IRISH NATIONWIDE’S external auditors warned the building society early last year about the potentially significant damage to its reputation by providing controversial week-long loans to Anglo Irish Bank chairman Sean FitzPatrick.
Auditors KPMG told the building society’s annual meeting in Dublin yesterday that they warned two directors of Irish Nationwide at a private meeting in February 2008.
Vincent Reilly, a partner at KPMG, said he warned Irish Nationwide’s then chairman, Dr Michael Walsh, and Terry Cooney, chairman of the audit committee, that the short-term length of the loans posed significant “reputational risk” to the building society.
Irish Nationwide provided loans of up to €122 million to Mr FitzPatrick over an eight-year period, enabling him to move his loans at Anglo Irish off the bank’s books to avoid disclosing them publicly.
Mr FitzPatrick resigned from Anglo Irish last December after the loan transfers were revealed.
Mr Reilly said the auditors discovered the loans lasted no more than a week, just over the end of Anglo Irish’s financial year at the end of September, and were repaid shortly afterwards.
He said the loans were authorised by Irish Nationwide’s board and that the Financial Regulator also knew about the transactions.
Danny Kitchen, who replaced Dr Walsh as chairman when he resigned last February, told what was an angry meeting of members in Dublin that he was not on the board at the time the loans were provided, but the board felt there was nothing improper about them.
“In hindsight it would perhaps have been better not to lend to Mr FitzPatrick as the society has been dragged into the controversy surrounding these loans and undoubtedly suffered reputational damage as a result,” said Mr Kitchen.
He admitted the financial institution had made mistakes but said “recrimination will solve nothing”.
Mr Kitchen said that part of the rationale in lending to Mr FitzPatrick was to benefit from any syndication by Anglo Irish where large customers’ loans could be sold on to the building society. He said this could be done by “building a relationship” with Mr FitzPatrick, but that in fact “no such syndication took place”.
Mr Kitchen said the loans were “profitable, well-secured and in some instances supported by Anglo Irish” and were disclosed, “amongst others”, in quarterly reports to the Financial Regulator.
He blamed “typographical error” for Irish Nationwide stating that a €27.6 million pension scheme had more than one beneficiary in its 2007 annual report.
He said Michael Fingleton was the only beneficiary.
Mr Kitchen said he planned to reduce its commercial property loans to 50 per cent of the building society’s overall loans by 2013 from about 80 per cent currently.
