Department told of Quinn stake in Anglo

THE DEPARTMENT of Finance was told early last year by the Financial Regulator about the stake held indirectly in Anglo Irish Bank by businessman Seán Quinn and his family.

However, department sources said yesterday that concerns that part of the Quinn’s stake – 10 per cent of the bank – might have been offloaded to wealthy Anglo Irish clients only emerged late last year, after the the bank was included in the State guarantee of bank liabilities last September.

Minister for Finance Brian Lenihan was informed of the matter soon after he took office in May of last year. His department, the regulator’s office, and the bank, all felt the shareholding was creating “instability” in the bank’s shares.

It is understood that at the time the regulator’s office was aware that the shareholding – held by way of contracts for difference (CFDs) – was in excess of 20 per cent.

A spokesman for Mr Lenihan said a number of inquiries were under way into matters to do with Anglo Irish Bank and that if any significant “corporate governance issues” came to light they would be investigated.

Mr Quinn and his family disclosed in July of last year that they had purchased a 15 per cent shareholding in the bank. At late July 2008 prices, a 15 per cent stake in Anglo Irish Bank would have cost more than €1.5 billion. Whether this stake has any value now is a matter for an assessor to be appointed under the legislation enacted last week for the nationalisation of Anglo Irish Bank.

The Quinn group also announced it had written off loans of approximately €1 billion advanced in relation to investments made by the family. This was taken to be a reference to the CFDs.

In December of last year a due diligence examination of the bank was begun as part of the Government’s recapitalisation proposal. It is understood that arising from this exercise information began to emerge concerning the treatment of the approximately 10 per cent of Anglo that had been held by the Quinn family by way of CFDs but not subsequently purchased.

The Financial Regulator is now investigating whether this block of shares was placed with a group of business figures, without having been placed on the market, in an exercise aimed at preventing any negative effect on the share price.

Mr Lenihan’s spokesman said the Minister “was aware from contacts between the Department of Finance and the Financial Regulator over the course of last year that a large overhang of shares were held by a particular investor and related persons, and that this was considered by the bank and the market to be a source of instability . . . The details of this were a matter for the institution itself and, as appropriate, the Financial Regulator.

“As a result of the due diligence process . . . certain matters in connection with transactions involving the Quinn stake in the bank came to the attention of the Minister, which may warrant further investigation by the Financial Regulator.”

A short statement was issued on behalf of Mr Quinn yesterday.

“As previously outlined individual Quinn family members acquired a collective holding amounting to 15 per cent of Anglo Irish Bank in July 2008. This position remains unchanged,” the statement noted.

“The regulator is and has been aware of this investment since that date. We would be pleased to provide any further detail requested to the appropriate bodies should further clarification be required.”

Under Irish law there is no obligation on persons who have entered into substantial CFD arrangements to declare this involvement. Nor does the regulator have any power to establish who lies behind particular CFD investments.

Owners of contracts for difference do not take ownership of shares they are investing in and under Irish law do not have to declare themselves to the market.