THE FINANCIAL Regulator is investigating the circumstances in which businessman Seán Quinn and his family unwound an indirect 25 per cent interest in Anglo Irish Bank last year.
The regulator is looking at whether part of the Quinns’ stake – representing 10 per cent of the bank – was placed with new investors, instead of being sold through the stock market.
Selling 10 per cent of the bank on the open market could have depressed the share price of Anglo Irish Bank, which was already down by over 50 per cent from its 2007 peak.
The regulator is also investigating whether Anglo Irish Bank lent money to the group of business figures who are believed to have bought the 10 per cent stake.
Mr Quinn and his family announced last year that they had taken a 15 per cent stake in Anglo, saying they had built up a stake in the bank by way of so-called contracts for difference.
However, what was not disclosed was that the family had built up a stake of 25 per cent by way of contracts for difference. Owners of contracts for difference do not take ownership of the shares they are investing in, and under Irish law they do not have to declare themselves to the market. However, their losses can be a multiple of their original stake.
It is understood the Financial Regulator’s office became aware of the size of the Quinn family’s secret stake in Anglo Irish Bank and intervened last year. The office was concerned about the investment’s size and that it was not being declared.
It is not known when the Quinn family built up its stake but by mid-2007 the bank’s market capitalisation was more than €13 billion. At its peak the owner of one-quarter of its shares stood to lose more than €3 billion if its share price collapsed, as Anglo’s did, falling from a high of €17.53 in mid-2007 to about €6 by mid-2008.
Up to now it was thought the collapse of the Anglo share price – rather than pressure from the regulator – was behind the Quinns’ decision to exit their contracts for difference by buying the actual shares.
The Quinn family kept and declared ownership of 15 per cent of the bank. It is understood the rest of the Quinn shareholding was bought by a group of wealthy individuals. How this was managed and who managed it are among the issues being investigated by the Financial Regulator.
“There are a number of strands to our investigation into matters in Anglo Irish Bank,” a spokesman for the regulator said. A spokesman for the Quinn Group had no comment to make. A number of sources said the Quinn stake in Anglo reached 25 per cent. A source close to Mr Quinn said the stake never grew to 25 per cent but would not say what size the stake was at its height.
The Quinn group has written off close to €1 billion it advanced to the Quinn family to help it buy its way out of the Anglo contracts for difference. The true extent of the family’s losses is not known. The Quinn group and family are Anglo Irish Bank’s largest debtor.
The bank was nationalised last week after Minister for Finance Brian Lenihan said its funding position had weakened after revelations concerning loans to the bank’s former chairman, Seán FitzPatrick.
