Drumm admits to ‘a lot of errors’ in financial statements

Former Anglo Irish Bank chief executive David Drumm has admitted he swore under oath and at risk of perjury that statements he submitted in his US bankruptcy case outlining his financial affairs were complete, even though he omitted significant asset transfers to his wife.

During questioning on the second day of his bankruptcy trial in Boston, Mr Drumm rejected the assertion that he was not willing to cooperate with the court-appointed officer, or trustee, overseeing his US bankruptcy case.

Irish Bank Resolution Corporation and the trustee, which have taken this legal action to try to block Mr Drumm's discharge from bankruptcy, claim he shouldn't be given a fresh financial start because he failed to disclose to court about $1.2 million of cash and property transfers to his wife in 2008 and 2009.

IBRC's lawyer John Hutchinson asked Mr Drumm whether he submitted a statement of his financial affairs to the court without including certain transfers of assets to his wife understanding that he was swearing under oath and at risk of perjury that the statement was correct. He replied that he did.

Mr Drumm, who owes the State-owned bank €8.5 million, admitted he was responsible for mistakes, errors and misstatements made in his original October 2010 bankruptcy filings but dismissed a suggestion by Mr Hutchinson that they contained a “staggering number” of errors.

“It is your word,” said Mr Drumm, though he agreed the number of errors and mistakes in his bankruptcy filings were voluminous. “Yes, there were a lot of errors,” he said.

This was the former Anglo chief’s second day in the witness box in a trial at the Massachusetts bankruptcy court to decide whether he should be granted a discharge from bankruptcy.

Mr Drumm resigned as chief executive of Anglo in December 2008 and moved to the US in June 2009. He filed for bankruptcy in October 2010 with debts of about €10.5 million after failing to reach a settlement agreement with his former bank.

He told the court that his comment in an email to his then US bankruptcy lawyer Stewart Grossman about disclosing information in his bankruptcy case two days before he filed his court financial statements in October 2010 was "very much" a joke. He told his lawyer in the email that it "never pays to be cooperative right!"

IBRC’s attorney played to the court a video recording of Mr Drumm’s testimony at a deposition in which Mr Drumm, under questioning by the bank, described the comment as “just a comeback”.

“It is just a joke really - Stewart and I had those kinds of ‘to’s and ‘fro’s,” Mr Drumm was heard telling the bank’s attorney on the video during his sworn testimony.

Mr Hutchinson then asked Mr Drumm if he took the sentiment expressed in his email to Mr Grossman “very much to heart” in all aspects of his bankruptcy proceedings. “Absolutely not,” he replied.

Questioned by his own lawyer, Mr Drumm said it was “very much” his intention to cooperate in his bankruptcy proceedings and that he never intended to conceal anything about his finances.

The former banker told the court he disclosed details of cash transfers to his wife to his financial advisers Verdolino & Lowey, a Massachusetts accountancy firm, in mid-September 2010 in documents submitted in preparation for a possible bankruptcy filing.

His accountants advised him that during a bankruptcy there might be an investigation into asset transfers going back over two years and they could be subject to a fraudulent transfer action.

Going through each cash transfer that the bank claims he failed to disclose, Mr Drumm told his lawyer David Mack that he included details of the transfers in documents and statements for his bank accounts and his wife's bank accounts he produced to the trustee in December 2010 and again in more documents submitted in January and February 2011.

Mr Drumm said he first realised he should have included details of cash transfers to his wife in his October 2010 court filings during a meeting with his creditors as part of the bankruptcy proceedings on April 1st, 2011.

Asked by his lawyer how he felt after the meeting, he said he was “absolutely devastated.” Mr Drumm said he asked his advisers about why they advised him not to include the cash transfers. Mr Grossman gave him “a pat answer and told me to calm down”.

Mr Drumm said that his advisers came back to him and concluded that maybe the cash transfers should have been included in the original bankruptcy statements. “It was just a total disaster,” he said.

He said at the time he filed his bankruptcy statements in October 2010 he expected the transfers to his wife would have been dealt during a “long and detailed process” that included creditors meetings.

The trial continues.