Initial profit on CFDs turned to steep loss, Anglo trial told

The trial of three former directors of Anglo Irish Bank resumed at the Circuit Criminal Court shortly before noon today with evidence from the former financial planning director of Quinn Insurance.

Shane Morrison told the court of Seán Quinn’s involvement in the purchase of Anglo contracts for difference (CFDs) – investment products based on share price.

He agreed with Paul Anthony McDermott BL, for the prosecution, that a company was set up to invest in CFDs in 2005 called Bazelly. The company was registered in Madeira, he said, and the beneficial owners were the five Quinn children. He said the investment strategy was directed by Mr Quinn snr.

Seán FitzPatrick (65), of Greystones, Co Wicklow; Willie McAteer (63), of Rathgar, Dublin, and Pat Whelan (51) of Malahide, Dublin, have been charged with 16 counts of providing unlawful financial assistance to 16 individuals in July 2008 to buy shares in the bank, contrary to section 60 of the Companies Act.

Mr Whelan has also been charged with being privy to the fraudulent alteration of loan facility letters to seven individuals. All three men have pleaded not guilty to the charges.

Mr Morrison said the CFDs initially included large oil stocks, European banks, Tullow Oil and Ryanair, and agreed they were successful at first. At the end of 2005, Mr McDermott said the portfolio was valued at €256 million and a €27 million profit had been made.

Mr Morrison said the figures sounded reasonable.

Mr McDermott asked to what extend Mr Quinn was “keeping in contact” regarding the CFDs. Mr Morrison said contact was very frequent.

“Several times a week,” he said.

At the end of 2006, the total gain on the CFD account was €298 million, Mr McDermott said. Mr Morrison agreed. He also agreed that Mr Quinn continued to play an active role in the CFD purchases and during 2007 the CFDs in Anglo increased.

By the end of 2007 the gain had reversed, Mr Morrison said. Mr McDermott said there was a €560 million loss. Mr Morrison said he could not confirm that, but agreed the figure did not surprise him.

He confirmed that at the beginning of 2008, the CFD interest in Anglo was still increasing at the direction of Mr Quinn.

He said he became aware of “Project Maple” in March 2008, some time after the so-called St Patrick’s Day massacre, when the bank’s share price dropped dramatically. The project involved the unwinding of the Quinn CFDs in the bank and the placing of a block of Anglo shares with institutional investors.

Mr Morrison said he was asked to confirm how many bank shares were held in different entities. He said he was dealing with Morgan Stanley, where there were “north of 10 people involved”.

He was later told the plan was unsuccessful as it did not attract “the level of appetite required”.

The case continues.