Developer claims Anglo Irish Bank used ‘fake’ rates to overcharge customers

John Flynn makes allegation as he attempts to halt IBRC’s US bankruptcy bid

The so-called ‘Tibor’ rate was allegedly named after Anglo executive Tiarnan O’Mahoney. Photograph: Aidan Crawley

The so-called ‘Tibor’ rate was allegedly named after Anglo executive Tiarnan O’Mahoney. Photograph: Aidan Crawley

 



John Flynn, a developer and one of the objectors to the US bankruptcy bid being made by Irish Bank Resolution Corporation (IBRC), is alleging that Anglo Irish Bank systematically overcharged borrowers by using a “fake”, inflated interest rate known as the “Tibor”.

Mr Flynn alleges it was named after Tiarnan O’Mahoney, the bank’s former chief operating officer and the head of its treasury department.

In the latest court filings, Mr Flynn says a former “senior executive” of Anglo told him in 2010 that the “Tibor” rate was used to price his loans.

He alleges this higher rate was secretly used in place of the Dibor (Dublin interbank lending rate) which was supposed to be the bank’s basis for calculating the cost of credit.

“It was explained that the overcharging was initiated by the treasury department of the bank, through the use of the Tibor . . . the fake rate Anglo would apply,”Mr Flynn told the court in documents filed yesterday.


Fraudulent loading of rates’
“It was named after Tiarnan O’Mahoney, who was in charge of the bank’s treasury department at the time of the fraudulent loading of rates,” he said.

Mr Flynn’s lawyers also told the court there is evidence that he and other borrowers were overcharged in this way and said David Drumm, the bank’s former chief executive who lives in the US, will back up their claim in court. Mr O’Mahoney would not comment when asked about the allegations last night.

Mr Flynn is one of a number of objectors to IBRC’s application for Chapter 15 bankruptcy protection in Delaware, which would secure $1 billion of its US assets from seizure by creditors while the bank is being wound down in Ireland. He is separately suing the bank in New York over the overcharging allegations, claiming he was overcharged on at least $150 million of loans. He says the Chapter 15 bid is to “frustrate” this and other US cases against IBRC.

Bankcheck, a consultancy retained by Flynn to help him produce evidence of his alleged overcharging, also made filings to the court yesterday alleging systematic overcharging by the bank. It said Flynn was overcharged by up to $ 11 million.

Eddie Fitzpatrick, the founder of Bankcheck, told the court he has analysed 240 different Anglo loan accounts that were supposed to have been priced using Dibor. “Every account for every customer was found to have been overcharged as a result of the loading of interest rates,” he said.


Access to internal memos
He said he had uncovered evidence of at least $500 million of overcharging, and told the bank he needed access to “all internal memos, emails, and other records for the treasury department during Tiarnan O’Mahoney’s tenure as head of it”.

Burlington Alpha and Burlington Beta, two hedge funds controlled by US billionaire Paul Singer, who owns $75 million of subordinated Anglo debt, also made further filings opposing the Chapter 15 bid. The funds want the court to compel the special liquidators of IBRC to give them access to sensitive internal documents.

The funds said they had sought a plethora of documents from the Irish Government under Freedom of Information laws, but had been rebuffed.

“[We] have been utterly foreclosed from obtaining even the most basic information about the Irish process through the limited – and illusory – means available under Irish law,” they said.