Neary ‘not aware’ of March 2008 deal between Anglo and Quinn
Former regulator denies ‘posterior-covering exercise’
Former financial regulator Patrick Neary has said he was not aware of a March 2008 agreement between Anglo Irish Bank and the Quinn Group to unwind businessman Sean Quinn’s large stake in the bank by placing Anglo shares with institutional investors.
The written agreement, which had previously been shown to have been sent to the regulatory authority, was ultimately not acted on as the bank could not drum up interest from institutional investors. The large Quinn stake, which he held through contracts for difference, was eventually unwound in a separate deal involving share-buying by the so-called Maple 10 investors and Quinn family members in July that year.
In earlier evidence, the court was shown internal Anglo emails in which chief executive David Drumm asked for the removal of a reference to the regulator approving the March deal from a draft copy of the agreement. Mr Neary told Brendan Grehan SC, for Pat Whelan, that he had no contact with Mr Drumm in relation to the March deal.
As part of that agreement, Anglo was to lend €460 million to the Quinn family, and negotiations took place with the banks Credit Suisse and Lehman Brothers about them coming in subsequently to refinance the loan.
Mr Neary said he was not aware of that written agreement and neither was he aware that a copy had been sent to the regulator’s office.
Mr Neary said he did not know if a file existed in the regulator’s office on the Anglo CFD position, though his “best guess” was that there should have been and probably was. He said he had no records of any briefings he received about the situation in this period.
The witness was shown a letter sent to Con Horan, then prudential director at the regulator’s office, by Colin Morgan of Quinn Group on April 1st 2008, in which Mr Morgan referred to refinancing as part of the March deal. “I have never seen this letter before,” Mr Neary told the court.
“Mr Horan never brought it to your attention that Anglo were going to refinance the deal,” Mr Grehan asked. No, the witness replied. He said his understanding of what was to happen in March was that the Quinns were going to take a shareholding of 10-15 per cent in Anglo, funded by Credit Suisse, and that the balance of the shares were to be placed with domestic and international investors.
Mr Neary said he used email in 2008, but said he would “not necessarily” be copied in on correspondence. He could not recall any meetings with Mr Drumm about this matter.
Mr Grehan put it to the witness that the only letter he seemed to have sent about the Anglo CFD issue was on June 25th 2008. Addressed to Mr Drumm, the letter stated that the Regulator was concerned about the level of Anglo’s lending to the Quinn Group, which at that point was approaching €2 billion.
Mr Grehan suggested the letter was “a posterior-covering exercise” by Mr Neary as he knew that Anglo would have to continue lending to the Group because otherwise they could they could both collapse. “You knew full well what was going on but wrote the letter to cover yourself,” counsel suggested.
Mr Neary responded that the letter reflected the views of the Regulator at the time that Anglo’s exposure to Quinn was rising at a steady rate. He said the regulator was seeking to “keep the pressure on Anglo”, which in turn would keep the pressure on Quinn.
Mr Neary told the court he was advised of lending to the Quinn family to buy shares as part of a deal to unwind its CFDs in Anglo on July 23rd at a board meeting of the regulatory authority. Mr Neary said Mr Horan told the meeting the Quinn family would be loaned €169 million for a two week period and Credit Suisse had indicated they would then take over the loan.