View from Dublin: Drumm trial a com­pli­cated crim­i­nal process

Belfast Telegraph - Business Telegraph - - News - BY RICHARD CUR­RAN

David Drumm’s con­vic­tion for false ac­count­ing and con­spir­acy to de­fraud was a very un­usual, tech­ni­cal and pro­longed crim­i­nal trial. The for­mer chief ex­ec­u­tive of An­glo Ir­ish Bank never de­nied his par­tic­i­pa­tion in the trans­ac­tions with Ir­ish Life & Per­ma­nent. The trial was all about whether they had il­le­gally cre­ated a de­cep­tion.

Drumm’s de­fence was that he had en­gaged in these trans­ac­tions in the con­text of the stress­ful events of the time and had “put on the green jersey”.

The Ir­ish bank­ing system was in trou­ble and he had an­swered Ire­land’s call, hav­ing had the Cen­tral Bank en­cour­age Ir­ish banks to sup­port each other.

It was also ar­gued that he didn’t ben­e­fit from the trans­ac­tions. But that isn’t nec­es­sar­ily cor­rect.

Firstly, Judge Karen O’con­nor pointed out that ir­re­spec­tive of who in the Cen­tral Bank said what about Ir­ish banks help­ing each other, these trans­ac­tions were ei­ther against the law or they were not. Looked at through this prism, set­ting up a se­ries of cir­cuitous multi-bil­lion euro trans­fers had cre­ated a false impression of the fi­nan­cial po­si­tion of the bank.

It was a most un­usual fraud, be­cause Drumm was never go­ing to pocket the pro­ceeds of the fraud or the false ac­count­ing.

This was a de­cep­tion on the mar­ket aimed at sav­ing the bank. And it failed.

In that sense, it was ul­ti­mately a waste of time.

Drumm (in­set right) might not have ever pock­eted the ben­e­fits of the fraud­u­lent trans­ac­tions, but he did stand to gain if the scheme had worked.

He would have kept his job if the bank did not go un­der.

He was a highly-paid multi-mil­lion­aire who stood to suf­fer fi­nan- cial and rep­u­ta­tional dam­age if the bank col­lapsed.

At the heart of the fraud on the mar­ket was a de­cep­tion.

Any­body who was in­ter­ested in buy­ing or sell­ing An­glo Ir­ish Bank shares, or any­body con­sid­er­ing trad­ing in its bonds, or con­sid­er­ing with­draw­ing their de­posits, was given a false ac­count of the fi­nan­cial po­si­tion of the bank. They suf­fered as a re­sult.

Any­body who bought shares at this time was de­ceived.

Once the gov­ern­ment de­cided in Septem­ber 2008 to guar­an­tee all of the de­posits in all of the Ir­ish banks, the de­cep­tion was es­sen­tially re­dun­dant any­way. The gov­ern­ment de­ci­sion to guar­an­tee all li­a­bil­i­ties and the sub­se­quent col­lapse of the bank re­sulted in a €30bn bill for tax­pay­ers. One could of course ar­gue that he was act­ing to pre­vent the col­lapse of the bank, be­fore the tax­payer was on the hook for the money. Nev­er­the­less, the trans­ac­tions were reck­less and il­le­gal. It is trou­bling to think that if An­glo Ir­ish Bank had not col­lapsed, de­tails of this fraud on the mar­ket might never have come to pub­lic at­ten­tion.

A mas­sive de­cep­tion would have taken place and we might never have known about it.

Ques­tions were be­ing asked about these de­posits in some fi­nan­cial and reg­u­la­tory cir­cles quite early on, but would they have been fully pur­sued and re­ferred to the nec­es­sary au­thor­i­ties if the bank had not col­lapsed un­der the weight of its ex­ces­sive, turbo-charged lend­ing?

It is quite pos­si­ble they would not.

The au­dit com­mit­tee of the bank missed them. The regulator missed them. Very few peo­ple knew the full de­tails and the rep­u­ta­tional dam­age to Ir­ish bank­ing that would have flowed from dis­clo­sure might have kept the trans­ac­tions be­low the radar.

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