Former Anglo Irish Bank chief executive David Drumm told one of the 'Maple 10' investors in July 2008 that if the hole in the bank wasn't plugged immediately "Anglo would be gone in a week" and would drag down AIB and Bank of Ireland, the trial of three former Anglo directors has heard.
Businessman Brian O'Farrell, one of a group of investors known as the 'Maple 10' who agreed to buy shares in the bank in July 2008, also said he was told the Financial Regulator, Central Bank and Department of Finance were aware of the transaction.
The deal involved each of the 10 purchasing 1 per cent of the bank’s shares, worth some €45 million, in order to unwind contracts for difference (CFDs) – investment products based on shares – held by businessman Seán Quinn.
Seán Fitzpatrick (65) of Greystones, Co Wicklow, William Mc Ateer (63) of Rathgar, Dublin and Pat Whelan (51) of Malahide, Dublin have been charged with 16 counts of providing unlawful financial assistance to 16 individuals in July 2008 to buy shares in the bank, contrary to Section 60 of the Companies Act.
Mr Whelan has also been charged with being privy to the fraudulent alteration of loan facility letters to seven individuals.
All three men have pleaded not guilty to the charges.
Giving evidence this morning, Mr O’Farrell said he had been doing business with Anglo for 15 years when Mr Drumm and Mr Whelan came to his home at 8.30am on Monday July 14th, 2008, after he returned from holidays. They lived near him in Malahide, he said. Mr Drumm explained the CFDs put the bank in a very bad position.
“He told me ‘you’ll probably make no money in this transaction but you’ll be a friend to the bank,’” Mr O’Farrell said. He said Mr Drumm spent an hour explaining about CFDs and hedge funds and that he made the decision “there and then” to agree. Mr O’Farrelll said he then signed the forms presented to him.
Úna Ní Raifeartaigh SC, for the prosecution, highlighted a facility letter offering Mr O’Farrell the loan to buy shares. She pointed out his signature was dated July 11th, which would “appear to be a Friday” in the week before he had the meeting at his home.
“I didn’t know that,” Mr O’Farrell said.
Under cross-examination from Brendan Grehan SC, for Mr Whelan, Mr O’Farrell said he was definite that the meeting he had with Mr Drumm and Mr Whelan was “a Monday morning”. He recalled being told the bank was “under attack”.
He had formed “a strong bond of friendship” with Mr Whelan over 15 years and he wanted to help the bank, he said.
If “the bank went, I went,” Mr O’Farrell said.
He also acknowledged that the loan to buy bank shares had personal recourse of 25 per cent. He told Mr Grehan that he never had full recourse on any of his loans with Anglo. He said Mr Whelan also told him there was "an obligation" to have recourse with this particular loan.
Under re-examination from Ms Ní Raifeartaigh, Mr O’Farrell agreed banking was a competitive market, but there had been no negotiation “whatsoever” on the rate of recourse for the share loan.
The case continues.