SEÁN FITZPATRICK, the former chairman of the now State-owned Anglo Irish Bank, was questioned by gardaí yesterday under section 10 of the Criminal Justice (Theft and Fraud Offences) Act 2001.
This is the first high-profile arrest of a major banking figure under the Act, though other people have been charged under its money-laundering provisions, usually in association with suspicion of involvement in other crimes.
The Act provides for dealing with a number of “white collar” crimes, including money laundering and false accounting. It outlines a number of offences incorporating deception for the purpose of making a financial gain or causing a loss to another.
Section 10 deals with “false accounting”. It makes it an offence to “destroy, deface, conceal or falsify” any account or accounting document; to fail to make or complete any such documents; or to furnish any information which to a person’s knowledge is or may be “misleading, false or deceptive”, with the intention of making a gain for himself or another, or causing a loss to another.
If a person is found guilty of such an offence, they face a fine or imprisonment of up to 10 years, or both.
A number of investigations have been continuing at Anglo since about the time that the bank was nationalised in January 2009 – a month after it emerged that Mr FitzPatrick had been moving loans out of the bank over eight years using short-term borrowings from Irish Nationwide Building Society.
The transfer of the loans meant that Mr FitzPatrick avoided details of the loans being published in the bank’s annual report each year.
However, the loans were included in the bank’s quarterly returns to the Financial Regulator.
The concealment of Mr FitzPatrick’s loans from public view is one of three issues being investigated by the Garda and the Office of the Director of Corporate Enforcement (ODCE).
When he resigned from Anglo, Mr FitzPatrick said the loan transfers “did not in any way breach banking or legal regulations”.
“However, it is clear to me, on reflection, that it was inappropriate and unacceptable from a transparency point of view,” he said in a statement at the time.
The inquiries at Anglo are also examining the lodging of €7.45 billion in deposits by Irish Life Permanent into Anglo over its financial year-end at September 2008 which were withdrawn days later.
The lodgements effectively masked the heavy loss of deposits at Anglo at the height of the financial crisis following the collapse of US bank Lehman Brothers when the bank later reported its annual results in early December 2008.
Irish Life Permanent claimed it was following the so-called “green jersey agency” where Irish banks were encouraged by the regulator and Central Bank to help each other at a time of scarce liquidity in the banking sector.
Both the regulator and the Central Bank said they were not aware of the deposits nor would they have supported them as they did not help Anglo’s liquidity position.
Gardaí and the ODCE are also looking at the so-called “golden circle” transaction which involved a group of 10 long-standing customers of Anglo buying a 10 per cent stake in the bank – using loans from the bank – which had been indirectly held and sold by businessman Seán Quinn.
The bank assembled the group of investors in the summer of 2008 to prevent the shareholding, part of a 25 per cent stake indirectly held by Mr Quinn, being sold on the open market. The sale of such a large stake at a time of severe volatility for Anglo could have further destabilised the bank.
Directors’ loans at Anglo are still under investigation by the regulator. The Irish Stock Exchange and Chartered Accountants Ireland, the representative body for accountants, are also carrying out inquiries at the bank.