talking about Anglo being the best bank in the world. I could see no reason why you would see selling shares in Anglo would be a good idea. It turned out I was wrong."
11.30: Seán Quinn took the stand at 10.45am. He said in 2005 and 2006 the Quinn Group was profitable and was making about €500,000 a year in profit.
He said as well as manufacturing and insurance, the group also had a portfolio around the world.
"Myself and Patricia, my wife, handed over the business to the children in 2002."
He said in 2006 the group had borrowings of €300m from Anglo and €1.1 billion from a consortium of banks.
He said he thinks it was in 2006 when he became interested in CFDs.
"We thought, we are on our own, obviously no-one else thinks it, we thought we took a very conservative approach," said Mr Quinn in describing how the business decided to take a 25% stake, via CFDs, in a "blue chip" bank in the Irish State.
In 2006, the CFD position was up to 8-10%. The share price had dropped by around 30% up by September 2007, he said.
On 11 September 2007, the stake in Anglo was up to 24%. He said: "I thought it (Anglo) was a marvelous company."
"We went through the pleasantries and chatted," he said describing the start of the meeting in the Ardboyne hotel in September 2007.
This is the meeting during which he said he told David Drumm in early December that "we had to take money out of Quinn Insurance to meet some of the margin calls".
"We were talking about hundreds of millions. Three, four hundred millions," Mr Quinn describes the extent of the margin calls between in late 2007.
"I never asked him for any money but I was pleased that he offered me money. He said to me how much it would take to fill the hole. He said to tidy this whole thing up we should make it 500 million.
"It reimbursed the insurance company and the manufacturing. It filled a hole that we had created."
He said if there was a bad day in the market a margin call would be made the next morning. On 17 and 19 March he said there were major margin calls made, in and around €300m.
After this Mr Quinn said he asked to meet the board of Anglo.
"Could I get some assurances from the board that the bank is OK? That was refused. If you see the share price reducing and you are still being told the bank is profitable and the share price going through the floor you are starting to wonder are we being told the truth here," he said.
"I wasn't at all happy. We reluctantly agreed that we would sell the shares, or the CFDs."
He said he had a couple of meetings with Con Horan and Patrick Neary from the Financial Regulator in the spring of 2008.
"Myself and Con Horan met on our own. They had two concerns. Was Quinn Direct OK? And the amount of money Anglo had loaned us. I don't call it loans. They had invested in us."
Asked if he spoke to the Regulator about CFDs, Mr Quinn said: "I think it was talked about. It was just very vague. The regulator was very cautious. He was just doing a bit of fishing."
"In July David rang me up and said he was going to sell the shares. I was even more annoyed at that discussion than the first one. I said 'why did you not do this a year ago? Why put in a pile of money in our name and then sell them?'"
"Did you have any say at this stage in whether the shares were sold or not?" Paul O'Higgins SC, prosecuting, asks Mr Quinn.
"No and he (Mr Drumm) let me know that in no uncertain terms ... He told me what he was doing and I objected strenuously," replied Mr Quinn.
11.00: It is the beginning of the second week of the Anglo trial and once again it is standing room only in the back of court 19.
Seán Quinn is due to be the first witness called to give evidence today.
Last week, we heard two days of evidence from Liam McCaffrey in which the former CEO of the Quinn Group described how Quinn had built up large shareholdings in Anglo through Contracts for Difference (CFDs) and that the business came under extreme pressure from CFD brokers to pay out on margin calls as the share price of these Anglo shares fell and fell.
Mr McCaffrey testified that the Financial Regulator was fully aware of a deal made between the bank and Quinn to unwind Quinn's CFD position.