Recourse was key difference between Maple 10 and Quinn family loans
Difference may explain why jury found Whelan and McAteer guilty
Judge Martin Nolan: he said it was “very difficult to see how these monies could ever be in the ordinary course of business since the main purpose of the share purchase was to stabilise the share price”
In the weeks and months leading up to the Anglo trial, two major concerns were aired continually .
The first was that it would be impossible to ensure a fair jury trial in a case that centred on the downfall of one of the most reviled and toxic companies in Irish history, its name synonymous with economic collapse and trauma. How would it be possible, the assumption ran, to find 12 ordinary citizens who were not prejudiced against anyone connected to Anglo?
The second concern was that it would be unrealistic to expect a jury of ordinary citizens to understand such a complex case, one that delved deep into the arcane world of high finance.
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- Anglo trial : Legal advice as an issue in the case
- Project Maple: Anatomy of a deal
- Full coverage of the Anglo trial
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Secrecy of the jury room
Both concerns, it appears, were unfounded. For 47 days,
the jury – who included a sales rep, nurse, bus driver, personal assistant, an unemployed man, hospital procurement professional and trade union employee – listened attentively to the evidence. To anyone who was in court for the duration of the trial, they came across as serious, conscientious people.
No one knows what went on in the jury room during deliberations but the verdicts show that the jurors had absorbed key nuances and had more than enough knowledge to decide it.
Of the three men on trial, Seán FitzPatrick was at the farthest remove from the scheme at the heart of this case: the transaction to unwind Seán Quinn’s stake in Anglo in July 2008.
The only evidence as to his knowledge of it came from five interviews he gave to gardaí in 2010. Specifically, the only evidence that he knew about the deal before it was carried out came from his own account of receiving a phone call from David Drumm, Anglo’s chief executive, on July 9th, 2008 – five days before Morgan Stanley put the plan into action. According to FitzPatrick’s statements, Drumm told him a plan had been devised to unwind the Quinn stake. It involved 10 people who would each buy a tranche of the bank’s shares. There would be some lending from Anglo for this.
FitzPatrick said Drumm told him the regulator would be “very happy” with the deal; overall, the chairman thought it was “kosher” and “above board”. FitzPatrick also told gardaí he asked Drumm if the investors were “people of substance”, whether they were good for it, and was told they were. According to FitzPatrick’s statement, he was not told the names – subsequently known as the Maple 10 – whose identities Drumm was keeping tight. Nor was he told of the terms of the lending.
The last point was critical. Under section 60 of the Companies Act, it is unlawful for a company to finance the purchase of its own shares. But there is an exception if this is in “the ordinary course of its business”.
One of the key battlegrounds in the trial was over whether the July 2008 scheme fell under that exception or not. In his closing speech to the jury, Judge Martin Nolan made his view on this point clear. It was “very difficult to see how these monies could ever be in the ordinary course of business since the main purpose of the share purchase was to stabilise the share price”, he said. As the judge added, however, the jury was free to disregard his observation.
The loans to the
Maple 10 businessmen – Seamus Ross, Gerard Gannon, Sean Reilly, John McCabe, Brian O’Farrell, Gerard Maguire, Joe O’Reilly, Paddy McKillen, Gerry Conlon and Patrick Kearney – were given at 25 per cent recourse, which meant that if the Anglo share price fell to zero, the bank could only ever recoup a quarter of the value of the loans.
In evidence, a banking expert called by the prosecution – former Ulster Bank director Tom Reid – zoned in on this limited recourse as an extraordinary feature of personal loans such as these. However, under cross-examination from the defence, Reid was asked if, conceptually, he had a difficulty with lending money to clients provided the loan was on commercial terms, meaning 100 per cent recourse. Reid agreed that, conceptually, he didn’t have a problem with that.
The prosecution argued there were several other features of the lending that brought it outside the course of ordinary business. But if recourse was a key factor in the minds of the jurors – as it was for Reid – then that would help FitzPatrick greatly. After all, the evidence was that he wasn’t told there was limited recourse. Indeed, as his barrister Michael O’Higgins said, it was not clear whether the recourse had even been decided on by the time of Drumm’s call.
The recourse was the key difference between the lending to the Maple 10 and the six Quinn family members, whose loans were on 100 per cent. That may well explain why the jury found Pat Whelan and Willie McAteer guilty on the charges of unlawful lending to the Maples but not guilty in relation to the lending to the Quinns.