Lawyer gives evidence at Drumm bankruptcy trial

Friday 23 May 2014 23.40
David Drumm spent the past two days giving evidence to the Bankruptcy Court in Boston
David Drumm spent the past two days giving evidence to the Bankruptcy Court in Boston

A bankruptcy lawyer has told a US court that his firm did 'goof' when filling out bankruptcy financial statements for his former client David Drumm.

Giving evidence at the former Anglo Irish Bank CEO's bankruptcy trial in Boston, Stewart Grossman admitted that his firm failed to explicitly include details of cash transfers between Mr Drumm and his wife.

Mr Grossman, Mr Drumm's former bankruptcy lawyer has spent all of today so far in the witness box.

He told the court that in his 41 years practising law, Mr Drumm was one of the most experienced financial professionals that he had ever represented for bankruptcy.

His firm assisted Mr Drumm filling out his financial statements when he first applied for bankruptcy, statements that did not include the transfers of cash, cars and property from Mr Drumm to his wife.

Mr Grossman told the court today, that he assumed Mr Drumm's transfers to his wife were included in his original statement of financial affairs in September 2010.

He said the first time he learned the asset transfers were not included was six months later, in April 2011, when he got a phone call from a "very animated" and almost hysterical Mr Drumm, who he said "freaked out" at the situation.

Mr Grossman testified that his colleague who had filled out the forms Ms Heather Zelevinsky was under the impression that not everything had to be included.

When questioned by Mr Drumm's lawyers, Mr Grossman admitted that he eventually concluded that this was the wrong approach and that they should have included the transfers.

He said there had been a goof, but he said it was not intentional.

Earlier, the court heard that when asked by Mr Drumm where he thought the landmines in his case were, Mr Grossman said his major concerns were the transfers to Mrs Drumm.

Mr Grossman told the court that Mr Drumm had originally transferred cash to his wife because she was getting nervous in September 2008, their marriage was "being bruised" and she and their kids were upset because "reporters were swarming around" and she needed security in money.

When it came to the house in Wellesley, Massachusetts, which the Drumms bought in January 2010 for $2m, Mr Grossman said that Mr Drumm was anxious to sell a house they had in Chatham and buy the house in Wellesley because he had a concern about the stability of his family.

He told Mr Grossman that he wanted to get rid of the Chatham home and keep the Wellesley property so his children could keep going to school there.

Mr Grossman told the court today that Mr Drumm told him that if the house had to be sold it would "make his kids insane and make his wife insane".

Bankruptcy Trustee gives evidence

The Trustee appointed by the US Court of Bankruptcy to examine Mr Drumm's finances has described trying to get information from Mr Drumm as "tedious".

Kathleen Dwyer began giving evidence at the court in Boston today, where she and the Irish Bank Resolution Corporation are challenging his entitlement to bankruptcy.

Ms Dwyer said that information had to be "drawn out from him over time and a series of requests".

She described him as a person who was "very sophisticated in financial matters", given his educational background and the description of work history.

She said he had no difficulties understanding the process and appeared knowledgeable.

She said she only became aware of the omissions of asset transfers to his wife after examinations of Mr Drumm over several meetings.

When it came to the purchase of the Drumms' home in Wellesley, Ms Dwyer said that the $831,000, which Mrs Drumm put up as equity in the property had originated from Mr Drumm.

She said that after her examinations, she learned a lot about Mrs Drumm's financial affairs.

She said that she did not have any bank accounts or funds in her own name from the time of her marriage in 1991 until September 2008.

She said that all of the funds Mrs Drumm had were from Mr Drumm and the sales of joint properties.

She said that based on her investigation of the case it was not accurate for Mr Drumm to say that he had no previous financial interest in the funds which were used to buy the Wellesley home.

When it came to the valuation of furnishings that were owned by Mr Drumm, Ms Dwyer said she expected the value to be higher than the figure of $10,000 originally submitted by Mr Drumm, given the scale of the properties involved.

She said there was evidence of $300,000 expenditure on furnishings in 2008 for the Chatham property in Cape Cod owned by the Drumms.

She said the home was more than 4000 square feet and was fully furnished with items "appropriate for a Cape Cod house".

She said there were some older, antique type furnishings, but for the most part it was contemporary furnishings.

She said it appeared to have been "professionally decorated".

She said she had walked through the entire property and completed a list of furnishings.

She said Mrs Drumm also had this list but had removed some items from the property.

Ms Dwyer testified that when the Chatham property was sold in 2010, the buyer wanted to buy the home fully furnished and paid $2.882m for the real estate and $150,000 for the personal property.

She went on to describe the Wellesley home which she said was a large home and that portions of it had been recently renovated.

Ms Dwyer said that she engaged a person who had expertise in furnishings and they toured the home together.

They drew up another list of furnishings there.

Ms Dwyer said Mr Drumm also told her that he had other items of furniture in storage.

Ms Dwyer gave evidence that Mr Drumm later changed the value of his furniture on his statement of financial affairs from $10,000  to unknown.

She said she had expected him to have provided a more refined valuation as Mr Drumm was in a position to be familiar with the property, it was his personal property and she said he had "presumably participated in acquiring the property".

At that point the case adjourned for the weekend and will resume on Tuesday as it is a holiday weekend in the US (Memorial Day).

Both parties agreed that they were hopeful the case could be concluded within two more days.

In addition to the conclusion of Ms Kathleen Dwyer's testimony, there are three more witnesses to be called next week, including Mrs Lorraine Drumm.