Former Anglo Irish Bank chief executive David Drumm will be sentenced on Tuesday at 2pm for his role in an illegal share-buying scheme aimed at propping up the bank's share price in July 2008.
At the end of a hearing lasting more than an hour at the Dublin Circuit Criminal Court, judge Karen O'Connor said she would deliver her sentence on Tuesday on Drumm's guilty pleas over the unlawful loans.
Drumm (51), who is serving a six-year sentence for conspiracy to defraud and false accounting, pleaded guilty last month to authorising unlawful loans to 10 property developers to buy shares in Anglo in 2008.
Loans of €45 million were provided to each developer to purchase Anglo shares to unwind the investment held by businessman Sean Quinn through contracts for difference, a form of gamble around the Anglo share price, that amounted to as much as 29 per cent of the bank's shares at one point.
The former banker was sentenced last month to six years in prison for directing a conspiracy to make Anglo’s balance sheet look €7.2 billion healthier than it was at the height of the financial crisis in September 2008.
These latest offences relating to permitting unlawful financial assistance by approving Anglo’s loans to the developers as the bank tried to buttress its declining share price by unwinding Mr Quinn’s interest because, the court was told, he was in a vulnerable position that could “knock” him and, in turn, Anglo and other banks over.
Transaction
Detective Sergeant Brian Mahon told the judge during the sentencing hearing at Dublin Circuit Criminal Court on Monday that Drumm "drove the transaction" in July 2008.
Det Sgt Mahon said the former Anglo chief came up with the solution of bringing together 10 investors to take part of the shareholding behind Mr Quinn’s stake, had spoken to Mr Quinn and persuaded him to through with the transaction, despite some reluctance on Mr Quinn’s part, and instructed his staff to execute it.
Drumm wore an off-white short-sleeved polo shirt with his glasses tucked into his shirt, blue jeans and black shoes in the dock. He listened intently to the proceedings that lasted more than an hour.
His defence counsel Brendan Grehan SC told the judge Drumm had “moved heaven and earth” trying to resolve the Quinn investment “in conventional ways” and matters “came to a crux” at the start of July 2008.
The court heard Drumm attempted to find others to buy shares in the bank and to unwind Mr Quinn’s investment from earlier that year by trying to find international investors and sovereign wealth funds.
When it became clear that a US investment company, Bain Capital, were not going to invest by July 9th, he came up with the idea of approaching 10 customers of the bank who became known as the Maple 10.
Financial Regulator
Mr Grehan asked the judge to take into account the involvement of the Financial Regulator. He said the evidence "points very clearly to a large body of people not seeing this being legally a problem."
These included the regulator, Anglo's external lawyer Robert Heron, a solicitor at what was then known as Matheson Ormsby Prentice, one of the country's big-five law firms, and investment bank Morgan Stanley.
There was “no question that the Financial Regulator had a very serious and, dare I say it, noble interest in Mr Quinn’s position being unwound,” he said.
It was only afterwards that everybody became aware the Quinn Group had breached regulatory guidelines on the insurance side of its business to meet margin-call losses on Mr Quinn's CFDs, he said.
“This was a problem entirely of the creation of Mr Sean Quinn; it was done in secret and with the bank being placed in an incredibly vulnerable position at a time that was the worst possible in relation to the global financial crisis,” he said.
The regulator had told Anglo in July 2008 that it could not lend Mr Quinn any more that the €2 billion it had already provided to cover the losses on his investment around the bank’s shares at a time when Mr Quinn was “haemorrhaging” cash.
‘Green light’
Mr Grehan asked the judge to take into her consideration the judgment in the trial of two former Anglo bankers, finance director Willie McAteer and head of lending in Ireland Pat Whelan, who were convicted of the same offences in 2014 but were sentenced to 240 hours' community service each.
In that trial judge Martin Nolan said he could not hand down custodial sentences as the Financial Regulator had given the "green light" to the illegal share-buying scheme for which they were convicted.
The judge found “a State agency led them into error and illegality” and the men were involved in “a genuine if misguided attempt to save the bank.”
Mr Grehan said the court does not have the option of sentencing Drumm to community service given that he is incarcerated but “it is something that the court should have regard to.”
He told the court Drumm’s guilty plea meant he had avoided what would have been a lengthy trial. The McAteer-Whelan trial lasted more than four months in 2014.
Det Sgt Mahon, who is on secondment with the Office of the Director of Corporate Enforcement, told the court that there was about 20 gardaí in addition to civilian staff working on the investigation at its peak.
They analysed in the region of 40,000 documents seized during searches of Anglo’s buildings on St Stephen’s Green and Baggot Street, he said.
Drumm’s conviction on these charges marked the end of nine years of investigation and criminal prosecutions of transactions in the run-up to the collapse of the bank in January 2009.
