Rolling updates from latest hearing in trial of former Anglo Irish Bank directors
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Check in today for live updates as the trial of former directors in Anglo Irish Bank proceeds.
The prosecution’s seventh witness is Sean Quinn jnr, who first took the stand in this trial yesterday and will continue giving evidence today.
10:25All of our rolling coverage of the Anglo trial can be seen here.
11:20The trial has resumed here in Court 19.
Judge Martin Nolan is warning the jury about media reports today which he said incorrectly stated that Sean FitzPatrick was at a particular meeting with Sean Quinn in September 2008.
The judge has told the jury that Mr FitzPatrick wasn’t present at the meeting. He said that jurors may read the papers if they like but to take the evidence as it’s said in court.
“Most of the time the reporting is right but sometimes it can be wrong, as shown today.”
Sean Quinn jnr has resumed his evidence and is being taken through documents relating to the Anglo share-buying deal by prosecuting counsel Úna Ni Raifeartaigh SC.
Mr Quinn jnr admitted he has very scant knowledge of the deal, but that most signatures on the documents are his own.
In 2002 he became a shareholder of the Quinn Group. Additionally, he would sign a large amount of documents as part of his role as operations director of Quinn Insurance.
He agreed under cross-examination from counsel for Pat Whelan, Lorcan Staines BL, that he had a high level of responsibility, with 1,000 people under him.
He agreed he and his family were involved in litigation with the remnants of Anglo.
This, he continued, revolved around the fact that the Quinns felt they were not liable for the loans from Anglo because, he alleged, they were illegal and as a result they are not liable for them.
11:54Another Quinn sibling, Colette, has now finished giving evidence. She gave broadly similar evidence to that of her brother, saying she had little knowledge of the intricacies of the Anglo shares deal and only finding out later that the funding was coming from Anglo.
Sean Reilly is now giving evidence. He was a customer of the bank and received loans from them.
He has said Pat Whelan called him in his office in Ivy Court around July 8th, 2008. He was asked to come in and meet David Drumm the next day. The meeting was in Mr Drumm’s Stephens Green office, and Mr Whelan was also there.
Mr Drumm said bank shares were coming under pressure from short selling and they were trying to unwind a position in the bank. They asked him to buy about 1 per cent, or 60 million shares.
The holder of this “position” was not disclosed.
“I was told Anglo would loan the money on 25 per cent personal recourse.
“If the shares ended up at 0 per cent I would have to pay 25 per cent, or €15 million.”
He was told Morgan Stanley would sort out the mechanics of the deal.
He said he was told the lawyers and Financial Regulator had approved the deal. The meeting lasted about 30 minutes.
He would think about it, he said, and went off and consulted with his partner. He decided it was a good deal at 25 per cent recourse, and they went along with it.
Another reason for going along with it was because the bank wanted him to complete the deal and he had a good personal relationship with the bank.
On July 10th, he went in to speak with Mr Drumm and gave the bank power of attorney to take the necessary steps in the transactions.
About 10 million shares were bought in the end using a loan of €45 million. The shares were bought at €4.365.
Mr Reilly said he was only aware of the Quinn involvement from reading the newspapers.
He later read the press release announcing the unwinding of the Quinn CFD position and was able to link this to the deal he had done.
12:10Sean Reilly is now going through documents relating to the deal to buy the Anglo shares. One document detailed the 25 per cent recourse he would be liable for if the shares fell to zero.
Mr Reilly said he understood that in the deal, the bank had 100 per cent security on the shares and a 25 per cent additional personal recourse on Mr Reilly.
In other words, if the share price bottomed out to zero, Mr Reilly would have to pay a quarter of the value of the loan.
Mr Reilly said he signed the document on July 11th, 2008, accepting the terms of the deal.
Another document, signed on the same date, was then presented to the witness. It granted power of attorney to Anglo officials allowing them to engage Morgan Stanley to buy up to 12 million shares in the bank. Its terms extended to July 25th, 2008.
This document meant Mr Reilly gave power to the bank to act on his behalf when buying the shares, counsel said.
A third document from July 11th, 2008 was also shown. This detailed conditions attached to the loan facility.
The document stated Mr Reilly had to give the bank 10 days’ notice before selling on the Anglo shares and that the bank might nominate a third party to buy the shares.
The witness said he promised Mr Drumm to not to “flood the market” with the shares.
12:36Mr Reilly looked at a letter dated July 17th, 2008. This is a facility letter from Anglo which stated that it “supersedes” the previous facility letter sent out on July 10th, 2008.
This replaced the original €60 million loan figure with a lower figure of €45 million. This reflected the fact that the shares were bought at a lower price than originally envisaged.
It also differed from the first facility letter in that it stated the recourse to the borrower would be 25 per cent or the value of the shares.
The word “or” in that last sentence had been introduced into this document in comparison with the letter dated July 10th, counsel said.
Mr Reilly said he understood this to mean that if the shares fell to nothing he would have no recourse - in other words, he would not have to repay any of the €45 million.
The jury also viewed a third loan facility letter addressed to Mr Reilly from Anglo and dated January 5th, 2009. This letter stated that it “rescinds” the previous facility letters from July.
The witness said shortly before receiving this letter he got a call from Mr Whelan stating there was a mistake in the July 17th letter, and the January letter was sent out to address this.
This letter removed the clause stating the recourse could include “the value of the shares at the expiry of the facility”.
Cross-examination of Mr Reilly has now begun. He agreed with counsel for Mr Whelan that he was a long-standing borrower from the bank.
He agreed he would have been considered a wealthy man, with a large portfolio including office blocks in Dublin.
13:02Mr Reilly told defence counsel Brendan Grehan SC that he initially made money on the Anglo shares deal and was up €7 million at one stage.
He later sold 80 per cent of the shares. The stake he was left with became worthless when the bank was nationalised, but he still had to repay 25 per cent recourse - about €2 million.
He said he would have had 10 to 15 loans at the time, with varying recourses. A maximum recourse of 30 per cent would have been normal for investment loans with Anglo at the time.
Mr Reilly said Anglo would have generally been “unusually sticky” about personal recourse compared to other banks.
He said he had facilities with practically all the other banks. With Ulster Bank he could have loans with no personal recourse, or personal recourse of up to 50 per cent.
He also had loans with international banks. Mr Grehan suggested these loans “would not be for millions, we’re talking hundreds of millions”. The witness agreed and said there was no personal recourse on these loans.
Mr Reilly concluded his cross-examination, saying he found Pat Whelan “very straightforward” to deal with.
He confirmed during re-examination that there was no negotiation with Anglo over the 25 per cent recourse in the deal because he thought 25 per cent was “ok”.
Mr Reilly has now finished his evidence. Up next is another “Maple Ten” investor - Joe O’Reilly.
13:57Before breaking for lunch, developer and builder Joe O’Reilly was in the box. He is the second Maple Ten investor to give evidence.
On July 4th, 2008, he got a call asking him to meet Anglo officials. He was in Portugal at the time.
He said he met Mr Drumm and Mr Whelan on July 6th at a restaurant in Faro.
Mr Whelan said a person had a large stake in Anglo, mainly through contracts for difference, Mr O’Reilly went on. This was causing turbulence in the shares and driving the shares downwards, the then Anglo executives said.
They wanted to unwind the situation, he said, and asked him to buy 1 per cent of the shares - up to €60 million worth.
The Anglo figures explained the shares were being “shorted”, which impacted on the share value and the bank’s reputation.
The lunch meeting lasted just over an hour. The bankers said the Financial Regulator was on board with the unwinding deal and it was implied the Department of Finance had also been informed. Mr O’Reilly said he was also told lawyers and Morgan Stanley had approved the deal.
Mr O’Reilly agreed he signed an initial facility letter which stated Anglo would have 25 per cent recourse on the loan - in other words, 25 per cent of the loan amount if the shares fell to zero.
He later received a second facility letter which was dated July 17th, 2008. However, the witness was “certain” he received this “some time” after that date.
It contained an altered paragraph in the loan security section. This read: “Recourse to the borrower will be limited to 25 per of the balance outstanding under the facility or to the value of the shares at the expiry of the facility.”
Mr O’Reilly said he took this to mean the recourse would be whatever the shares were worth at the end of the facility in early January 2009. As it turned out, the shares were worth nothing by that date - meaning no money would need to be repaid.
However, a third facility letter was later issued. This removed the alternative recourse of the end value of the shares and reverted to the terms agreed in the first facility letter, meaning Mr O’Reilly was again subject to 25 per cent, of €45 million.
The witness said he sold some of the shares - about 500,000 - and was left with 9.75 million, which were worthless by the start of 2009.
Counsel for Pat Whelan, Brendan Grehan SC, also re-examined the previous Maple Ten witness, Sean Reilly.
Mr Reilly was in a taxi heading away from the court when he received a phone call asking him to return.
Mr Grehan asked Mr Reilly if it was unusual for Anglo’s private banking division to approach him with transactions he might want to get involved in.
Mr Reilly said it was not unusual and happened several times. However, he agreed with the prosecution that Anglo had never approached him before with a deal to buy shares in the bank.
The trial has broken for lunch. Judge Martin Nolan joked to Mr Reilly “to get away while you can”.
Evidence from more Maple Ten investors will be heard when the court resumes after the lunch break.
14:55We’ve started back after lunch with the cross-examination of Maple Ten investor Joe O’Reilly.
He has already told the jury about the loan he was offered by Anglo, at 25 per cent recourse, to buy shares in the bank to help stabilise the share price.
He is now being cross-examined on this by counsel for Mr Whelan, Brendan Grehan SC.
He agrees that he was involved with large property developments such as the Grand Canal Theatre and the redevelopment of the Carlton Site by O’Connell Street.
He agrees he was worth a substantial amount. Mr Grehan suggests a figure of about a billion euro.
Mr O’Reilly agrees he had loans from many banks.
14:57Mr O’Reilly has told Mr Grehan that he was sometimes approached by Anglo’s private bank division about transactions he might like to get involved in.
He says on some loans the recourse was “interest only”. Some loans had some capital recourse, maybe 20-30 per cent and the interest.
He says his company, Castlethorn, would have a loan from Anglo with a “relatively small personal guarantee”. He agrees in general he would seek to get the best deal possible.
Counsel puts it to him that there’s nothing unique about the bank approaching him with a deal involving a loan with “limited recourse”.
Mr O’Reilly says the bank was involved with him in a development plan for shops near the Gaiety Theatre.
15:21In relation to the share deal, Mr O’Reilly says he “trusted the bank” and “got good comfort that they were using one of the leading legal firms in town”.
He also says he got the impression either the Department of Finance or the Central Bank was aware and approved of the deal. He was also aware Morgan Stanley was involved.
“That was as good a team as you could put out there,” he says.
Mr O’Reilly agrees with counsel that he was “happy to let the bank get on with the details, having signed the main headlines” (of the deal).
He says that in July he thought the shares were good value. The reasoning was, the shares had fallen 75 per cent in their value and would have to fall another 75 per cent before he would be liable for a loss. It was his belief the shares would go up.
15:32Ciara Quinn, daughter of Sean Quinn Senior tells the prosecution she was a 20 per cent shareholder in the Quinn Group and worked in Quinn Insurance as a claims investigator.
She said she signed many documents at the time, including several identical to the ones signed by Sean Quinn Junior and Colette Quinn as heard about previously.
She says her role was confined to signing documents that were put in front of her and that nobody talked to her about these at the time. She agrees that these documents were put in front of her by staff in the Quinn Group.
15:33Ciara Quinn's sister, Brenda Quinn is now in the box. She says she had no knowledge of the build-up to the deal. She is now aware that she got a €15 million loan to purchase shares in her name.
She says she had no interaction with Morgan Stanley, the Financial Regulator or lawyers about the deal at the time.
15:35Next up is Patricia Quinn, wife of Sean Quinn Senior.
She says she played no active role in relation to the Quinn Group and no role in the building up of private wealth for her children. Her husband took care of all this.
She also played no role in the CFD deal, she tells prosecuting counsel. She agrees that her signatures appear on the documents.
Speaking of one document she says: “It’s my signature but I don’t remember anything, I don’t know anything about it.”
15:44“I was at home looking after the children, I have no involvement with anything here,” Patricia Quinn tells the prosecution.
Her evidence is now finished.
15:49Now up is Lorcan McCluskey, who, in 2007, was associate director of lending in Anglo. He left in September 2012.
He says he was contacted by Pat Whelan around July 9th, 2008. He was asked to go to his office where he was told that a CFD position was being unwound and that €60 million each was being loaned to ten investors.
He was instructed to prepare the facility letters for the ten people. He said he hadn’t dealt with most of them before and had never met four of them.
15:50The Anglo team working on the deal was called `Team 91', Mr McCluskey says.
He says the exercise was “very unusual” as he had never before been asked to draft ten identical loan facility letters.
“Never happened before, never happened since, so it’s very unusual,” he says.
16:21Mr McCluskey says he was aware of the large fall in Anglo share price on St Patrick’sday 2008. He was at the parade in Dublin when he was told to come into the office to deal with an urgent margin call.
He says that on March 18th he became aware of the full extent of Sean Quinn’s CFD position.
Mr McCluskey is now describing the second facility letter sent to Maple Ten granting them an effective zero per cent recourse.
He says his first reaction to sign such a letter was “refusal”.
“I voiced my discomfort because I was of the view that it was taking away 25 per cent recourse,” he says. “It was weakening the bank’s positions.”
“Michael (O’Sullivan, his line manager) told me he had been advised by Pat (Whelan) that it had been approved by the CEO and the board of the bank.”
“I said that was ok but I refused to sign it. So the letter dated 17th of July was ultimately signed by Michael and Pat.”
The witness says he understands that these letters were then sent out to the ten investors.
He says that in January the team prepared more amended facility letters. These had the effect of reverting to the original recourse terms of July 2008.
He says these new letters came about as a result of an “asset quality review” with directors. He says this was a “high level review” of large facilities.
16:46Mr McCluskey says in a normal facility there would be repayment terms that would require the borrower to meet some sort of fixed repayment terms. He says this did not appear to be the case with the facilities offered to the Maple Ten.
Referring to the second facility letter which offered zero per cent recourse, he says the amount of the facility was amended from €60 million to €45 million in this letter. This was because the shares had already been bought and their value had dropped.
The witness says he believes this second letter, which was dated July 17th 2008, was actually drafted in October.
“I believe I got the request from Michael (O’Sullivan) in the middle of October,” he says.
“It could have been started from scratch or it could have used the previous format from the 10th of July.”
The witness has now moved on from the Maple Ten documents. He is now identifying the facility letters sent to the Quinn family.
16:48Evidence has now finished for the day, Mr McCluskey will finish his evidence in the morning. We have heard from 14 witnesses so far.
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