We weren’t told of loans
Anglo trial hears that financial regulator did not know about loans to Maple Ten
THE financial regulator did not know loans would be given to the Maple Ten to buy shares in Anglo Irish Bank, the Dublin Circuit Criminal Court has heard.
Con Horan, second in command at the regulator, and its prudential director in July 2008, said he was told the ten businessmen would purchase the €445million worth of shares out of their own resources.
The chartered accountant said he had specifically asked Anglo chief executive David Drumm if finance was being provided to the ten investors. He said Mr Drumm had only indicated that short-term funding would be provided if one of the investors had a temporary ‘cash-flow issue’.
Mr Horan told the court: ‘I understood most of them [the ten investors] were putting up the funds themselves and this was just a contingency in terms of somebody having a cash-flow issue.’
Mr Horan said he understood the Quinn family’s investment in the shares underlying Seán Quinn’s contracts for difference stake would also not be sourced from loans from Anglo. He said he was told it would be funded by the money tied up in the CFDs, with the balance made up by a loan from Credit Suisse ‘ with JP Morgan i n the background’.
When he was later informed by Anglo that there was a delay in the finance from Credit Suisse, and that Anglo would have to put up the money initially, he said he was reassured that Anglo would be repaid within a matter of weeks.
He said he had told Anglo and Morgan Stanley, the financial servi ces f i rm which arranged the unwind, that he did not have any objection to the scheme ‘ based on what I was told’. But he said he pointed out that he did not have access to the details of the scheme or documents relating to it. He added: ‘It was up to Morgan Stanley and Anglo to make sure that all regulatory requirements were adhered to.’
Mr Horan said the regulator’s office had earlier in the year been ‘uncomfortable’ with the lending Anglo proposed to make to the Quinn family as of March 2008 in an initial draft of the CFD unwind, as there were already liquidity problems within the Quinn group.
Mr Horan said it was suggested that the Quinns were going to borrow €460million from Anglo in relation to this deal – €100million of which would go towards Quinn Insurance to increase its solvency. ‘We did not necessarily want to see the bank increase
Regulator’s attitude was ‘positive’
its exposure to the Quinn Group at that time,’ he said.
He said the regulator’s attitude had in March been ‘positive’ towards the unwind proposal, which at this stage did not involve lending to any other investor apart from the Quinns, and came against a background of global financial turmoil. Mr Horan said he had first heard market rumours of a large CFD stake having been built up in Anglo in 2007.
He said that on February 22, 2008, the Domestic Standing Group, made up of the regulator, the Central Bank and the Department of Finance, had met and considered the impact of a disorderly unwind of major CFD positions. But he agreed with defence counsel Brendan Grehan SC that this was ‘all in a void’ regarding the exact size of Seán Quinn’s stake in Anglo.
He said he followed up with a meeting with Mr Quinn on February 28, at which he said Mr Quinn told him his investment was ‘broad based’ and included banks and building firms. This was ‘not true,’ he conceded.
Mr Grehan asked why Mr Quinn had not had to reveal the size of his Anglo stake at this meeting. He said: ‘How is it that the financial regulator, in a one-to-one meeting with Mr Quinn, having at a DSG meeting a couple of days earlier heard the holding was of momentous importance to the entire financial stability of the country, how is it that Mr Quinn could go to a meeting and not answer a question?’
Mr Horan replied: ‘I believe he said he was not overly exposed to Anglo.’
Mr Horan was giving evidence at the trial of former Anglo chairman Seán FitzPatrick, director of finance William McAteer and managing director of lending Ireland Pat Whelan. All three deny charges of providing illegal financial assistance to 16 people.
The trial continues.