A facility letter under which a €7.65 million loan was given to former Anglo Irish Bank CEO David Drumm in 2008 to buy bank shares had described the loan as a “non-recourse” loan, meaning the bank could only redeem the loan against the shares purchased, the Commercial Court was told today.
Both Mr Drumm and the Bank say this description was a “mistake” and the loan was actually a “recourse” loan. The bank denies Mr Drumm’s claim this acceptance by him was a factor in the bank allegedly reaching agreement with him to allow him a reasonable time to pay off the loan and not to move against his family home or take legal action.
Mr Drumm, who resigned in December 2008, claims the “non-recourse language” used in the January 10th 2008 loan facility document was “put in in error” and he later agreed with Anglo it would be replaced by a “recourse” facility executed in 2009.
This acceptance by Mr Drumm was a “valuable benefit” to Anglo because, when it was nationalised in 2009, its shares were virtually worthless and the entire loan to Mr Drumm would have had to be written down if it was a “non-recourse” loan, his counsel Declan McGrath said yesterday.
Mr Justice Peter Kelly granted counsel an order requiring Anglo make discovery of all documents relating to contact and negotiations between Mr Drumm and the bank between December 1st 2008 and July 2009 related to repayment of Mr Drumm’s loans, including contacts with Donal O’Connor and Declan Quilligan of Anglo.
Anglo denies it had given Mr Drumm any concession for his acceptance the loan was a non-recourse loan.
Mr Justice Kelly today dealt with matters concerning documents to be discovered for the hearing of Anglo’s proceedings against Mr Drumm for €8.3 million arising from the loan and interest. The full hearing is expected to take place later this year.
As well as opposing the Bank’s claim for the €8.3 million, Mr Drumm has counterclaimed for some €2.6 million over the termination of his employment and loss of bonuses.
Now living at Stage Neck Road, Chatham, Cape Cod, Mr Drumm has in letters to Anglo claimed he has sufficient assets to meet his liabilities to the bank and its demand for immediate repayment is premature, in breach of loan agreements with him and amounts to harassment.
Mr Drumm has also claimed he and his wife Lorraine have given undertakings relating to their former family home in Malahide, which has been transferred into Mrs Drumm’s name in what Anglo alleges is a fraud on creditors but the couple claim was for “taxation reasons”.
The judge was told Mr Drumm has agreed to discover documents evidencing his claim for mental distress arising from the bank’s actions. He will also discover all documents relating to the transfer of the family home and the date of the couple’s move to Abington, Massachusetts.
Paul Sreenan SC, for Anglo, said it had agreed to discover a range of categories of documents but argued documents sought relating to alleged contacts and negotiations between it over his loan and Mr Drumm extended over too long a time period
Mr McGrath said, after Anglo was taken over by the State and its shares were “virtually worthless”, a difficulty arose because of the “non-recourse language” in the January 10th 2008 loan facility.
The bank’s lawyers and auditors were concerned how the loan was to be treated in the bank’s annual accounts for 2008 as, at that time, there was much controversy about loans to other Anglo executives, including former CEO Sean Fitzpatrick. The issue had delayed publication of the bank’s accounts.
It was agreed between the Bank and Mr Drumm the 2008 loan facility would be replaced by a 2009 “recourse” facility which did not include the “non-recourse language”. Mr Drumm had written to Anglo on January 28th 2009 setting out his understanding of the agreement but received no correspondence until June 2009.
Mr Drumm was later told by Eugene Murray of Anglo its lawyers were reviewing its loans in light of a relationship framework agreement with the Minister for Finance. This was “a clear attempt” to negate the effect of the agreement between Anglo and Mr Drumm as to how his loans were to be treated, counsel said.
Mr Justice Kelly said he was satisfied there was “toing and froing” between Mr Drumn and Anglo from December to June 2009 and Mr Drumm was entitled to discovery of documents relating to such contacts, including phone contacts, up to July 1st 2009, not January 31st 2009, as the bank had argued.
The judge also said Mr Drumm’s side could seek sworn replies from Anglo to questions related to deferred bonus payments to employees leaving the bank between January 2005 and January 2010 and to payments in lieu of notice to senior executives of over the same period. Mr McGrath said his side had the name of some persons who had received such payments.
Mr Drumm also sought documents related to his claim his privacy rights were interfered with through alleged leaks by Anglo of his banking details to others, including the media. An Irish Times article of October 16th 2009 referred to having seen bank records of Mr Drumm, counsel said.
Mr Justice Kelly said it was clear it did not just happen an Irish Times journalist and photographer were just sauntering past St Stephen's Green when Mr Drumm was going to a meeting with Anglo. He directed Anglo to discover documents relating to any communications by it to the media between September 23rd and October 21st 2009.
Mr Drumm was not entitled to discovery of communications between Anglo and the Department of Finance about accounts as any such communications would have occurred when the State owned the bank, he added.
