Anglo's board and auditors criticised at egm Shareholders told FitzPatrick owed bank a total of €129m in 2007
MANSION HOUSE EGM:DONAL O’CONNOR, the new chairman of Anglo Irish Bank, told shareholders at an extraordinary general meeting (egm) yesterday that in 2007 his predecessor, Seán FitzPatrick, owed the bank a total of €129 million, some €42 million more than previously thought
Its published accounts showed that he owed only €7 million as he repaid €122 million before the financial year ended, and then borrowed cash again shortly afterwards.
In 2006 he used a similar system to disguise a €56 million loan.
Mr FitzPatrick and his boardroom colleagues owed the bank a total of €179 million at the end of the bank’s last financial year on September 30th.
Mr FitzPatrick owed Anglo €84 million.This calculation included a personal guarantee over €11 million owed to it by fellow director, Lar Bradshaw, who has also resigned.
The other board members owed it €95 million.
The revelations about the former chairman’s dealings last month also forced the resignation of then chief executive David Drumm.
The Director of Corporate Enforcement, Paul Appleby, the Stock Exchange and Financial Regulator are investigating the loans.
The bank says its solicitors have told it that the practices were not in breach of company law.
The scandal is thought to have played a key role in the Government’s decision to take full ownership of Anglo rather than simply recapitalising it with a €1.5 billion cash injection and taking 75 per cent control.
Yesterday’s meeting had been called to consider the recapitalisation proposal, but the motion was not put and the business of the meeting adjourned.
Yesterday the Minister for Finance, Brian Lenihan, said that Mr FitzPatrick’s actions had damaged the overall reputation of Irish banking.
Directors are obliged to give details of loans from their companies in their firm’s published accounts, but they only have to reveal the precise amount that they owe at the balance-sheet date, which marks the end of the financial year. Mr FitzPatrick’s practice of “warehousing” part or all of his debt to Anglo Irish Bank in Irish Nationwide meant he was only obliged to reveal the actual amount due at that point.
This meant he could cover up the true amount of his debt.
Mr FitzPatrick had an ongoing credit facility with the bank that allowed him to borrow sums up to a set limit.
The bank has not said what the limit was but it is understood that the amounts he owed varied from time to time.
Its credit committee, which approves and oversees large loans, and various managers were aware of the deal, but its auditors and some of Mr FitzPatrick’s fellow directors were not.
Shareholders at the meeting in Dublin’s Mansion House yesterday criticised board members and the bank’s auditors, accountancy firm Ernst and Young, for this failure.
The bank’s own explanation was that directors’ loans were not regarded as posing a risk to the business, and therefore did not come to the board’s and auditors’ attention.
Several times during yesterday’s meeting Mr O’Connor described Mr FitzPatrick’s behaviour as wrong and unacceptable. However, he did not say who approved the former chairman’s credit facility.
Yesterday Ernst and Young issued a statement saying when it carried out audits of the bank. Its staff received certificates from directors detailing their loan balances at the end of each financial year.
“Until late 2008, Ernst and Young was unaware of the refinancing transactions undertaken by the former chairman of the bank, which concealed the extent of his loans with the bank during previous years,” the firm said.
Anglo Irish Bank’s share price has collapsed from a high of €17.50 in May 2007 to 22 cent on Thursday night, a fall of almost 99 per cent.
It is suspended from the Irish and London stock exchanges pending nationalisation.
Last September it said it had put aside €500 million to cover projected losses from loans to property developers.