Entire affair ends back at regulator’s office

Judge Martin Nolan’s comments on the regulator are extraordinary

It was Friday, January 9th. 2009. The financial regulator had just announced that its chief executive during the boom years, Patrick Neary, was retiring from his powerful post in Dame Street.

“The authority has accepted, with regret, the decision of Patrick Neary to retire as chief executive,” it said.

It praised Mr Neary for his “wealth of experience, both domestic and international”, not to mention his “dedication, commitment, a strong work ethic and integrity”.

"During his time as chief executive Patrick has made a significant contribution to the development of the organisation and to the principles-based approach to regulation which was adopted by all of the stakeholders in Ireland.


“The system is, of course, now under review in the light of the global financial crisis, which has posed such major issues for regulators worldwide...The authority wishes Mr Neary well for the future.”

Mr Neary was well rewarded for his contribution. He received a €630,000 pay-off and an annual pension of €143,000. Little is known how exactly this generous pay-off was arrived at but it must have required very senior State approval.

Within weeks of Mr Neary's resignation, news that Anglo Irish Bank had loaned money to fund the purchase of its own shares by both the Quinn family and 10 long-standing clients of the bank would break.

At once the State announced it was firmly on the case.

A spokesman for the Department of Finance said in the week the Quinn/Anglo story broke: "Various matters are being considered by the financial regulator, the Office of the Director of Corporate Enforcement [ODCE]...any significant corporate governance issue that comes to light will be investigated by the appropriate authorities".

Soon gardaí would also be involved after the regulator itself made a complaint that it believed something deserving of investigation had occurred between Anglo and the Quinns.

The State assured the public it would get to the bottom of what seemed a huge financial scandal.

Six years later, hundreds of interviews, the analysis of one million documents, thousands of investigation hours and the occasional arrest finally led to 48 days of evidence, 50-odd witnesses, days of legal argument and a jury’s deliberations before it was finally over.

Judge Martin Nolan boiled the entire Quinn-Anglo affair back to where it all started: the office of the financial regulator on Dame Street.

“It would be most unjust to jail these two men when I feel that a State agency [the financial regulator] had led the two men into error and illegality,” he said.

Judge Nolan praised gardaí for carrying out a “difficult and unusual investigation” but his comments on the regulator who started the whole investigation were extraordinary.

“I find it incredible that red lights didn’t go off someplace in the regulator’s office and the appropriate legal advice was not sought.

“It seems to be by not taking action and not warning the bank, they (financial regulators office) gave a green light to lending for the purposes of buying shares.”

During his evidence in the Anglo trial Mr Neary’s cut a figure far removed from the man portrayed in such respectful terms at the time of his retirement.

He veered from, at best, forgetfulness to at times farce.

In his two days in the witness box Mr Neary said “I don’t recall” 30 times, “I don’t know” 23 times, “I can’t recall” 12 times, “I can’t/don’t/cannot remember” 12 times, “That’s a complete blank to me” once, and “I’ve absolutely no recollection” four times.

His failure to keep notes and lack of curiosity were striking features of the trial.

At one stage, for example, he recalled meeting David Drumm, the chief executive of Anglo, in his office on September 12th, 2007.

The day before Mr Drumm had been informed by Mr Quinn that he had build up a very large position gambling on his bank.

Mr Drumm was ordered by his board to inform Mr Neary about this.

However the regulator could not recall this when questioned by Michael O’Higgins SC for Seán FitzPatrick.

It was, he said, “a special meeting of a personal nature that was [what was] conveyed to me before [(Drumm] came in”.

Q: “Well, I would regard personal nature like I’m having problems at home or where I’m going on holiday. I take it we’re not talking about that?”

A: “Well it allowed for that possibility.”

Q: “It did, did it?”

A: “Yes it did because I had no idea what kind of an issue a chief executive of a financial institution might come and raise with me .”

Q: “Well, could it have something to do with finance – rather than trouble at home ?”

A: “Oh, it could be to do with anything, but I got the impression that – from Mr Drumm – that this was very much an informal chat he wanted to have with me .”

It was this type of inadequate response which destroyed Mr Neary’s credibility as a witness.

It raises serious questions about the events of the last six years and why the State has poured millions of euro into investigating bankers while failing to take a harder look at itself.

Last night the Central Bank issued a statement in response to yesterday’s ruling.

The Central Bank notes the court’s comments on the Irish Financial Services Regulatory Authority’s actions at the time of the Anglo Irish Bank share purchase transaction in July 2008, it said.

“The Central Bank has substantially strengthened Ireland’s capacity in financial regulation and supervision over the past number of years and introduced sweeping changes in supervisory practices.

“It is confident that the shortcomings identified by the court would not recur today,” said the statement.

At 1130am today the new governor of the Central Bank, Patrick Honohan, will brief journalists at the launch of its annual report.

He can expect tough questions about how much the culture in Dame Street has really changed.

Nobody in his office has been sacked for incompetence or faced any sanction despite the entire collapse of Ireland’s banking system.

Easier to round up a few fall guys and give them perhaps community service.