David Drumm, the former chief executive of Anglo Irish Bank, authorised deals which led to the falsification of the bank's balance sheet, a jury has been told at the opening of his conspiracy to defraud trial.
On the first day of the trial prosecutors described Mr Drumm (51) as “the man who called the shots” at Anglo Irish Bank and said the deals he authorised also made it appear deposits from customers were €7.2 billion greater than they were in reality.
Dublin Circuit Criminal Court heard Mr Drumm was involved in a conspiracy with others to dress up and falsify the bank’s balance sheet during “very rocky” times for the banking world in 2008.
Mr Drumm (51), with an address in Skerries, Co Dublin, has pleaded not guilty to conspiring with former bank officials Denis Casey, William McAteer, John Bowe and others 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 has also pleaded not guilty to false accounting on December 3, 2008, by furnishing information to the market that Anglo’s 2008 deposits were €7.2 billion larger than they were.
Opening the case on Friday Paul O’Higgins SC, prosecuting, told the jury they would hear recorded phone conversations during which Mr Drumm gave permission for money to “pass go”, adding several billion euro in non-existent customer deposits as it passed around the various financial institutions.
Money circulated ‘at lightning speed’
Mr O’Higgins said it was the prosecution’s case that money circulated “at lightning speed” between Anglo, Irish Life & Permanent and Irish Life Assurance, before returning to Anglo.
He told the jury of ten men and five women there was absolutely “no commercial reality” to the transactions.
Mr O’Higgins said, as a result of the conspiracy, wholly artificial and completely unreal transactions were born, with the intention of deceiving investors, depositors and lenders.
He said there was no onus on the State in this case to prove that any customer or individual had lost money as a result of the conspiracy.
He explained that deposits from “non banks” are believed to “look better” on a bank’s balance sheet and are preferable to deposits from other banks.
It was Anglo’s “prime intention” to ensure its balance sheet appeared as strong as possible as its financial year end approached in September 2008.
Mr O’Higgins asked the jury to recall the “very rocky times” in the banking world 2007 when banks began to have serious worries about where they were going to source money.
He said the fact that Anglo’s banking model was heavily focused on commercial property meant they found themselves particularly under threat.
The jury heard that both Irish banking authorities and the Governor of the Central Bank wanted Irish banks to assist each other with liquidity issues. But Mr O’Higgins said this couldn’t excuse what happened, and has lead to the trial in this courtroom today.
He said the State banking guarantee on September 30th, 2008 did not lead to the abandonment of the plans or a change to the figures published in December 2008 and was also irrelevant.
Mr O’Higgins said there was nothing illegal in itself about moving money around between banks.
But he said the only purpose of these transactions was that when the bank published its financial results, it would suggest to the public that customer deposits were greater than they really were.
He said when David Drumm put forward the bank’s accounts in December 2008, he knew that the figures were not true.
He said the only logic of the transactions was to deceive people looking at the end of year figures.
Mr O’Higgins said Mr Drumm was the person who “called the shots” in Anglo. He described him as “the moving spirit” between the bank’s treasury department and its lending department.
This morning, Paul O’Higgins told the jury of ten men and five women they must each act as 15 independent judges of the facts but that at the end of the trial only 12 of them will be tasked with deliberating on the verdicts.
The specially enlarged jury is a result of the length of the case, which is estimated to run from three to five months.
Mr O’Higgins told the jury Mr Drumm, like every defendant in a criminal case, was presumed to be innocent until the prosecution have overcome the burden of proof it must reach.
He said this standard is one where the prosecution has proved it’s case beyond reasonable doubt.
“Even if you thought it was much more probable that he was guilty as not of the charges, you must acquit in those circumstances,” he said.
Earlier last month another jury was sworn in over a number a days but difficulties arose with some of those jurors and another jury had to be empanelled. There then followed some weeks of legal argument.
The trial continues this afternoon in front of Judge Karen O’Connor.