Businessman Seán Quinn admitted he was "greedy" at a meeting with the financial regulator in February 2008, the trial of former Anglo Irish Bank directors William McAteer, Pat Whelan and Seán FitzPatrick heard yesterday.
Mr Quinn had paid a “very high price for investing in Anglo”, losing “at least” €2.4 billion on the investment, former Quinn Group chief executive Liam McCaffrey said.
Cross-examining Mr McCaffrey, Brendan Grehan SC, for Mr Whelan, highlighted a minute from a meeting between the financial regulator’s office and Mr Quinn on February 28th, 2008.
The minute recorded Mr Quinn as saying “Seán Quinn needs to be reined in and had been greedy” in terms of his dealings with Anglo Irish Bank shares.
Mr McCaffrey said he was not present for that meeting, though he knew about it; and he did not think there had been any outcome from it.
Mr FitzPatrick (65) of Greystones, Co Wicklow; Mr McAteer (63) of Rathgar, Dublin; and Mr 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 McCaffrey agreed with Mr Grehan that the financial regulator was “full square behind” a deal between Anglo and Mr Quinn to buy out his interest in the bank’s shares. The deal was documented in a memo on March 31st, 2008, and the memo was sent to the financial regulator, the court was told.
It involved the sale of some of Mr Quinn’s interests in the bank. His interests were mainly held as contracts for difference (CFDs), investment products based on share price.
Shares placed on the market
Some of Mr Quinn's interests were to be placed on the market and "one of the outcomes sought" was that the market price of shares in the bank would not be destabilised, Mr Grehan said. He said this was "in everyone's interests", including the financial regulator's.
The shares were placed on the market in April, but nobody wanted to buy them, Mr Grehan said.
The court was told of a meeting between officials from the financial regulator’s office, Mr Quinn and Mr McCaffrey on February 20th, 2008, about financial problems at Quinn Insurance.
Mr Grehan pointed out that Quinn Insurance’s difficulties did not become public until September that year when the company was fined “a record figure” of €3.5 million by the regulator.
A note taken at the meeting and displayed in court said the regulator was concerned about the company’s financial position and “the replacement of assets with less liquid assets”. This involved the transfer of properties to Quinn Insurance in return for money paid out by the company, Mr Grehan said.
The minute recorded Mr Quinn as having “apologised sincerely for the current financial situation” and for “the problems it was creating for the financial regulator”, and as saying that “anything told to the financial regulator from now on will be 100 per cent true”.
Mr Grehan suggested Mr Quinn was gambling with CFDs. But Mr McCaffrey said he thought gambling was the wrong word. Mr Quinn had been “dealing with a highly leveraged derivative”, he said.
Mr Grehan said the note showed Mr Quinn agreed that €100 million would be put into the insurance company by March 2008 and assets worth €500 million in Prague, Istanbul, Kiev and Russia would be sold.
He asked if any of these sales had taken place. Mr McCaffrey said they had not.
MrMcCaffrey also agreed there was an agreement that the financial regulator would not disclose what was going on.
'Hit particularly hard'
After the "St Patrick's Day massacre" when US bank Bear Stearns collapsed, Anglo's share price was "hit particularly hard", Mr Grehan said. One of the immediate consequences was that the Quinn Group needed more money.
An additional €200 million was provided by Anglo, and the Quinn Group “hands over the keys of the shop by way of guarantees”, Mr Grehan said.
By March 29th, 2008, Mr Quinn had a CFD holding of about 29 per cent of Anglo’s shares. In June, Quinn Insurance needed a further financial injection of €200 million, Mr Grehan said, unrelated to the CFD issues, and Anglo agreed.
Yesterday afternoon Mr McCaffrey said there had been no “face-to-face meeting” between Anglo Irish Bank and Quinn representatives to begin unwinding Mr Quinn’s CFD position in July 2008. The former Quinn chief executive regarded this as “unusual”.
He noted a “degree of panic” in the transaction that was in “contrast” to the meeting between the parties in March 2008.
He was speaking in response to a letter shown to the court which had been written by Mr Quinn to then Anglo chief executive David Drumm on July 26th, 2008, to express concern at events between July 9th and 14th.
Mr Quinn wrote that he was not sure he had been treated fairly and was “in effect forced to sell the shares regardless of market price”.
“There seemed to be a degree of panic driving the process,” he wrote.
The court was also told about a statement by Mr McCaffrey to gardaí regarding the transaction to unwind the Quinn CFDs.
Mr McCaffrey was told by Anglo Irish Bank that it had taken legal advice from Matheson Ormsby Prentice and he presumed there was no legal issue, he told gardaí in a statement read out in court by Mr Grehan.
The financial company executing the transaction, Morgan Stanley , were “experts” and Mr McCaffrey would have relied on them to raise any concerns about the legality of the transactions, the statement read in court said.
In cross-examination by prosecution counsel Úna Ni Raifeartaigh SC, Mr McCaffrey accepted that he was not aware what Matheson Ormsby Prentice had been told about the transaction by the bank.
The court was also told about a transcript of a Garda interview with Seán FitzPatrick by the former Anglo chairman’s counsel, Michael O’Higgins SC.
It concerned the meeting at the Ardboyne Hotel in Co Meath in 2007, attended by Mr McCaffrey, Mr Drumm, Mr Quinn and Mr FitzPatrick. At this meeting Mr Drumm and Mr FitzPatrick learned the extent of Mr Quinn’s CFD holding in Anglo.
Mr FitzPatrick told gardaí David Drumm had asked him to go to the meeting because he felt Mr Quinn held the then chairman in “such regard”, according to the transcript.
Mr Drumm felt that if Mr FitzPatrick showed Mr Quinn how “disappointed” he was about his CFD interest in the bank he would “dispose of them quickly,” Mr FitzPatrick said in the transcript.
The former Anglo chairman told the Garda he was disappointed because Mr Quinn was “gambling” in the bank’s shares and that could be “dangerous” for the bank and “volatile” to shareholders.
Mr O’Higgins said this was quite a close match to Mr McCaffrey’s recollection of the meeting.
