One of the Maple 10 investors who borrowed money to buy Anglo shares in July 2008 said he agreed to go ahead after being told he would be “a friend to the bank”, the trial of three former Anglo directors heard yesterday.
Businessman Brian O’Farrell, one of a group of investors known as the Maple 10 who agreed to buy shares in the bank in July 2008, also said he was told the Financial Regulator, the Central Bank and the Department of Finance were aware of the transaction.
The Maple 10 deal involved each of the businessmen borrowing €45 million from Anglo to purchase 1 per cent of the bank’s shares in order to unwind contracts for difference (CFDs) – investment products based on shares – held by businessman Sean Quinn.
Mr O’Farrell said former chief executive of Anglo David Drumm told him if the hole in the bank wasn’t plugged immediately “Anglo would be gone in a week” and would drag down AIB and Bank of Ireland.
Sean Fitzpatrick (65) of Greystones, Co Wicklow, William Mc Ateer (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.
Giving evidence yesterday, Mr O’Farrell said he had been doing business with Anglo for 15 years when Mr Drumm and Mr Whelan came to his home at 8:30am on Monday July 14th after he returned from holidays. Mr Drumm explained the CFDs had put the bank in a very bad position.
“He told me you’ll probably make no money in this transaction but you’ll be a friend to the bank,” Mr O’Farrell said. He said he made the decision “there and then” to agree and he signed the forms presented to him.
Úna Ní Raifeartaigh SC, for the prosecution, highlighted a facility letter offering Mr O’Farrell the loan to buy the shares. She pointed out his signature was dated July 11th, which would “appear to be a Friday” in the week before the meeting at his home.
“I didn’t know that,” Mr O’Farrell said.
Under cross-examination from Brendan Grehan SC, for Mr Whelan, Mr O’Farrell said he was definite that the meeting was “a Monday morning”. He recalled being told the bank was “under attack”.
He had formed “a strong bond of friendship” with Mr Whelan over 15 years and he wanted to help the bank.
If “the bank went, I went,” he said.
He also acknowledged that the loan to buy bank shares had personal recourse of 25 per cent. He told Mr Grehan that he never had full recourse on any of his loans with Anglo.
Under re-examination from Ms Ní Raifeartaigh, Mr O’Farrell agreed there had been no negotiation “whatsoever” on the rate of recourse with the bank.
Also giving evidence yesterday, Dermot Kieran, who was senior manager in group finance at Anglo in 2008, said he prepared pitches for the bank when they approached investors.
He said he was aware of phone calls on the weekend of July 12th between Morgan Stanley and the Financial Regulator and between Morgan Stanley and legal advisors Matheson Ormsby Prentice. These related to the purchase of shares in Anglo by the Maple 10 to unwind the Quinn CFDs.
He confirmed issues to be addressed during the calls included market abuse considerations and legal disclosure requirements. He also confirmed he was working with his superiors Matt Moran, Fiachre O’Neill and Brian Gillespie over the weekend of the 12th.
Ms Ní Raifeartaigh asked on whose instruction his superiors were operating.
“I understand they were operating on the instructions of the CEO and the board,” Mr Kieran responded.
Under cross-examination by Lorcan Staines BL, for Mr Whelan, he said he understood Anglo had taken full legal advice from Matheson Ormsby Prentice on the legality of the transaction and Morgan Stanley had carried out “due diligence as well”.
Mr Staines highlighted an email dated July 9th from Mr Moran, then chief financial officer at the bank, to Mr Kieran. It said regarding “Project Maple” – the “regulator conversation done and went fine”.
The case continues.
