Anglo board told Quinn share loans not unlawful
ONE OF the country’s leading law firms, Matheson Ormsby Prentice, advised the board of Anglo Irish Bank in July 2008 that the loans to the children of Seán Quinn to buy shares in the bank did not breach company law or constitute “unlawful financial assistance”.
According to a letter from the firm to the directors of Anglo, the law firm advised the bank on unwinding Mr Quinn’s investment in the bank through contracts for difference (CFDs) and the purchase of a stake of 14.3 per cent spread among his five children.
The firm also gave advice on the acquisition by “certain other, unrelated parties” of less than 3 per cent each of Anglo’s shareholding.
Although the letter makes no reference to the 10 Anglo customers who purchased a 10 per cent stake held by Mr Quinn, this advice is understood to refer to the so-called golden circle transaction.
This transaction, in which Anglo organised loans of €451 million to 10 customers to acquire this stake, is being investigated by the Garda Bureau of Fraud Investigation and the Office of the Director of Corporate Enforcement.
Anglo’s private placing of the shares by means of loans helped to prop up the share price at a critical stage of the financial crisis.
The bank’s former management maintain that they secured legal advice and notified the Financial Regulator of the transactions.
The regulator maintains that it was misled on the transactions.
The letter – dated July 22nd, 2008 – says the firm was asked to record “briefly” the advice it gave “on the most important legal issues which arose”.
The advice included arrangements on the purchase by each of Mr Quinn’s children of about 2.85 per cent of the shares in Anglo.
The legal firm drafted a contract with a Portuguese firm based on the island of Madeira to execute the unwinding of Mr Quinn’s CFDs, according to the law firm’s letter, a copy of which has been seen by The Irish Times. Mr Quinn is understood to have used the Madeira firm, Bazzely V – Consultadoria Economica E Participacoes, for tax reasons. A spokesman for Mr Quinn had no comment.
Asked to comment on the letter, the firm said it could not without the consent of its client.
The letter, headed “Anglo Irish Bank Corporation plc – Project Maple”, said the loans to the Quinn children to buy the shares “did not constitute unlawful financial assistance contrary to the provisions of the Companies Acts”.
This was on the basis that “the lending to the Quinn shareholders was in all respects in the ordinary course of business of the bank and that the loans provided did not reduce the net assets of the bank”.
The legal firm said the unwinding of the Quinn CFDs and the children’s purchase of shares “did not constitute inside information” under Market Abuse Regulations. The purchases by the Quinns “do not represent a substantial acquisition of shares prohibited by the Irish Takeover Panel Act 1997”, they said.
They said on the basis that there were no arrangements between the Quinn shareholders and that none of them would be able to exercise “significant influence over the bank”, the share purchases do not require notification to the Central Bank and Financial Services Authority of Ireland.
However, they noted that “the bank has kept the Financial Regulator informed of the transaction”.
The regulator is understood to have seen a copy of the letter, but it would make no comment on it.
The firm advised that on the basis the loans to the Quinn shareholders were in the ordinary course of the bank’s business, the acquisitions of the shares did not constitute a significant transaction which was prohibited by the Irish Stock Exchange, or which required shareholder approval.