Anglo’s €7.2bn deal had no ‘commercial substance’ – expert

A CIRCULAR €7.2bn cash trade between Anglo Irish Bank and Irish Life and Permanent (IL&P) during the 2008 financial crisis had “no commercial substance,” an accountancy expert has told a jury.

The witness in the trial of Anglo’s former CEO David Drumm said the deal started off with €1bn, which could have passed back and forth “ad infinitum” as the transaction had no financial constraints.

Accountant Dan Taylor was giving expert evidence for the prosecution on the 66th day of Mr Drumm’s trial at Dublin Circuit Criminal Court yesterday. Mr Drumm (51) is pleading not guilty to conspiring to defraud by dishonestly creating the impression that Anglo’s customer deposits were €7.2bn larger than they were in September 2008.

He is alleged to have conspired with Anglo’s former finance director Willie McAteer and head of capital markets John Bowe, as well as ILP’s then-CEO, Denis Casey, and others.

Transfers

The case centres on a series of interbank deposits which circulated between Anglo and IL&P.

The transfers in question were routed through Irish Life Assurance, returning to Anglo where they were then treated as customer deposits, which are a better indicator of a bank’s health.

Mr Drumm also denies false accounting, by providing misleading information to the market.

Mr Taylor, a partner at global accountancy firm BDO, told Paul O’Higgins SC, prosecuting, that he was asked to look at the 2008 transactions between Anglo and IL&P.

Mr Taylor said in fairly presenting a transaction or balance, its “commercial substance” had to be understood.

“Commercial substance is whether or not there is any underlying economic benefit or cost or business purpose,” he said.

Mr Taylor said the interest paid on the liability side of the transaction and the assets side cancelled each other out.

His evidence in the trial is due to continue today.