Appleby believes bank loans suggest illegality

The director of corporate enforcement is poised to investigate Anglo Irish Bank, writes ARTHUR BEESLEYSenior Business Correspondent

PAUL APPLEBY, the director of corporate enforcement, has formed the view that the circumstances surrounding the concealment of directors’ loans at Anglo Irish Bank suggest “illegality”.

In private correspondence with members of an Oireachtas committee, which has been seen by The Irish Times,Mr Appleby says he has formed his view in spite of assertions by Anglo and a "former director" of the bank that the transfers did not breach banking or legal regulations.

This is an implicit reference to Anglo’s former chairman, Seán FitzPatrick, whose resignation from the bank in December was the first act in a series of events that ultimately led to its nationalisation last month.

Mr FitzPatrick’s loans, which on occasion exceeded €100 million, were routinely transferred to Irish Nationwide Building Society at the end of eight successive financial years in Anglo.

Irish Nationwide has denied any impropriety in relation to the loans and said they were part of its “ordinary” business.

The loans affair and various other lapses in Anglo have led to demands from across the political spectrum for Mr Appleby to ask the High Court to appoint an inspectorate to investigate the bank.

He has made no public comment on such demands.

However, in a letter to the clerk of the Joint Oireachtas Committee on Finance and the Public Service on February 2nd, Mr Appleby says the “present focus” of his examinations in the company is on the loans issue.

“Before I can formally investigate a company and require the production of its books and documents for examination, I must under company law form the opinion that circumstances suggesting prejudice, misconduct and/or illegality are present with respect to the company’s affairs,” he says.

“I have formed that opinion in the Anglo case notwithstanding the above assertions.

“A primary purpose of this type of examination is to establish to what extent there is prima-facie evidence that prejudice, misconduct and/or illegality did occur.”

Although these remarks represent the first public indication about the evolution of Mr Appleby’s views in respect to Anglo, he gives no guidance in the letter about the likely outcome of his current examination.

However, he says he will have a “clearer view” of the prospects of his initial investigation, when they are brought to a satisfactory conclusion by late March or early April.

“When the documentation which I have sought is available and when it has been examined for compliance with the applicable company law provisions, I will be able to determine the appropriate next steps in our investigations,” Mr Appleby said.

“It is always very difficult to speculate in advance how well an investigation may proceed in the future, because progress depends, for example, on the timeliness of the production of the requested material, the absence of legal challenge by the relevant parties, the extent to which further enquiries may be necessary following initial examination of the material and the complexity of the matters at issue,” the director of corporate enforcement added.