On December 22nd, 2010, a little over two months after David Drumm filed for bankruptcy in Massachusetts, Heather Zelevinsky, an employee at the Boston law firm advising the former Anglo Irish Bank chief executive on his US bankruptcy case, wrote him an email.
She told him and Stewart Grossman, Drumm's bankruptcy lawyer at the firm Looney & Grossman, that she had sent Andrew Lizotte, the lawyer acting for Kathleen Dwyer, the court-appointed trustee overseeing his bankruptcy, "a hard copy of everything David provided (minus the summary of transfers between David and Lorraine)," referring to $1.2 million (€879,000) in husband-to-wife cash transfers, mostly between September and December 2008.
Giving evidence on the third day of Drumm’s bankruptcy trial in Boston on Friday, Mr Grossman, the second witness in the trial, said he advised Mr Drumm before he filed for bankruptcy that all cash transfers had to be included in his court bankruptcy statements and that Mr Grossman believed all transfers were in the statements he filed on October 29th, 2010, purporting to be a complete picture of his finances.
Asked whether it was Ms Zelevinsky’s decision to take out the summary of the transfers, as mentioned in the December 22nd email, Mr Grossman said: “I don’t know, but it looks like it from this email.”
Later in the testimony, Mr Grossman conceded the omission of the husband-to-wife cash transfers in the Drumm bankruptcy filings was a “goof” – either by his firm or by Mr Drumm if his firm had explained to him the cash transfers should have been included.
Defrauded creditors Irish Bank Resolution Corporation, formerly Anglo, and Mr Drumm's bankruptcy trustee are seeking to deny him a discharge from bankruptcy, claiming he defrauded creditors by transferring cash to his wife and for making false oaths in his bankruptcy case by omitting the transfers. Mr Drumm, who owes the bank €8.5 million (most of it arising from loans to buy Anglo shares), is contesting the claims.
On Thursday, Mr Drumm towards the end of about 10 hours of questioning over two days admitted he was asked by Looney & Grossman to fill out draft financial statements, which should have included his cash transfers in the two years before his bankruptcy.
The following day, Mr Grossman said he wasn’t involved in the day-to-day preparations of Mr Drumm’s statements and that while he was “a little fuzzy” he believed that Ms Zelevinsky, an associate in his law firm, didn’t think she had to include cash transfers older than a year.
This week, the court will hear from Ms Zelevinsky on her thinking on the transfers. She is one of three remaining witnesses to testify in this trial.
Ms Zelevinsky will be called by Mr Drumm's side in a defence that has parallels to arguments made by the defendants, his former colleagues, in the recent Anglo criminal trial involving illegal lending to buy shares: they did what they did after consulting professional advisers. 'Totally freaked out'
Mr Drumm has testified he did not realise he had to include cash transfers in his bankruptcy statements until April 2011, almost six months after he submitted the statements to the court. Despite this, the transfers were included in bank statements and spreadsheets
he handed over to his bankruptcy trustee from December 2010, he said.
Another witness yet to testify in this trial central to the story is Lorraine Drumm.
Mr Grossman said the Drumms told him in 2010 that Lorraine Drumm had “totally freaked out” as the banking crisis deepened in late September 2008 and wanted money of her own.
Mr Drumm’s bankruptcy trustee Kathleen Dwyer, the third witness in the trial, testified on Friday that Mr Drumm told her a $831,000 (€608,955) cash deposit from his wife’s bank account and used to buy their $2 million family home in Wellesley had come from their “household income”.
Further questioning of Mr Drumm revealed the money came from his earnings at Anglo (where he made $18 million between 2004 and 2009) and that Lorraine Drumm didn’t even have her own bank account from the time she married Mr Drumm in 1991 until September 2008, Ms Dwyer said.
The bank and trustee claim Lorraine Drumm subsequently opened 15 accounts in her sole name at eight banks funded with the $1.2 million in cash from her husband. (Mr Drumm also disclosed in testimony that he loaned his brother $6,000 six weeks after he filed for bankruptcy.)
Mr Drumm was virtually cleaned out of cash, the bank’s attorney John Hutchinson said to Mr Grossman during questioning on Thursday, and that he had to get $250,000 from his wife to fund a capital investment in his new American business to secure a US visa.
The court will also hear from attorney Peter Covo, who helped the Drumms set up a nominee trustee to hold the ownership title to their home in Wellesley, Mr Drumm claims, to avoid being found by the media. The case resumes today.
