Anglo trial told accused entered into dishonest scheme

Counsel said it was no defence to say they had been told to do what they did by more senior people in the bank

 

The trial of four former bankers accused of a conspiracy to defraud in 2008 has reached its closing stages.

Four former executives from Anglo Irish Bank and Irish Life & Permanent (ILP) are on trial for allegedly conspiring to mislead investors about the true health of Anglo Irish Bank.

John Bowe (52) from Glasnevin, Dublin, Willie McAteer (65) of Greenrath, Tipperary Town, Co. Tipperary, Denis Casey (56), from Raheny, Dublin, Peter Fitzpatrick (63) of Convent Lane, Portmarnock, Dublin have all pleaded not guilty at Dublin Circuit Criminal Court to conspiring together and with others to mislead investors by setting up a €7.2 billion circular transaction scheme between March 1st and September 30th, 2008 to bolster Anglo’s balance sheet.

On day 70 of the trial Úna­Ní Raifeartaigh SC, for the Director of Public Prosecutions, began outlining the State’s case to the 13-strong-jury.

She told the jurors that they were on the home stretch now and it had been an extraordinary trial.

She said “put bluntly” the State’s case against the four men was that in 2008 Anglo and ILP entered into a dishonest scheme to make Anglo look stronger than it actually was on their end of year balance sheet, dubbed the “snapshot”.

“Anglo wanted a particular target. It couldn’t get there in the usual way...they resorted to these unusual means,” counsel said.

Ms Ní­ Raifeartaigh said the four accused entered into a scheme that involved sending money around in a series of circular transactions so that it would come back “dressed up as a corporate deposit”. She said that corporate deposits were an easy way of measuring the health of a bank.

She said you could call it a circular transaction or “you could call it ping pong”.

“Anglo Irish Bank was batting €1 billion over to Irish Life and Permanent. Irish Life and Permanent would pass it to its life assurance business Irish Life Assurance, who would bat it back to Anglo,” she said.

Snapshot

She said the purpose of the deal was to mislead the people who would be looking at the “snapshot” in the bank’s published accounts. These were investors, depositors and lenders and they were entitled to expect that the accounts gave a true and fair view of the bank.

Counsel said it was not necessary for the prosecution to show that individuals had actually suffered economic loss as a result of the scheme.

“This was a set of transactions that was empty. A nothing or an empty transaction. This was creating assets and liabilities out of nothing,” she said.

‘Emperor’s new suit’

Referring to the expression “putting on your best suit”, meaning to put out the best balance sheet possible at year end, counsel said: “It’s not putting on your best suit, it’s putting on a disguise” and she compared the transactions to the “Emperor’s new suit”.

She said the four accused agreed to carry out the scheme to “bolster” the Anglo balance sheet and at the time it was their intention to mislead users of the accounts.

She said that the position taken by ILP’s former CEO Mr Casey and ILP’s former finance director Mr Fitzpatrick, that they couldn’t have known how Anglo would represent the deals to the market, was not credible.

“It is not a reasonable possibility. These are professionals. They are not babes in the woods, naive innocents abroad.

“What did they think Anglo would do? They must have known they would not be engaging in complicated transactions as an exercise in futility

“The only way they could boost the customer deposits was somehow not to tell the public,” counsel said.

She said the executives from ILP were motivated by a quid pro quo arrangement where Anglo would help ILP with their balance sheet in December 2008. She told the jury it was a “you scratch our back, we scratch yours” arrangement.

Going through the evidence against the accused she said that a series of telephone calls showed that Mr Bowe and Mr McAteer were involved in the deal. Mr Bowe was Anglo’s head of capital markets and Mr McAteer was head of finance at the now defunct bank.

Garda interviews

She noted that during his garda interviews in 2010 Mr McAteer frequently replied that he couldn’t recall things when asked about events in 2008. She said he was present at meetings during which this very unusual transaction of €7bn was discussed and “he has no recollection at all”.

“Maybe he had a very bad memory a year and a half later...Is there an awareness that this is not a legitimate transaction and a desire to distance himself from it?”, she asked.

She said that even if any of the accused were not involved in authorising the transactions, the prosecution said they were guilty of conspiracy if they were involved in implementing the transactions with the intention of misleading people.

She said that in a phone-call in September 2008 Mr Bowe told David Drumm, then Anglo CEO, that “the money goes around in a circle” and “we give the money to them and the dance here is we actually get it back in time and that’s becoming very very tough to do”

Mr Drumm replied that “a fucking journal entry would do it a lot quicker” and Mr McAteer later commented “very good journal entries”.

Fippant remark

Ms Ní Raifeartaigh said that Mr Drumm’s flippant remark is what the case was all about – that the deal was simply about getting a figure on the journal.

She also told the jurors it was no defence for any of the bankers to say they had been told to do what they did by more senior people in the bank. She told them that the attitude of the Financial Regulator, the Central Bank or the Regulatory Authority was not relevant to the issues the jurors had to decide.

She said they had to decide if this was a dishonest scheme and if there was dishonest intent behind it. She said what the Financial Regulator thought was not of assistance in reaching their decision.

“Any indifference, or acquiescence or turning a blind eye by the Regulatory Authorities did not provide the conspirators with a defence,” she said.

She said there was no evidence that the Financial Regulator knew about the transactions in advance and even if he had known, this would be irrelevant. She told the jurors they needed to put the Financial Regulator to one side in this case.

She also told them they had heard a lot about the financial crisis but she said this could not be used as an excuse. “Necessity was not an excuse or a defence to the offences,”she said.

The prosecutor will continue her closing speech on Wednesday. The jury will also hear closing speeches from each of the defendants’ lawyers. After hearing a charge on the law from Judge Martin Nolan only twelve of the jurors will be selected to deliberate on the evidence.