Anglo fine 'mild slap on wrist'

The family of Sean Quinn has told the Commercial Court the €2.5 million maximum fine the Central Bank could potentially impose on Anglo Irish Bank over €2.34 billion loans allegedly made for the unlawful purpose of supporting its share price would only amount to the “mildest slap on the wrist” for the bank.

The family is entitled to advance arguments the bank breached Irish and European laws against market manipulation in making such loans and was therefore not entitled to recover the loans from them, their counsel Bill Shipsey SC said.

The maximum criminal penalty for the bank's conduct was a fine of €10 million while the maximum civil remedy was a fine of €2.5 million by the Central Bank, representing just one thousandth of the sum committed by the bank to manipulate the market and amounting to the "mildest slap on the wrist," he said.

In the circumstances of this case, it was hard to see how such a fine could be proportionate, he submitted. Anglo had decided it was in its own interests "to break the law" by advancing monies for the express purpose of propping up its share price, he said.

The family claims the loans were made to companies in the Quinn group for the unlawful purpose of funding margin calls on Contract for Difference (CfDs) positions taken out in Anglo by Sean Quinn via a Madeira-registered company, Bazzely owned by the Quinn children.

Where a bank engaged in such illegal activity, it was not disproportionate to argue an implied legal prohibition against recovering its money, Mr Shipsey submitted. Anglo was also not entitled to be unjustly enriched via having security over assets of third parties in relation to the loans and facilities, he argued.

This was the background against which the family wanted the court to allow them make the case that, under the Market Abuse Regulations 2005 and the Companies Act 1963, the loans are unenforceable against them due to being made for the illegal objective of supporting the bank's share price, he said.

The only issue the court had to decide at this stage was whether the family had the necessary legal standing to rely on the alleged breaches of the law, he said. The facts of this case gave rise to the family's entitlement to avoid the share pledges and guarantees provided by them on foot of which the bank sought to recover the loans and had appointed a receiver.

The family has pleaded unconscionable conduct and negligence by the bank and also alleged undue influence was exercised on them to sign the various documents, he said.

Mr Shipsey was making closing submissions in the hearing before Mr Justice Peter Charleton of a key preliminary issue of law in proceedings by Mrs Patricia Quinn and her five adult children aimed at avoiding liability for the €2.34 billion loans.

That issue is whether the family has the necessary legal standing to allege breaches of the Market Abuse Regulations and Section 60 of the Companies Act in support of claims that guarantees and share pledges provided by them, on foot of which the bank seeks to recover the €2.34 billion loans and has appointed a receiver, are unenforceable due to alleged illegality.

The four day hearing concluded yesterday. After remarking the case clearly did not fall into the category of the "unstateable or unlosable", the judge said he wanted time to address the issues and reserved judgment to February 29th.

Anglo, now Irish Bank Resolution Corporation, contends the family does not have the legal standing to allege abuse of the 2005 Regulations and Companies Act in support of its bid to avoid liability for the loans. It also argues some €500 million loans are unrelated to the alleged loans to fund margin calls on CfDs.