Quinn assured of health of Anglo by financial regulator and bank, court hears

Businessman Seán Quinn has said he was assured of the health of Anglo Irish Bank by the financial regulator and by the bank in 2008.

Giving evidence at the trial of former Anglo Irish Bank directors William McAteer, Pat Whelan and Seán FitzPatrick yesterday, Mr Quinn said when he spoke to the regulator at meetings in spring 2008, he “always asked” about the bank’s viability and “always got assurances” that the bank was “strong and well capitalised”.

Mr Fitzpatrick (65) of Greystones, Co Wicklow, Mr McAteer (63) of Rathgar, Dublin, and Mr Whelan (51) of Malahide, Co 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.

Mr Quinn told the court he believed Anglo was a “blue- chip Irish bank regulated by the State”.

“I thought it was a marvellous institution,” he said.

He had invested in Anglo through contracts for difference (CFDs) – investment products based on share price – and by September 2007 he had an interest in 24 per cent of the bank’s shares, the court heard.

The family had talked about “putting a toe in the water”, he said, but had ended up with the “whole feet, head and neck” in the water. They didn’t mean to get in so deep, he added.

At a meeting in February 2008 with the financial regulator, Mr Quinn said he believed his CFDs in Anglo were talked about, “but it was very vague”.

He thought the regulator was “doing a fishing exercise”, he said.

Asked by senior counsel Brendan Grehan, for Mr Whelan, about being the richest man in Ireland in 2006, he said he had “read that”. Mr Grehan also pointed out he was the 12th richest in the UK and Britain. Mr Quinn responded he’d forgotten that. “It was never an important criteria for me,” he said.

Counsel continued that Mr Quinn had also been among the 200 richest people in the world in 2006.

“How times can change,” Mr Quinn responded.

He said in 2006 the group had borrowings of €300 million from Anglo and €1.1 billion from a consortium of banks.

Ardboyne meeting
At a meeting with chairman of Anglo Seán FitzPatrick and chief executive David Drumm in the Ardboyne Hotel, Navan, in September 2007, Mr Quinn claimed they did not want him to sell his shares.

He said they made it very clear if the shares went on to the market the share price would collapse. They asked “if and when the share price recovered, would I be happy to take the holding to single digits”?

“I said I’d be happy to do that,” Mr Quinn said.

Mr Grehan said at one stage Mr Quinn had nine different brokerage firms all buying CFD positions in Anglo and they had bought the stocks in which the CFDs were leveraged.

He asked Mr Quinn if he understood this could create an artificial market and keep the share price up and, if it became known, that hedge funds might force the sale of shares. Mr Quinn said he did.

Mr Grehan then asked why he invested further in CFDs after September 2007.

Mr Quinn said the share price was down so much and the profits were up so much, he thought it was an opportunity to buy more.

“It turned out I was wrong,” he said.

He also said loans given by Anglo in December 2007 to fill a €400 million “hole” in the Quinn Group – money that had been spent on paying CFD providers when the Anglo share price dropped – were not loans.

“I don’t call it a loan; they had invested in our name in their bank,” he said.

Fill hole
He also claimed he never asked Mr Drumm for that money, but had explained the financial position to him.

“He said to me how much would it take to fill the hole. He said to tidy this whole thing up we should make it €500 million,” Mr Quinn said.

Asked about the whereabouts of certain documents, Mr Quinn complained that he did not have them.

The receiver “wouldn’t give us anything from the office, not even the deeds of the children’s houses”, he said.

He explained that if there was a bad day on the market, the CFD providers would make a margin call for the money lost. On March 17th and 19th, he said there were “major margin calls” made, in and around €300 million.

“We had to throw the kitchen sink at it at that stage,” he said.

He said he sought a meeting with the board of Anglo afterwards to get some assurances from them.

“If you see the share price reducing and you are still being told the bank is profitable and the share price going through the floor, you are starting to wonder are we being told the truth here,” he said.

The meeting was refused. He said he reluctantly agreed that some of his CFD interests would be sold.

“Did you have any say at this stage in whether the shares were sold or not,” senior counsel Paul O’Higgins, prosecuting, asked Mr Quinn.

“No and he [Mr Drumm] let me know that in no uncertain terms,” Mr Quinn responded.

He claimed Anglo had been funding margin calls for their own benefit. Mr O’Higgins asked what he meant by that.

In trouble
"Well it certainly wasn't for our benefit. It appears that Anglo knew that the bank was in trouble in November 2007."

Mr Quinn said after the government bank guarantee in late 2008, he met Mr Drumm in Buswell’s Hotel in Dublin. He said he there to “appease”.*

“They still felt very comfortable . . . we’d come to a gentleman’s agreement and we’d all live happily ever after,” he said.

The case continues.

*This article was edited on February 11th, 2014