David Drumm guilty verdict: 87 days in court 19

Former Anglo chief executive seldom reacted during evidence

During his trial David Drumm became animated when a stockbroker talked about loan-to-deposit ratios. Photograph: Gareth Chaney/Collins

During his trial David Drumm became animated when a stockbroker talked about loan-to-deposit ratios. Photograph: Gareth Chaney/Collins

 

Twenty-six of the witnesses during David Drumm’s 16-week trial were former employees of Anglo Irish Bank, hailing from both the treasury and the lending sides of the bank. The first of them was Matt Cullen.

He told how he hand-delivered a letter to the Central Bank on September 29th, 2008, requesting emergency funding because Anglo did not have the resources to meet calls the following morning.

During Friday-afternoon meetings held around that time in Drumm’s office, ideas about how to get “the cash in” to the bank were urgently debated and discussed, recorded over a succession of days on a spreadsheet.

The meetings were held after the so-called St Patrick’s Day Massacre in March 2008 when the bank’s share price plummeted in the wake of the wider turmoil prompted by the banking crisis that had begun in the United States.

Drumm had asked him, Cullen said, to approach others for help. Cullen spoke with Bob O’Hara of the Central Bank in April 2008: “Bob said we were not to show ’effing reliance on ECB [European Central Bank] funding,” he told Dublin Circuit Criminal Court.

John O’Donnell, former chief financial officer of AIB, said AIB declined a “back-to-back” cash transfer with Anglo in 2008, though his Anglo counterpart, Matt Moran, had told him that the Financial Regulator knew that such an arrangement had been proposed.

One by one the ideas to boost cash flow failed, the court was told. Other banks were simply not interested. Eventually the only plan left on the spreadsheet was the back-to-back deal with Irish Life and Permanent (ILP).

On Wednesday, day 87 of the trial, Drumm, of Skerries, Co Dublin, was found guilty to conspiring to defraud depositors and investors at Anglo by “dishonestly” creating the impression that deposits in 2008 were €7.2 billion larger than they were.

He was also found guilty of false accounting on December 3rd 2008, by furnishing information to the market that Anglo’s 2008 deposits were €7.2 billion larger than they were.

Taped conversation

A taped conversation between Moran and John Bowe on September 22nd, 2008, illustrated Anglo’s plight, and the efforts of men trying to find a way out of the difficulties in which they found themselves.

Joking about an upcoming meeting with a Credit Suisse banker, Moran quipped: “Look, if I can get a bit of drink into him, I might say to him, ‘I’d like about five billion before the 30th.’” Bowe wondered if they could “get him to sign the beer mat”.

The black humour continued aloud as Bowe wondered if Credit Suisse might be prepared to “give us a little kind of one-night stand”, while Moran replied: “Well I’ll promise him there’ll be no f***ing STD out of it.”

Bringing Moran through the deal, Bowe went on: “You don’t need the physical cash. What we do is we pay them and they pay us, do you know what I mean? It’s sort of the cherry on the cake, plus a bit of the cake as well. The f***ing tin, as well as the bloody oven.”

Credit Suisse said no, as former Anglo employee Peter Geisel testified later. Anglo’s lack of options were starkly drawn during a call between Ciarán McArdle and non-executive director Donal O’Connor, on September 29th, 2008.

“All those guys that were supposed to do us special favours have fallen away,” McArdle said. The isolated bank was rapidly losing liquidity.

The details of of the €7.2 billion ILP/Anglo transactions were detailed in recorded calls between McArdle and Paul Kane of ILP on September 25th. ILP would give Anglo funds for a week, or two if it wanted.

Illustrating the tensions, former Anglo executive Declan Quilligan told how a Credit Suisse banker cried at a meeting in September 2008 because he had invested in Lehman Brothers the previous day “and now there was just nothing”.

Following the collapse of Lehman Brothers, everyone was falling over and Anglo was fighting to survive because “nobody knew where this was going to end”, Quilligan recalled during his evidence.

Jurors got an insight into Anglo’s culture from one of its treasury executives, Tony O’Hanlon. “I had concerns about their systems, their policies, their procedures,” he told defence counsel.

During highly technical evidence, bankers had to be asked by barristers to slow down and remember that not everyone was familiar with the concepts of “repos”, “window dressing” and “liquidity ratios”.

Animated

Usually, Drumm did not react during evidence. However, his face did become animated when stockbroker Ciarán Callaghan talked about loan-to-deposit ratios. Such computations, clearly, were the fabric of his former life.

By the end of the snows in March, employees and former bankers from ILP came to give their evidence. Senior ILP management had directed that the Anglo deal was to be kept “fairly tight” and not to be the subject of “idle chit chat”.

During a call between ILP witness Paul Kane and Peter Fitzpatrick, the former ILP chief financial officer tersely instructed the transactions with Anglo be documented as a binding agreement “in case something goes pop”.

Fitzpatrick said ILP would be massively exposed if the deal was not recorded and instructed that standard banking language be used when doing so to “avoid f***ing confusion in anyone’s mind”.

ILP director Breffni Byrne gave evidence that ILP’s audit committee, of which he was head, had no knowledge of the deal, while ILP banker Peter McCabe said his ears pricked up when he heard traders saying they were doing several-billion deals with Anglo.

When he mentioned to chief ILP dealer David Gantly’s office that he thought things were getting dangerous, he said he he was told in no uncertain terms that his input was not required and that all the bosses knew about the deals.

And with the judge’s charge ringing in their ears, the jurors left court 19 to begin their unenviable task.

Was David Drumm a man who pulled off a massive con? Or was he the responsible captain of a ship who kept it afloat and away from dangerous rocks?

After just over 10½ hours of deliberations, the jurors reached the view he was the former.