Regulator representative continues evidence at Anglo trial

Tuesday 11 March 2014 23.00
Con Horan said he was the person in the Financial Regulator's office who had the most engagement with Anglo Irish Bank and the Quinn Group
Con Horan said he was the person in the Financial Regulator's office who had the most engagement with Anglo Irish Bank and the Quinn Group

The former prudential director of the Irish Financial Services Regulatory Authority has told Dublin Circuit Criminal Court that consideration was given by the authority to trying to get the two main Irish banks to take over Seán Quinn's interest in Anglo Irish Bank.

Con Horan agreed that a meeting of the Domestic Standing Group on 8 July 2008 discussed the possibility of finding a "domestic solution" to the Quinn problem, if Anglo's efforts to find a US investor were unsuccessful.

The group was made up of representatives of the Department of Finance, the Central Bank and the regulator.

Mr Horan was giving evidence at the trial of the former chairman of the bank, Seán FitzPatrick, and two directors of the bank, Patrick Whelan and William McAteer.

All three men deny giving illegal loans to 16 people to buy shares in the bank in July 2008.

Mr Whelan also denies being involved in fraudulently altering seven loan facility letters.

Anglo Irish Bank was trying to find investors to buy the shares in which Mr Quinn had an interest through Contracts for Difference (CFD) and unwind Mr Quinn's position in the bank.

The court heard one of the domestic solutions being considered was that the two main Irish banks would establish investment vehicles to take over the CFD position.

But Mr Horan agreed that the regulator had no power to force the banks to take over the position.

He said he would have been appealing to their self-interest, as if Mr Quinn's position was unwound in a disorderly way it could have implications for the entire financial system, not just Anglo.

The day after the meeting of the Domestic Standing Group, the court heard the former chief executive of Anglo, David Drumm, called Mr Horan to tell him that the bank was going to place a portion of the shares with ten investors.

The court heard that at a meeting between the regulator, representatives from the Central Bank and representatives from Bank of Ireland on 11 July 2008, there was a "frank exchange of views" on possible developments in the relationship between Quinn and Anglo.

Asked if this meant Bank of Ireland was saying no to any involvement in taking over the shares, Mr Horan said he could not recall this meeting.

Mr Horan told the court again that he did not know Anglo was lending money to the ten "Maple Ten" investors before the transaction at the centre of this case was carried out.

He said he was told by Mr Drumm that there was a possibility of some very short-term lending to the investors if they had cash flow problems.

Mr Horan said the issue of possible short-term lending to them did not cause him any alarm bells in the way it was put to him. He said he did not know there was going to be any actual lending to the ten.

The court was told that former senior Department of Finance official Kevin Cardiff will give clear evidence that Mr Horan called him in July and told him there was going to be some lending to the ten individuals.

But Mr Horan said he would simply have told him what Mr Drumm told him about short-term lending being a possibility.

He agreed that Mr Cardiff must have misunderstood him or was misreporting what he said.

Mr Horan was asked by lawyers representing Mr FitzPatrick why there were no notes of key conversations in which Mr Horan was involved in July 2008, despite the fact that it was his practice to take contemporaneous notes of telephone conversations.

Mr Horan said the preference was for contemporaneous notes, but in July 2008 he said they were in the middle of a crisis, there was severe pressure on the authority and contemporaneous notes were not always maintained.

He said he had amalgamated the three conversations into a note for an authority meeting later in July. He said he was trying to give evidence as accurately as he could.

Regulator sought legal advice

Earlier, the trial heard the regulator sought legal advice about the lending by Anglo Irish Bank to Mr Quinn to fund his stake in the bank.

Mr Horan said the regulator decided in June 2008 to take legal advice, as a precaution, in relation to the market transparency of Mr Quinn's holding in the bank and the loans by Anglo which were funding Mr Quinn's payments to his brokers.

He said he was the person in the regulator's office who had the most engagement with Anglo Irish Bank and the Quinn Group.

Mr Quinn had built up a stake of around 29% in Anglo Irish Bank by gambling on the bank's share price through financial instruments CFDs.

The share price of Anglo was falling through 2008 and Mr Quinn had to pay hundreds of millions of euro to the providers of his CFDs.

From the end of 2007, Anglo was lending Mr Quinn the money to make these payments.

Lawyers for Mr Whelan put it to Mr Horan that the chief executive of the authority, Patrick Neary, had said in his short statement to gardaí that Mr Horan was the person dealing with the matter.

Mr Horan said it was a major issue, discussed on an ongoing basis by the Central Bank, Department of Finance and the regulator's office.

Mr Horan said he was currently on secondment to the European Banking Authority in London and left the Financial Regulator three years ago.

He agreed that Mr Neary retired in 2009.

Mr Horan was asked if the Financial Regulator was putting Anglo Irish Bank under pressure to unwind Mr Quinn's position in the bank through CFDs.

He said the regulator was anxious to see the position unwound.

Juror who knows potential witness excused

Meanwhile, a juror hearing the trial has been excused after it emerged he knew a potential witness in the case.

The juror sent a note to Judge Martin Nolan to say he knew a woman who worked in the Financial Regulator's office who may give evidence at the trial.

The judge excused the juror from further service on the jury and thanked him for his commitment so far.

Fifteen jurors were sworn in to hear this case.

The law was changed last year to allow 15 jurors to hear a case rather than the usual 12, in cases due to last more than two months.

The jury were told at the beginning of the trial that if there are still more than 12 jurors available at the end of the trial, a public ballot will be held to decide which 12 will actually deliberate on the case.