Four former Anglo executives on trial for conspiring to defraudWednesday 20 January 2016 23.54
The trial has begun of four former bankers accused of conspiring to defraud by misleading investors, depositors and lenders to Anglo Irish Bank about the true value of its customer deposits.
Former Anglo executives John Bowe and William McAteer and former Irish Life and Permanent executives Denis Casey and Peter Fitzpatrick have denied being involved in a conspiracy to defraud in the amount of €7.2 billion between March and September 2008.
They are accused of engaging dishonestly in transactions between Anglo Irish Bank, Irish Life and Permanent (IL&P) and Irish Life Assurance to make Anglo's non-bank, customer deposits look much larger than they were, with the intention of deceiving depositors, investors and lenders.
Prosecuting Counsel Paul O'Higgins said the transactions involved vast sums of money.
He said they amounted to one large candy floss whose only conceivable purpose was to puff up Anglo's deposits to mislead those looking at its year end figures and induce people dealing with Anglo not to change their behaviour.
He said this was manifestly dishonest and was done with dishonest intent.
15 people have been sworn in to hear the case.
They were told this morning they were only the third jury in the history of Irish criminal trials to be sworn in as a jury of 15.
Mr O'Higgins told them they had signed up for the long haul and their commitment to the most important process in Irish society was appreciated by everyone.
He said it was a big thing in anyone's life to devote themselves to public duty to this extent.
The trial could hear from up to 100 witnesses and last up to five months.
Mr O'Higgins said the scheme embarked on was to conduct a series of transactions, designed to allow people to be deceived about the real level of Anglo's customer deposits - or deposits which were not from banks.
These were more important for the health of the bank than lending from other banks.
This was at a time when Anglo was having serious difficulties raising money from anywhere, he said.
The court heard the scheme involved money being deposited by Anglo in IL&P and then deposited back in Anglo by Irish Life Assurance before Anglo's year end, before then being transferred back to Irish Life and Permanent afterwards.
Mr O'Higgins told the jury they would hear evidence that from March 2008, Anglo was seeking ways to make its customer deposits seem better than they were.
At the end of March, €1bn was deposited by Anglo into Il&P, and Irish Life Assurance deposited €750m into Anglo which was then transferred back into IL&P.
Anglo returned the favour for IL&P in June 2008, Mr O'Higgins said, when IL&P had a particular problem in relation to funding.
He said 30 September 2008, was Anglo's year end. The day before, Anglo put €1.2bn into IL&P which went back into Anglo via Irish Life Assurance.
He said the money circled around and as it passed go it "clicked a switch" to make it look like a customer deposit.
He said Anglo actually ran out of money at one stage to keep things moving, but, he said, the money did the rounds six times.
By 30 September Anglo's customer deposits contained a totally false customer deposit of €7.2bn leading the bank to look a lot healthier. This was to disguise the reality that Anglo's non-bank deposits were actually declining, the court heard.
The prosecution case is that Mr McAteer, Mr Casey and Mr Fitzpatrick authorised the transactions and that Mr Bowe authorised them to a degree and knowingly implemented them.
Mr O'Higgins said it was entirely irrelevant whether what was planned in the conspiracy actually happened.
What was relevant was that when the transactions were carried out they were done with the intention of using them to mislead.
He also told the jury they may hear that other people were involved in the conspiracy and could have been or should be charged. These may be people who were very senior who might appear to have had a role.
But he said that was not relevant to the jury and they were only concerned with the four people on trial.
He said they would have to consider the charges against each of the accused men separately, even though they were on trial together.
Mr Bowe is Anglo's former Head of capital markets and Mr McAteer is the bank's former director of finance.
Mr Casey is the former chief executive of IL&P and he was also managing director of Irish Life Assurance.
Mr Fitzpatrick was the former director of finance of IL&P and was on the board of Irish Life Assurance.
Staff asked to 'brain storm' ideas for funding
A former director of treasury at Anglo told the court that key funding staff were asked to "brain storm" to come up with ideas for funding the bank in the run up to its half year end in March 2008.
Matt Cullen said it followed the "St Patrick's Day Massacre" when Anglo's share price had dropped significantly.
He said discussions had taken place between the bank's Chief Executive David Drumm and the Central Bank and other executives of banks and they were told a decision had been made to "show a strong corporate number" on the next reporting date.
He explained that this was to show the bank was strong and secure at the half year end.
He said he was asked to approach people he knew in other banks to see if any assistance could be given in this regard.
He knew David Gantley from IL&P and contacted him. "I told him I had been asked to ask him what he could do "to help us on the corporate side". He said he mentioned the figure of €750,000.
Mr Cullen described how at a brain storming session with members of the finance and treasury departments the idea for back-to-back loans came up whereby Anglo would give the money to IL&P and they would give it back through Irish Life Assurance which was a non-bank corporate subsidiary.
He said there were no executive directors or anyone senior to him at those meetings and he would have instructed Kieran McArdle, who managed the traders desk and reported to him, to carry out the transaction.
However, he said he would have told Matt Moran and Mr Drumm was informed.
He said it would have been discussed at meetings of the executive directors and he "believed we were tasked by executive management to do so they were aware and wanted us to complete this transaction".
He said at a meeting in Mr Drumm's office on the 28 of March 2008 Mr Drumm had said "I see Irish Life are doing €750,000" and that Mr Drumm was delighted.
He said another executive Kieran McArdle said: "David you know how this works?" and Mr Drumm had replied yes that is not an issue.
He said Mr Moran had already said there was no issue and that they could do it that way.
He also detailed a €3bn "repo" or sale and repurchase deal with IL&P the following June when IL&P was coming to its have year end and needed cash coming in.
He said Anglo had a strong cash flow at the time so it temporarily bought a mortgage portfolio from IL&P because IL&P had been told by the Central Bank Governor that it should not be showing such reliance on ECB funding.
He said IL&P had asked him if Anglo would do this for them. Mr Cullen said he asked Mr Drumm, Mr Moran and Mr McAteer and they said yes.
Mr Cullen said they were asked to come up with funding initiatives again in July 2008 in preparation for Anglo's year end in September 2008.
They had a document with 50 initiatives but by September there were only three left.
As the funding initiatives fell away, he said Mr Drumm asked him to talk to IL&P to see if they would do transactions worth €6bn to €7bn in September at Anglo's year end.
Mr Cullen said Irish Life agreed to do it if Anglo would do the same for them in December the court heard.
He said he spoke to Mr Drumm and Mr McAteer who said that would be no problem.