Bank scrutinises letter in US Drumm legal action

THE AUTHENTICITY of a letter filed in support of a lawsuit taken this week against Anglo Irish Bank, in the US bankruptcy case of its former chief executive David Drumm, is being scrutinised by the bank in its defence of the action.

The independent law officer appointed by the US court to Mr Drumm’s case filed the letter in her action against Anglo to stop the bank removing her as trustee and to extinguish the bank’s €8.5 million claim against Mr Drumm.

The letter to Mr Drumm is dated January 10th, 2008, but is printed on Anglo headed paper showing the name of a director, Donal O’Connor, who was not appointed until June 2008.

The letter offered Mr Drumm a loan of €7.65 million to buy Anglo shares and options to buy shares on a non-recourse basis, secured only on the shares in the bank.

In the run-up to the nationalisation of the bank in January 2009, the loan was changed to recourse, making him liable for the debt.

Kathleen Dwyer, the independent lawyer appointed by a Massachusetts court to oversee Mr Drumm’s bankruptcy, has used the letter as evidence, claiming Anglo fraudulently changed the share loan to make him liable. She has claimed Mr Drumm was induced to accept the transfer of the loan from being a non-recourse to a recourse facility on the basis that Anglo agreed not to pursue him for certain assets, including his family assets.

Ms Dwyer claimed that, at the start of the financial crisis in late 2007, the bank’s chairman Seán FitzPatrick “required” Mr Drumm and other Anglo executives to buy shares in the bank and exercise share options in an effort to prop up the bank’s share price.

The bank had no comment.

Anglo is understood to be examining the letter and considering whether it should be referred to those investigating the bank.

Ms Dwyer did not respond to a call or an e-mail last night on the origin of the letter.

In an affidavit filed by Mr Drumm in Anglo’s action against him over his €8.5 million loans, he said he told Anglo executive Declan Quilligan and chairman Donal O’Connor in late December 2008- early January 2009 that the share loans granted to directors were recourse loans.