Regulator’s role in Anglo-Quinn share deal had degree of ‘plausible deniability’
Anglo former chief financial officer Matt Moran says regulator was ‘involved on two fronts’ with Quinns
Matt Moran, former chief financial officer with Anglo Irish Bank, outside Dublin Circuit Criminal Court yesterday. Photograph: Collins Courts.
There was an element of “plausible deniability” about the financial regulator’s involvement in an Anglo Irish Bank-Quinn share deal, the trial of three directors from the bank heard yesterday.
Matt Moran, former chief financial officer with the bank, agreed with Michael O’Higgins SC, for Seán FitzPatrick, that there did seem to be plausible deniability on the regulator’s part in relation to a deal made between the bank and Seán Quinn in March 2008.
This deal would unwind Mr Quinn’s 29 per cent interest in the bank’s shares, partly by having an institutional investor purchase the stock, but it did not ultimately go ahead.
The court had been told of contacts between the financial regulator and Anglo in relation to the deal.
Mr O’Higgins asked Mr Moran if “there was a touch of ‘Yes, Minister’ going on here”.
“It’s difficult for me to comment on that remark,” Mr Moran responded.
“Have you ever heard the phrase ‘plausible deniability’?” Mr O’Higgins asked. He explained this meant being “involved and controlling” something in some shape or form “but not appearing to be above the water line” and, if questions were asked later, involvement could be plausibly denied.
“That’s the flavour of what’s happening here?” he suggested.
“That does appear to be the case,” Mr Moran responded.
Mr FitzPatrick (65) of Greystones, Co Wicklow; Willie McAteer (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.
Mr O’Higgins asked who Mr Moran believed Matheson Ormsby Prentice solicitor Robert Heron was acting for during the Anglo-Quinn deal.
Mr Moran responded that Mr Heron was to “sit in the middle” between the Quinn Group and the bank.
He did not know first-hand who made that proposal, the court heard.
Mr O’Higgins asked if Mr Moran had ever known circumstances where “two significant entities” shared a solicitor.
“Ever done business like that before?” he asked.
“No, I haven’t,” Mr Moran responded.
Mr Moran agreed that the regulator was “involved on two fronts” in 2008 with the Quinns in relation to Quinn Insurance and also with the bank in relation to Mr Quinn’s contracts for difference (CFDs), investment products based on share value.
He also confirmed that, as part of the March deal between Anglo and the Quinns, it was agreed that the CFD deposit, repayable from CFD providers once the holdings were unwound, would not go back to the bank but would go into Quinn Insurance instead.
Mr O’Higgins suggested this would be “the last thing” the bank would want to do as it wanted to reduce its lending to the Quinns. Mr Moran agreed.
Mr O’Higgins also pointed out that, in a first draft of the agreement, it was recorded the regulator agreed the money would go back to the Quinn Group. This clause was subsequently removed.
Financial services company Morgan Stanley was asked to become involved in the deal in early 2008, the court was told. Its transactions committee queried why the financial regulator was “so keen to get the transaction done” and why it was “rushed”, the court was told.
And when the March deal did not work out, Mr Moran said the regulator’s office expressed “huge disappointment”.
Mr O’Higgins highlighted a discussion on or about April 1st, 2008, between Liam McCaffrey of the Quinn Group and the chief executive of Anglo, David Drumm.
He said Mr McCaffrey suggested Mr Quinn would “go long” and buy shares in the bank before unwinding his CFDs in Anglo. But Mr Drumm vetoed that.
Mr Moran said Mr Drumm thought it would be “improper” and the regulator would not approve.
So, at the first instance of something suspect, “Mr Drumm put his foot down and said no,” Mr O’Higgins suggested.
Mr Moran agreed.
The court has heard that ultimately a deal was done in July 2008 to unwind the Quinn CFDs. This involved the “Maple 10” borrowing from the bank to buy 1 per cent of the shares each, and the Quinns borrowing to buy almost 15 per cent. The Quinns issued a press release about their purchase.
Patrick Gageby SC, for Mr McAteer, suggested in mid-2008 the options for an orderly unwind of the Quinn CFDs “were disappearing into the past” and the Maple 10 deal was “the last-chance saloon”.
Mr Moran agreed, saying it was “the last roll of the dice”.
Under re-examination by Paul O’Higgins SC, for the prosecution, Mr Moran agreed that Morgan Stanley was not only involved in the Quinn-Anglo deal but also one of the “most significant” CFD providers to Quinn.
“So Chinese walls and all that,” Judge Martin Nolan interjected.
Mr O’Higgins asked whether the Quinns knew about the lending to the Maple 10 at the time.
Mr Moran said he did not believe so.
“Efforts were made to ensure the other side of the transaction was not disclosed to the Quinns,” he said.
Mr O’Higgins said the public also did not know about the Maple 10. If a member of the public was buying Anglo shares on July 16th or 20th, 2008, “all they would know was what was in the Quinn announcement”.
Mr Moran agreed.
The judge asked the jury to return on Wednesday for the continuation of the trial.