Drumm showed ‘disdain’ for US bankruptcy rules, court hears

Boston trial hears of ex-Anglo chief’s ‘unquestionable recklessness’

Former Anglo Irish Bank chief executive David Drumm showed "disdain, unquestionable recklessness and indifference" to US bankruptcy rules, the final day of his bankruptcy trial in Boston heard yesterday. A lawyer for the bank, now Irish Bank Resolution also said Mr Drumm was trying to argue a "former CEO in bankruptcy defence" by blaming his advisers for his failure to disclose in sworn US bankruptcy statements €2 million in asset transfers to his wife.

John Hutchinson, attorney for IBRC, told Judge Frank Bailey in closing statements on the sixth and last day of Mr Drumm's bankruptcy trial in Boston that because the former banker had the means to hire advisers didn't mean he could delegate responsibilities to them for making incorrect statements.

Mr Drumm was a former chief executive of a global bank with 16 years’ experience in banking and “as knowledgeable and sophisticated” a bankruptcy debtor as you would ever see, Mr Hutchinson said.

The lawyer told the court that this was an ordinary bankruptcy case and there were “no special rules” for Mr Drumm. The only thing that made this case different was “the level of disdain, unquestionable recklessness and indifference to the rules”, he said.

It would be "manifestly unjust" to award Mr Drumm a discharge from bankruptcy, giving him a fresh financial start from €10.5 million of debt, because he had engaged in numerous and repeated acted of concealment and false oaths by failing to disclose transfers of cash and property to his wife Lorraine, Mr Hutchinson argued.

In his closing statement, David Mack, one of Mr Drumm's lawyers, described the State-owned bank's case as "nothing but a witch-hunt," saying that it was "out to get" Mr Drumm from the start and they have "thrown the kitchen sink" at him trying to portray him as a "serial liar".

Mr Mack said the case was "long on rhetoric and short on substance" and that Mr Drumm did not knowingly intend to make a false statement. He told the judge that Mr Drumm disclosed the cash transfers in material given to his bankruptcy lawyers and forensic accountants before he filed for bankruptcy in Massachusetts in October 2010.

Mr Drumm disclosed this information to his advisers knowing that the bank, which is owed €8.5 million by its former chief executive, would be an “extraordinarily aggressive creditor.”

The omission of the transfers from his sworn bankruptcy statements were due to Mr Drumm and two advisers incorrectly interpreting what was required under one section of his bankruptcy statement.

“He understands now that he made a mistake,” said Mr Mack.

His lawyer questioned why Mr Drumm’s advisers would let him perjure himself by making a false statement.

The bank and trustee would have the court believe that his disclosure of further information about the transfers in the three months after he filed the statement was “just Mr Drumm controlling information… with his evil black hat on,” he said.

Referring to the cash transfers to Mrs Drumm, Mr Mack said that from September 2008 she wanted a nest egg and to take control of her life after raising her children alone for two years, and because every time she saw her husband during the banking crisis at that time “it looked like he was going to drop dead.”

There was “nothing nefarious” about a $250,000 loan Mrs Drumm gave her husband in 2009 to help him establish an American business to secure a US visa for his family, he said.

Mr Hutchinson said Mr Drumm gave more and more false oaths and contradictory evidence in his evidence “to cover his tracks and keep his story up to date,” he said.

Mr Mack told the judge that the bank had played “gotcha” on Mr Drumm by trying to catch him out on sworn statements and testimony he had given “close to 20 times” between 2009 and 2014.

“Bankruptcy is not a game of gotcha,” he said. “A discharge should not be taken away because a debtor made an honest mistake.”

The judge gave both sides until July 15th to file post-trial submissions. A ruling is expected later in the summer.

Simon Carswell

Simon Carswell

Simon Carswell is The Irish Times’s Public Affairs Editor and former Washington correspondent