Anglo Trial

Live rolling updates from day three of the Anglo Irish Bank trial

Irish Times Reporters Fri, Feb 7
 
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  • This event has now ended
  • 10:05
    Good morning, the third day of the trial of former executives of Anglo Irish Bank is due to begin shortly. Check in regularly for live updates.
  • 10:08
    For a look back over liveblog proceedings from day one, click here. If you wish to see what was said on day two, check in here.
  • 10:29
    Prosecuting counsel Una Ni Raifeartaigh SC outside the Criminal Courts of Justice yesterday for the Anglo Irish Bank trial in the Circuit Criminal Court. Photograph: David Sleator/The Irish Times
    Prosecuting counsel Una Ni Raifeartaigh SC outside the Criminal Courts of Justice yesterday for the Anglo Irish Bank trial in the Circuit Criminal Court. Photograph: David Sleator/The Irish Times
  • 10:37

  • 10:46

  • 10:54
    Businessman Seán Quinn arriving at Dublin Circuit Criminal Court this morning for the trial of three former Anglo Irish Bank executives. Photograph: Alan Betson/The Irish Times
    Businessman Seán Quinn arriving at Dublin Circuit Criminal Court this morning for the trial of three former Anglo Irish Bank executives. Photograph: Alan Betson/The Irish Times
  • 11:28
    Proceedings have begun on day three of the trial of former Anglo Irish Bank directors Sean FitzPatrick, Pat Whelan and William McAteer.

    The case is progressing swiftly, with four witnesses in all having already been called and 99 remaining. Again it’s standing room only in Court 19.

    This may be because one of the most recognisable names on the witness list, Sean Quinn, is expected to give evidence today. The Cavan businessman is already in court and sitting behind the jury box.

    He will have to wait until later to take the stand, however, as his former Quinn Group chief executive, Liam McCaffrey, is still being cross-examined by counsel for Pat Whelan.

    Mr McCaffrey is continuing to explain the background to the large amounts of money Mr Quinn had to pay out in “margin calls” when his investment position in Anglo began to go wrong.

    Mr McCaffrey agreed with Brendan Grehan SC that Mr Quinn was willing to take money from all the various Quinn companies to fund these margin calls.

    The witness has also confirmed that in February 2008 the Financial Regulator was unhappy with Mr Quinn over his financial management of inter-company loans used to fund the margin calls.

    Mr McCaffrey agreed that Mr Quinn was fined a record €3.5 million by the regulator for this.
  • 11:33
    Former Quinn Group chief executive Liam McCaffrey arriving this morning at Dublin Circuit Criminal Court, where he has again been giving evidence in the Anglo trial. Photograph: Alan Betson/The Irish Times
    Former Quinn Group chief executive Liam McCaffrey arriving this morning at Dublin Circuit Criminal Court, where he has again been giving evidence in the Anglo trial. Photograph: Alan Betson/The Irish Times
  • 12:01
    Seán FitzPatrick, former chairman of Anglo Irish Bank, arriving at the Dublin Circuit Criminal Court this morning. Photograph: Alan Betson/The Irish Times
    Seán FitzPatrick, former chairman of Anglo Irish Bank, arriving at the Dublin Circuit Criminal Court this morning. Photograph: Alan Betson/The Irish Times
  • 12:19
    Latest report here from Irishtimes.com on proceedings in the trial today.
  • 12:31
    Mr Grehan SC asked Mr McCaffrey about a letter from Anglo referring to an agreement made with the Quinn Group to reduce a €500 million debt to the bank by selling off a portfolio of properties in Prague, Istanbul, England and Russia.

    “Did any of these sales take place?” counsel   asked. “No,” replied the former chief executive of Quinn Group.

    On February 28th, 2008, a meeting took place between Con Horan, then from the financial regulator’s office; the financial regulator at the time, Patrick Neary, and Sean Quinn, in which Mr Neary said he was concerned about the situation between Anglo and the Quinn Group.

    Mr Quinn said he deeply regretted the situation and believed that “Sean Quinn needed to be reigned in”, referring to himself.

    He told the meeting he believed it would be a mistake to sell off the contracts for difference (CFD) position in “an uncontrolled fashion - and this would not be in anybody’s interest”.

    Mr Grehan said the collapse of US bank Bear Stearns on St Patrick’s Day 2008 significantly changed the situation for Sean Quinn. Before this, counsel said, “Sean Quinn was able to tell the regulator ‘I’m not going to sell shares’ ”.

    “No one was able to tell Sean Quinn what to do until the St Patrick’s Day Massacre,” he suggested.
  • 12:35
    On the following day, Mr McCaffrey wrote a letter to Anglo referring to an advance of a €220 million facility to Quinn Finance Limited.

    In the letter, displayed to the jury through the use of a document scanner and the numerous computer terminals in the court room, he wrote: “I can confirm that as additional comfort to the security on this facility, the Quinn family are prepared to support their personal guarantees by giving Anglo Irish Bank Corporation plc physical custody of their shares in Quinn Group (ROI) Limited.

    “As a further measure of comfort, Quinn Group (ROI) Limited will not incur any further indebtedness within the group without the prior permission of Anglo Irish Bank.”

    Mr Grehan has described this as the Quinn family handing over “the keys of the shop” to the bank.

    Mr McCaffrey responded that he didn’t think this letter significantly altered the security on the loan, stating: “It’s a matter of degree”.
  • 12:35
    Former Anglo Irish Bank executive Pat Whelan arriving at court this morning. Photograph: Alan Betson/The Irish Times
    Former Anglo Irish Bank executive Pat Whelan arriving at court this morning. Photograph: Alan Betson/The Irish Times
  • 12:57
    Willie McAteer arriving at Dublin Circuit Criminal Court for the third day of the Anglo Irish Bank trial this morning. Photograph: Alan Betson/The Irish Times
    Willie McAteer arriving at Dublin Circuit Criminal Court for the third day of the Anglo Irish Bank trial this morning. Photograph: Alan Betson/The Irish Times
  • 13:19
    The court has heard Mr Quinn’s stake in Anglo, through CFDs, went from 24 per cent to 29.3 per cent between September 2007 and Easter 2008.

    Mr McCaffrey met the then Financial Regulator on March 31st, 2008, along with Colin Morgan from Quinn Insurance Ltd. Con Horan, described as “second in command” with the Financial Regulator, was also there.

    The minutes of that meeting, again displayed to the court via the document scanner, state that Mr McCaffrey told the regulator of the company’s plans to unwind the CFD holding in Anglo, and how a press release would be released on the morning of the transaction day.

    The minutes state: “In terms of cash amounts involved, closing CFDs would free up margin. This combined with borrowings from Anglo of €460 million would allow a long position of some €900 million to be achieved.

    “It is anticipated that about 50 per cent of this could be refinanced within two months - discussions are ongoing with Lehman Brothers and Credit Suisse.”

    Mr Grehan asked: “As far as you were concerned, the Financial Regulator were four square behind it (the deal to unwind the CFDs)?” Mr McCaffrey agreed with this.
  • 13:24
    Mr Grehan displayed a draft letter sent on May 19th, 2008, from Mr McCaffrey addressed to Con Horan at the regulator’s office, but beginning “Dear Patrick”.

    Describing a number of transactions in 2007 and early 2008 which were “not subject to proper due diligence”, the letter continues: “We have brought these transactions to the attention of the financiers. They require comfort from the Financial Regulator as to whether any action is envisaged against Quinn Insurance that could impact its ability to continue to trade as usual.

    “You have approved this repayment plan subject to the provision that, should equity markets improve, we will accelerate repayments.

    “On this basis we would appreciate acknowledgement that the Financial Regulator is aware of the transactions and the actions taken by Quinn Insurance as outlined above, and does not envisage taking any action that could impact the ability of the company to trade as normal.”

    Mr Grehan SC put to the witness that this draft letter presented “a very sanitised version of events” that were the subject of the Financial Regulator’s investigation.

    He said the letter contains “no mention that quite an extraordinary amount of money had to be borrowed from Anglo to replenish the coffers of the Quinn group”.

    Mr McCaffrey disagreed and said all the transactions with Anglo were disclosed.
  • 13:41
    Describing the Quinn Group’s position with Anglo in 2008, Mr Grehan SC suggested to Mr McCaffrey:   “The whole thing at this stage was a house of cards. The whole thing could come crashing down.”

    The former Quinn Group chief executive disagreed, saying: “We had large debts and covenant problems. The Quinn Group had no liquidity issue. Quinn Group had substantial debts.

    “Many profitable companies have substantial debts. That doesn’t mean they will come crashing down. The ratio of profit to debt was not exceptional.”

    The court saw an email sent on July 14th, 2008 from Anglo to Mr McCaffrey. The brief email states: “Although Anglo have confirmed that FR (Financial Regulator) are happy with transaction, can you put in a call with Con Horan out of courtesy?”

    Mr McCaffrey said he called the Financial Regulator and “spoke to Con out of courtesy. He seemed reasonably well briefed on what was happening. I said there would be a press release when the shares go long.”

    “He was positive about the matter, is that right?” counsel asked. “Yes,” said Mr McCaffrey.

    “You were happy with that comfort from him that what was happening was in order and above board?”

    “I was,” the witness replied.

    The trial broke for lunch and Mr McCaffrey will return to the witness box for further cross-examination at about 2pm.
  • 14:20
    Senior Counsel Paul O'Higgins (left) and Paul Anthony McDermott BL at Dublin Circuit Criminal Court during the trial of former Anglo Irish Bank executives today. Photograph: Brian Lawless/PA Wire
    Senior Counsel Paul O'Higgins (left) and Paul Anthony McDermott BL at Dublin Circuit Criminal Court during the trial of former Anglo Irish Bank executives today. Photograph: Brian Lawless/PA Wire
  • 14:37
    Key points so far from today’s proceedings in the case:

    • The trial is progressing swiftly, with four witnesses in all having already been called and 99 remaining. Again it’s been standing room only in Court 19. This may be because one of the most recognisable names on the witness list, Sean Quinn, is expected to give evidence today. The Cavan businessman is in court.
    • The trial was told that on February 28th, 2008, a meeting took place between Con Horan, then from the Financial Regulator’s office; the Financial Regulator at the time, Patrick Neary, and Sean Quinn, in which Mr Neary said he was concerned about the situation between Anglo and the Quinn Group. The trial heard Mr Quinn had said he deeply regretted the situation and believed that “Sean Quinn needed to be reigned in”, referring to himself.
    • Brendan Grehan SC put to witness Liam McCaffrey, former chief executive of the Quinn Group, that a draft letter shown in court on Quinn Group financial dealings presented “a very sanitised version of events” that were the subject of the Financial Regulator’s investigation. He said the letter contains “no mention that quite an extraordinary amount of money had to be borrowed from Anglo to replenish the coffers of the Quinn Group”. Mr McCaffrey disagreed and said all the transactions with Anglo were disclosed.
  • 15:05
    The trial resumed at 2.14pm when Brendan Grehan SC continued to question the former chief executive of the Quinn Group, Liam McCaffrey.

    It was said that in a letter written by Mr McCaffrey, he wrote: “I was told by Anglo they had taken legal advice to clear the transaction (CFD unwinding) and therefore presumed that no issues were raised as regards its legality.

    “Normal practice in banking followed by Anglo and others is that they would check the legality of the transaction.

    “In addition, Morgan Stanley (who were executing the transaction) were experts in this type of transaction, and I would have relied on them to raise any concerns they may have had as regards the legality of the transaction.

    “I was also aware that the Financial Regulator was familiar with the transactions. However, they raised no concerns with us as regards legality.”

    They had raised no objections in this matter with Quinn Group, Mr McCaffrey told the court.

    “He was more positive than he had been in March” is how Mr McCaffrey described in July the attitude of Con Horan to the CFD unwinding.
  • 15:10
    A press release issued on July 15th, 2008, by the Quinn family was displayed to the jury.

    Part of it read: “They are in the process of unwinding their interests held in AIB (Anglo Irish Bank) through CFDs and as part of this process individual family members are purchasing long holdings in the bank’s ordinary shares which will represent close to 15 per cent of Anglo Irish Bank’s ordinary shares capital.

    “The family regards these shareholdings in Anglo Irish Bank as long-term holdings with significant opportunity for capital growth.

    “In recent years we’ve been highly impressed with Anglo’s ability to outperform the banking sector in terms of profit growth and we are confident this trend can be maintained over the longer term, notwithstanding the current difficulties being experienced in international banking.”

    Mr McCaffrey described his relationship with former Anglo executive Pat Whelan as “a good, professional” one, and said both men had “a high degree of mutual regard for each other”.

    The Anglo share price began to climb after the execution of the July transaction, back to the “lofty heights” of in and around €7.

    “A bit like one of those lines on a hospital monitor, it goes flat in the end,” Mr Grehan said, describing the plot of a graph of the Anglo share price in 2008.
  • 15:26
    Brendan Grehan SC, for Pat Whelan,   finally finished his cross-examination of Liam McCaffrey at 2.45pm.

    His questioning of the former Quinn group chief executive lasted over three hours.

    There was disagreement between the two men over where the blame for the demise of the Quinn Group could be laid.

    “Would you agree that Sean Quinn lost €2.4 billion on this spectacular punt on CFDs?” Mr Grehan asked Mr McCaffrey.

    “He paid a very high price for investing in that bank,” replied Mr McCaffrey.

    “He paid a very high price for investing in CFDs. That can’t be called investing,” counsel said.

    “It’s a matter of terminology,” was the final response from Mr McCaffrey.

    Before this, Mr Grehan told the court that after the unwinding of the CFD position in July 2008 and the subsequent press announcement, the price of Anglo stocks recovered and “Mr Quinn came back for another rattle”.

    As evidence of this, Mr Grehan exhibited a letter from Sean Quinn to former Anglo Irish Bank chief executive David Drumm on July 26th, 2008.

    In the letter, Mr Quinn wrote: “I’m not sure we were treated fairly. We were in effect forced to sell the shares regardless of market price on the downside [….]

    “I feel that the bank’s insistence on the sale was detrimental to our position. I’m sure that your motivation was to protect the bank and by definition our holding of it.

    “There seemed to be a degree of panic driving the process.

    “After a heated discussion on Friday, I call you back to say we should all consider it over the weekend, however, the approach from Anglo on Monday morning was just as aggressive and you walked out of the telephone call. I called you later that day but my call was not returned.”
  • 15:33
    Read Fiona Gartland's account of what has been happening in the proceedings today.
  • 15:38
    Full coverage of proceedings in the trial is available here.
  • 16:02
    Court 19 at Dublin Central Criminal Court has been packed again for the Anglo trial today. Photograph: Cyril Byrne/The Irish Times
    Court 19 at Dublin Central Criminal Court has been packed again for the Anglo trial today. Photograph: Cyril Byrne/The Irish Times
  • 16:28
    The trial concluded at 3.45pm for the weekend. Sean Quinn sat in court all day and will have to return next week to begin his evidence.

    Before proceedings came to a close there was much needed light relief when counsel for the prosecution made a comment about how Michael O’Higgins SC, defence barrister for Sean FitzPatrick, was suggesting much of the evidence.

    “Perhaps Mr O’Higgins would like to go into the box himself,” said Paul O’Higgins SC, prosecuting, to much amusement from the jury and others in the court, including Judge Martin Nolan and Mr FitzPatrick.

    Judge Nolan explained that the defence teams were using this “unfortunate witness” to lay out their cases and the full contexts of their defence to the jury.

    As his questioning, coming close to five hours at this stage, resumed, Liam McCaffrey smiled wryly, paused and asked: “I’m just wondering how long I’m gonna be here.” Cue more laughter to the court.

    The court earlier heard that from November 2007 to July 2008 the Quinn Group borrowed €1.975 billion from Anglo in order to service margin calls on the contracts for difference.

    “It’s an awful lot of money isn’t it,” said Michael O’Higgins SC, and Mr McCaffrey agreed.

    The barrister said that Morgan Stanley was brought in to “clean up the awful mess” that Quinn and Anglo found themselves in.

    He said: “Part of Morgan Stanley’s brief was to try and get the toothpaste back into the tube. I’m suggesting they were brought in to clean up the awful mess.”

    Mr McCaffrey said that this was not an accurate description of the law firm’s brief.

    Proceedings have finished for the day. Check back on Monday for the latest in the trial.