THE OFFICER appointed by a US court to oversee the bankruptcy of former Anglo Irish Bank chief executive David Drumm has sued the bank, claiming it fraudulently transferred a loan in January 2009 he used to buy shares in the bank.
Mr Drumm attended his first public hearing in Boston yesterday after he filed for bankruptcy last month following the failure of negotiations to settle the bank’s action against him over unpaid loans.
Dressed in a dark suit, navy tie and striped shirt, Mr Drumm arrived at the JW McCormack post office and court house in downtown Boston at 2.06pm local time (7.06pm Irish-time) for a meeting of his creditors.
He refused to answer any questions from waiting reporters. “I am not going to comment to the media at all today,” he said, before entering the building.
The meeting started at 2.37pm and was over within 15 minutes. Mr Drumm swore on oath and said he lived at 73 Old Colony Road in Wellesley, Massachusetts.
He provided a Massachusetts driver’s licence as identification but was told during the meeting that a tax return he had provided “won’t be sufficient”.
Anglo, Mr Drumm’s largest creditor which is owed €8.5 million, yesterday sought to appoint its own trustee, Michael Epstein of New York-based restructuring firm CRG Partners, to the case to manage the bankruptcy.
The move was challenged by Kathleen Dwyer, the interim trustee appointed last month by the court to manage Mr Drumm’s bankruptcy who yesterday filed a lawsuit against the State-owned bank.
She has sought to “extinguish” the bank’s claims against Mr Drumm “because of wrongful conduct of the bank”, claiming that it had received fraudulent transfers.
Lawyers for Ms Dwyer filed a lawsuit, claiming Anglo changed a share loan of €7.65 million advanced in January 2008 which was non-recourse – secured only on the shares in the bank – into a recourse loan a year later leaving him fully liable.
Ms Dwyer has claimed in her suit that this amounted to a “fraudulent transfer” and imposed an obligation on Mr Drumm in the run-up to the nationalisation of the bank that was otherwise only recourse on “worthless stock”.
She claimed that towards the end of 2007, as banks were experiencing financial difficulties, Anglo chairman Séan FitzPatrick “required” executive directors of the bank to buy shares in an effort to prop up the bank’s stock.
“To facilitate this arrangement, the bank agreed to provide loans to its senior officers to finance their mandated purchases,” said Ms Dwyer in a court filing.
Ms Dwyer has also cited breaches of confidentiality around Mr Drumm's financial arrangements with Anglo, naming articles published in The Irish Timesin October 2009, and Mr Drumm's €2.6 million counter-claims against the bank in her lawsuit.
As legal representative of Mr Drumm’s estate, Ms Dwyer has sought damages for any breach of confidentiality and the €2.6 million he claims to be owed.
Her lawyers argued at the meeting that Anglo should not be allowed to vote on the appointment of a trustee as it holds “a material adverse interest that should disqualify it”.
Given the dispute between Anglo and Ms Dwyer over her appointment as a trustee, the matter will be decided by the court. Mr Drumm declined to answer any questions about Anglo or his case afterwards.
On the way down from the 10th floor meeting room, he joked in a packed lift: “There are only so many journalists you can fit in an elevator”.
The next meeting of Mr Drumm’s creditors will be held on December 7th at 10am in the offices of Ms Dwyer’s lawyers in Boston.
Lawyers for Mr Drumm’s wife Lorraine, who is also one of his creditors, told the meeting that she supported the appointment of Ms Dwyer as trustee to her husband’s estate but later added that she would not be voting.
Anglo’s loans account for more than 90 per cent of Mr Drumm’s debts and has unsecured claims of at least $11.5 million, the meeting was told.
The bank was represented at the meeting by high-profile US bankruptcy lawyers, Kenneth Leonetti of Boston law firm Foley Hoag and Larry Nyhan of Sidley Austin in Chicago.
Despite the challenge to her appointment, Ms Dwyer will remain interim trustee of Mr Drumm’s bankruptcy estate.
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