Day Seven: Anglo Irish Bank TrialThursday 13 February 2014 16.38
- Day seven 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
- Mr Whelan has also denied seven charges of being privy to the fraudulent alteration of a loan facility letter
16.15 The trial has finished here for the day.
Join us tomorrow for live updates of day eight of the evidence.
Mr Tuite finished his evidence by telling the jury that he was told by Pat Whelan that legal advice had been sought on the Maple Ten deal and it was deemed to be above board.
He said he was also told that "anyone who needed to be aware was aware", for example the Anglo board or the Financial Regulator.
16.00 Former Anglo employee Niall Tuite is now giving evidence. He was Head of Credit Risk for Ireland and the US.
He told the jury he had a role in approving the credit risk in the Maple Ten deal.
He said that in December he discovered that the conditions of the loan had been changed and that the Maple Ten were now subject to 0% recourse.
It was his belief that this was done “without credit approval.”
On the morning of Christmas Eve he went to Pat Whelan’s office and voiced his concerns.
He told Mr Whelan he wanted the issue “elevated to the highest levels in the bank.”
He said Mr Whelan responded that he happened to be meeting with Anglo’s Executive Chairman Donal O’Connor in half an hour and would raise the matter then.
Mr Tuite said that a short time later Mr Whelan “put his head into my office and said he had spoken to Donal and that the matter was in hand.”
“His exact words were, ‘you don’t need to worry about it’,” Mr Tuite said.
Mr Tuite said that in January the loans were reinstated to their original recourse.
15.49 Developer and investor Gerard Gannon has just finished his evidence. He was a long-time client of Anglo and was responsible for developing the Malahide Marino.
He said he received a call from Mr Whelan sometime in July. Mr Whelan told him he had an opportunity for him and asked if he would be interested in meeting Anglo CEO David Drumm.
They met a few days later and had a “chit chat”. Mr Gannon was told the opportunity had come up to buy shares in Anglo and they wanted to give him a chance to get involved because he “had been a good customer of the bank.”
The witness said that no third parties were mentioned at this meeting and no issues the bank may have been facing were discussed.
Mr Gannon said he was interested and the deal was put in place.
He continued to give similar evidence to the other Maple Ten witnesses.
He told how he signed particular documents related to the €45 million loan from Anglo. He confirmed that the initial recourse on him was 25%.
During a brief cross-examination by Mr Grehan, Mr Gannon said: “I always found all people who worked in Anglo to be honest and truthful.”
15.20 Towards the end of Mr Maguire’s evidence the jury was sent out while barristers dealt with legal argument. According to Judge Martin Nolan this is only the second time jurors have been sent out.
The trial has now heard from 16 witnesses out of an expected 103.
The next witness will be a fourth Maple Ten investor, Gerard Gannon.
15.07 Maple Ten investor Gerard Maguire told Pat Whelan’s counsel, Brendan Grehan SC that he knew the Anglo director for twenty years.
“How would you find him?” counsel asked.
“I would have time for Pat,” he replied.
Speaking of when Mr Whelan called him while on holidays in Nice, he said: “This wasn’t an ordinary contact from the bank. It was Pat rather than my immediate manager. This was important.”
The witness said his main motivation was to help the bank but that if there was a profit to be made “I wasn’t going to turn it down.”
14.40 The trial resumed after lunch with the continued testimony of Maple Ten investor Gerard Maguire.
Mr Maguire has been looking at an internal memo sent to Anglo officials concerning the loan.
It states that: "The share markets have undergone considerable turmoil in the last 12 months. Shares are trading at very low levels. Many investors would now perceive that certain shares are now undervalued and that when markets recover there is considerable scope for profits to be made."
The document continues that "the borrower" believes there could be "significant capital accumulation" on the shares and that "there will be a considerable upside to Irish shares over the next six months."
Mr Maguire told counsel that he never expressed these views.
Mr Maguire said that the loan security discussed at the meeting in Nice was 25% personal recourse and full recourse on the shares bought with the loan.
Referring to the second facility letter which dispensed with all personal recourse, the witness noted it was dated 17 July 2008.
"I would have thought I received it after the 17th of July," he said.
14.30 The prosecution have called their 16th witness, another member of the Maple Ten group of investors.
Gerard Maguire said he has been in the property development business for the last 30 years and is mainly based in the north east of the country.
On Sunday 6 July 2008 he was on holidays in Nice, France when he got a call from Pat Whelan who was looking for his help.
Mr Whelan told him the bank’s shares were under attack from hedge funds. Anglo wanted people to invest in the bank "to inspire a bit of confidence and to fight off the attack".
They had tried to get financial institutions to invest but had no luck so were now approaching individuals.
Mr Maguire said he was aware the shares were in trouble as he had invested in Anglo previously. He said over a matter of months the share price had fallen from €13.50 to €6.50.
Mr Maguire asked Mr Whelan if he wanted him to return to Ireland. Mr Whelan said no, that he and David Drumm would fly to meet him in Nice a few days later.
The deal was presented to Mr Maguire over a two hour meeting. He would buy shares in Anglo and be allowed sell them in an "orderly fashion" when the share price went back up to €6.
The witness said he asked two questions before agreeing to the deal. First he asked if it was legal.
"They said they wouldn’t be approaching me with it if it wasn't legal," he replied. "They said they had sought legal advice and the legal advice was that it was in order."
Second he asked them if the Central Bank was aware of the deal.
The Anglo men responded that the Financial Regulator was aware of it and approved.
He signed a letter of acceptance and the shares were bought on 16 July 2008 at a price of €4.40. Anglo loaned him about €45 million to buy 10.2 million shares.
Mr Maguire told prosecuting counsel Paul O’Higgins SC that he had "limited" knowledge of share deals of this size.
"If everything went well there was a strong probability of a profit," he said. "The bank’s position took priority and well and good if we made a profit and we expected to make a profit."
12.40: Mr O'Sullivan is now under re-examination by the prosecution.
He said he was on holidays when the Maple Ten loans applications were first submitted on 10 July 2008.
He said he returned on 14 July and signed the papers.
He said he is not aware if the credit committee sat before this to approve the loans.
Some of the signatures on the application were members of the committee but he does not know if they sat formally as the credit committee to deal with them.
Prosecuting counsel asked him if the credit committee "had a function" in these loans.
Mr O'Sullivan responded that the structures of the loans were agreed elsewhere and the decision was made by the board.
Speaking about the period in the run-up to the bailout, the witness said Mr Whelan was travelling around the world looking for interbank clients to provide funding to Anglo.
These are clients needed by every bank to maintain enough funding to continue lending.
He agreed that if there was less money coming in there would be less lending.
12.20 Mr O'Sullivan has finished his cross-examination by counsel for Seán FitzPatrick, Michael O’Higgins SC.
The witness agreed that the Maple Ten loan applications stated that they did not have to go before Anglo’s non-executive directors for "approval".
Mr FitzPatrick was the non-executive chairman at the time.
Counsel explained that non-executive directors usually had to "note" large loans. This was a "form of safeguard" he said.
The witness confirmed that the Maple Ten loan applications, one of which was shown to the jury, stated they did not have to go before the non-executives for approval or noting.
Counsel put it to the witness that the "safeguard" was dispensed with on this occasion because it was believed the non-executive board members knew about the loans.
Mr O'Sullivan said the board probably knew about the main points of the loans but not the smaller details.
Counsel responded that "the devil is in the detail" and that it is these "details" that give rise to the criminal charges against Mr FitzPatrick.
11.40 Mr O'Sullivan agreed with counsel that the period from 30 September to 30 December 2008 was "incredibly turbulent for the bank and for the world".
This was ahead of the government bank guarantee which was to be brought in at the end of December.
Counsel said his client, Mr Whelan, was travelling the world trying to attract funding for the bank.
He said he was at road shows in New York, London, Stockholm, Paris and Frankfurt.
Mr O'Sullivan replied that Mr Whelan was "away on occasion, yes".
Counsel put it to him that people were working "nearly around the clock" ahead of the bailout and were under "extraordinary pressure". The witness agreed.
The witness has already detailed a "heated discussion" he had with Mr Whelan over the new loan condition given to the Maple Ten which removed any personal recourse on them.
Mr O'Sullivan said "it was a concern for me because I had signed something that wasn’t authorised," referring to his belief that the Anglo board were not aware the personal recourse had been removed.
He agreed that this was a high pressure period. The bank’s CEO David Drumm had resigned a few days before his discussion with Mr Whelan.
Mr O'Sullivan said he had regard for Mr Whelan and that "he was a normal colleague" but said that they clashed on this issue.
He agreed that the outcome of the discussion was to "get it sorted". New loan facility letters were sent out to the Maple Ten in January which reverted the loan to 25% personal recourse. All of the ten were now again subject to one quarter of the loan amount.
Counsel said that when the time came to repay the loans, some of the Maple Ten had sold most of their shares and were only liable to repay some of the 25% recourse. For example developer Sean Reilly only owed €2.5m.
Others had held onto all the Anglo shares and were liable for the full 25% recourse, amounting to around €12m.
11.00 Day seven of evidence in the Anglo trial has resumed with the continued cross-examination of former lending director Michael O'Sullivan.
Counsel for Pat Whelan, Brendan Grehan SC, has been discussing how the loans given to the Maple Ten compared to normal lending practice in the bank.
Counsel put it to the witness that the original loan condition of 25% personal recourse imposed on the Maple Ten was not unusually low for the bank.
He said that of the top 25 "loan connections", only five were on the basis of 100% recourse.
Mr O'Sullivan responded that full recourse would have been "the norm" for the bank, but accepted limited recourse was accepted sometimes.
He also agreed with counsel that the 2% interest rate payable on the Maple Ten loans was normal lending practice.
He further agreed that the bank took security on the Anglo shares bought with the loans and that this was also normal lending practice.