Day Eight: Anglo Irish Trial

Friday 14 February 2014 20.16
William McAteer, Pat Whelan and Seán FitzPatrick have plead not guilty
William McAteer, Pat Whelan and Seán FitzPatrick have plead not guilty

Key Points:

- Day eight 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

- Trial hears testimony that the Financial Regulators office was “very very very” positive about the Maple Ten deal

16.06 Evidence has finished slightly early for the week. The jury is dismissed by Judge Nolan with the warning that there is to be no “googling or investigating” over the weekend. 

The trial will resume at 10.30am on Monday when Anglo’s former Chief Financial Officer Matt Moran is due to take the stand. 

15.50 Ms Kinane said she was also responsible for drafting the loan application for the Maple Ten investors but that there was nothing underhand in the way she prepared the associated documents.

On 10 July 2008 she and her boss were called into Pat Whelan’s office and given a list of names. This was a list of ten of the bank’s largest customers.

Ms Kinane was not able to confirm a proposition from the defence that these ten men were responsible for 23% of Anglo’s loan book.

She said Mr Whelan asked them to draft facility letters offering the ten men €60m each in order to buy 10 million Anglo shares.

He also gave them a template to be used for the letter.

A document prepared for one of the Maple Ten’s loan application was shown to the court.

The jury were told all the applications were exactly the same.

Mr Kinane agreed that she drew up the document including the line that stated: "Given the opportunities (the investor) has approached us seeking a share dealing facility."

She said she was never told that the investors had not approached the bank and only found out later.

Ms Kinane said she had assumed the investors had approached the bank but that Pat Whelan had given them no background on the deal.

She said that they had to prepare these documents quickly and that she made the assumption that these wealthy individuals saw an opportunity in buying the shares.

"I had limited knowledge, I made some assumptions and assumed they would be reviewed by the right parties," she said.

Counsel for Mr Whelan, Lorcan Staines BL, asked Ms Kinane: "If there was someone in this room who would say there was something underhand in the way you prepared these memos, what would you say?"

"They would be wrong about that," Mr Kinane replied.

She said her team had limited knowledge and did what they were instructed.

"If there was any information that was incorrect I would have expected it to be reviewed and removed prior to signing," she added.   

15.15 Evidence resumed after lunch with Elma Kinane, who said she was a manger in the lending division of Anglo. She was on Team 91, which was responsible for dealing with Seán Quinn and the Quinn Group.

In late 2007 she was dealing with lending the Quinn Group funding for a shopping centre and warehouse when she first heard Mr Quinn had built up a Contracts for Difference (CFD) position in the bank.

In November, Team 91 were told that the Quinn Group needed €150 million to cover margin calls they had to pay on the CFDs.

In December, she was told Mr Quinn needed an additional €500 million to cover new margin calls.

She said that David Drumm "was keen that we accommodate the request" and asked that they find a way to get it done.

Ms Kinane said that in 2008 her team started to have concerns about Seán Quinn's exposure.

In March, she put together a memo outlining these concerns.

The witness said the concerns arose because the Quinn Group could not repay even a small amount of money and had failed to honour some commitments requested by the bank.

13.20 Before breaking for lunch more details were given of the conference call between Morgan Stanley and the Financial Regulator’s office.

Mr Gillespie agreed with Mr Whelan’s defence counsel that “he was at a somewhat lower level than everyone else” but that he was in the room in case Morgan Stanley “needed copies of passports or what have you.”

The parties to the call were himself, Con Horan and the Morgan Stanley officials as well as Anglo Chief Financial Officer Matt Moran and Anglo Head of Compliance Fiachre O’Neill.

Mr Moran oversaw the introductions while Mr O’Neill had little contribution to make, he said.

Separately, Mr Gillespie said that Sean Quinn’s CFD position was a very dangerous situation.

“I could see that the CFD deal could destabilise the financial system of the entire country,” he said.

Speaking about lending practices at Anglo, he said that “the banks whole approach to customer service was to minimise the amount of form-filling for customers.”

13.07 The jury has heard that the Financial Regulators office was “very very very” positive about the Maple Ten deal.

Former Anglo employee Brian Gillespie is now giving evidence. He previously worked in the Central Bank and in 2008 he held the title of head of compliance Ireland.

Mr Gillespie has been speaking about the deal to unwind Sean Quinn’s CFD position.

Morgan Stanley was enlisted by Anglo to implement the unwind of the CFDs on the market.

They were also one of the CFD providers to Sean Quinn.

Mr Gillespie said he was working over the weekend of 14 July 2008 and that he overheard a phone call between Morgan Stanley officials and Con Horan in the Financial Regulator’s office.

The witness said that he knew Mr Horan from his time working in the Central Bank. At that time, in the late nineties, the Financial Regulator and the Central Bank were a “unitary organisation.”

Mr Gillespie said he would have met Mr Horan then and that “they would have known each other.” He said he knew him well enough to recognise his voice on the phone.

The witness told the prosecution that Morgan Stanley set the agenda of the call on 14 July 2008.

Prosecuting counsel Úna Ni Raifeartaigh SC asked him what he thought Mr Horan’s opinion was of the unwinding deal.

Mr Gillespie said the financial regulator official was “very very very positive” about the transaction.

He said he never heard the term Maple Ten during that period but that he understands that the deal was called ‘The Maple Project’ by Morgan Stanley. He said he simply knew it as the CFD unwind.

Mr Gillespie said he was told by his Anglo head of group compliance, Fiachre O’Neill, that the deal had the agreement of the board and the approval of the Financial Regulator.

He said he was also told they had taken legal advice and were clear to proceed.

12.20 John McCabe said he dealt with Anglo from the 1980s and drew down around €500 million in loans from them over the years for development purposes.

These loans were typically at interest rates of between 1.5% and 3%.

He knew Pat Whelan as Anglo’s head lender in Ireland and had dealt with him for the previous 15 years.

On 9 July 2008 he got a call from Mr Whelan who said he had a proposition for him.

The next day Mr McCabe met Mr Whelan and Anglo CEO David Drumm.

The Anglo men told him that a major investor controlled 25% of Anglo shares and was only willing to redeem 15%. He was later told the identity of this investor.

He was told that the bank was looking for four or five long term clients to buy the remaining 10% of the stock. They wanted Mr McCabe to buy a 1% stake.

Mr McCabe said he asked if it was legal and was told it was "totally legal".

He said he was also told the Central Bank and the Financial Regulator were aware of the plan and that the Regulator was anxious to proceed with it.

They discussed him borrowing about €60m to buy the shares, with 25% recourse to him.

"I made all the inquiries I could and was happy with what I heard from those two gentlemen," he told counsel.

Mr McCabe said he had nearly no experience in stocks and shares. He "wasn’t into them" and "didn't want to get into them."

He said his main reason for getting involved was that he wanted to co-operate with the bank and to keep doing business with him.

"I was anxious to help when I was asked," he said. "The bank had been very good to me."

After a meeting that he thinks may have lasted around an hour, he agreed to the proposal and signed a facility letter.

Mr McCabe agreed with Mr Whelan’s defence counsel Brendan Grehan SC that his memory of details was "absolutely" hazy.

He agreed that he made his Garda statement over three years after these events occurred and had to rely on documents for a lot of the details.

11.40 Niall Tuite has finished his evidence. Under re-examination he told the prosecution that Anglo’s credit committee never met to approve the Maple Ten loans.

He confirmed "the apparent" credit committee approval was signed by him on 14 July 2008.

Prosecuting counsel Paul O'Higgins SC put it to the witness that the loan agreements with the Maple Ten were signed before this - on 10, 11 and 12 July 2008.

Counsel asked Mr Tuite if loan agreements were ever signed with clients before approval by the credit committee.

Mr Tuite said he was not aware of that ever happening.

The next witness is developer John McCabe.

He is the fifth Maple Ten witness to be called.

11.00 Day eight of evidence in the trial of former Anglo Irish Bank chairman Seán FitzPatrick and former executives William McAteer and Pat Whelan.

First up is the continued cross-examination of Niall Tuite who was head of credit risk for Ireland and the UK in 2008.

He has already told the jury that he was under the belief that Anglo’s board were aware of the Maple Ten deal.

He said he was also told that it had the approval of the bank’s legal team and the Financial Regulator.

When he found out that the deal did not have proper credit approval he confronted Mr Whelan who said he would get it sorted.