McAteer and Whelan spared jail in Anglo case

Judge says it would be unjust to jail men over unlawful loans to buy shares in bank

Two former directors of Anglo Irish Bank have been given the probation act for providing unlawful financial assistance to 10 businessmen in July 2008.

Tue, Apr 29, 2014, 21:36

Two former directors of Anglo Irish Bank convicted of providing unlawful loans to 10 businessmen to buy shares in the bank will not be jailed, a judge at the Dublin Circuit Criminal court has ruled.

Judge Martin Nolan adjourned the sentencing of the bank’s former director of finance William McAteer and its former head of Irish lending Pat Whelan until July 21st next for an assessment by the probation service for their suitability for community service.

He said it would be unjust to jail the two men given “a State agency had led them into error and illegality”.

The men have been barred from acting as company directors for five years.

McAteer (63), of Rathgar, Dublin and Whelan (52), of Malahide, Dublin, were found guilty earlier this month of providing unlawful loans to businessmen known as the Maple 10 in July 2008 to buy shares in the bank, contrary to section 60 of the Companies Act.

The two men were found not guilty of six counts of providing unlawful financial assistance to six members of the Quinn family.

Former chairman of the bank Seán FitzPatrick (65), of Greystones, Co Wicklow, was acquitted of the same allegations brought against him.

The court had heard that by July 2008, businessman Sean Quinn’s contracts for difference (CFDs) – investment products based on share price – were equivalent to more than 28 per cent of the bank’s shares. This was a serious concern for the bank as it was feared if the CFDs were unwound in an uncontrolled manner it would have a negative effect on the bank’s share price.

A deal was devised which involved providing loans to the Maple 10 to buy just over 1 per cent each of the shares underlying the CFDs, with six members of the Quinn family buying 15 per cent of the shares. The Maple 10 borrowed €45 million each while the Quinns borrowed €169 million. The deal was executed on July 14th, 2008.

Judge Nolan said in the course of the trial he had to interpret the true purpose of Section 60 and he reached the view that it was to prevent companies from lending money for the purposes of buying shares in their own company.

He said the explicit purpose of the loans to the Maple 10 was to stabilise the share price of Anglo. There was a fear in the bank and probably in the financial regulator’s office that if it was not stabilised it would “go down”, and affect the financial system.