Former Anglo executives knew of ‘illegal scheme’ to buy bank’s shares

FitzPatrick, McAteer and Whelan deny unlawfully providing financial assistance

Wed, Feb 5, 2014, 19:47

“At the end of a fixed period there is a closing off and the bookie pays you or you pay the bookie. You may own €1,000 euro or you may lose €1,000. If you lose the €1,000 you have to top up the amount you have with the CFD provider.

“Or you can close off the position which means the shares are sold and you have to pay what you owe”.

Mr Quinn controlled around €2 billion of Anglo stock through contracts for difference. Counsel said this made Anglo very nervous because if his fortunes changed it could seriously affect the bank. The Financial Regulator also became concerned.

Anglo tried to unwind Mr Quinn’s position by inviting Middle Eastern governments and other investors to buy the stocks but nobody was interested. On March 17th, 2008 the situation worsened when the collapse of Bear Stearns Bank caused Anglo’s share price to drop from €17 to €6.50. It would fall a lot more later, counsel said.

Mr O’Higgins said Anglo then “decided to do something absolutely illegal.” They wanted to swap Mr Quinn’s contracts for difference for ordinary shares and to bring in other investors in to dilute his control of the bank.

The prosecution said a plan was formed to allow Mr Quinn’s wife and five children to “go long” on the stock, meaning they would buy it outright once the contracts for difference position was unwound. A public statement was then released saying the Quinns had bought the shares outright and the contracts for difference situation was resolved.

However, according to the prosecution, the public were not told that the situation was a lot more complex. The bank had approached ten other “trusted borrowers” with “supposedly high net worth” and asked them to buy ten per cent of the bank’s shares. Anglo would loan them the money, €45 million each, to allow them to do this. As part of the deal the investors would only be personally liable for a maximum of 25 per cent of this loan.

Counsel said that Anglo staff approached these ten people with the deal. One was approached while on holidays in France while another was approached in Portugal.

Mr O’Higgins said “if a lot of people, when on their holiday, saw their banker approaching in the distance, they would head for the nearest sand dune”. However the deals were concluded and the shares were bought. He said Anglo told them “not to worry about the details” and that they’d “take care of the paperwork”.

Counsel told the jury that the actions of the bank were “absolutely illegal”. Mr O’Higgins’ final points referred to the separate charges against Mr Whelan. He told the jurors that in October 2008 Mr Whelan allegedly decided to send a new loan facility letter backdated to July which would drop the personal recourse on seven of the loans from 25 per cent to nothing. This would mean that the bank would lose out on around €112 million and others would be saved that amount.

The case continues before Judge Martin Nolan tomorrow when the jury of seven men and eight women will heard the first witness for the prosecution.