Drumm raises the ante for Anglo board – he claims, in effect, that they knowingly approved misleading accounts
21 November, 2011
Former Anglo-Irish Bank chief executive David Drumm, in challenging the bank’s lawsuit against him in his US bankruptcy case, said the transferring of Chairman Seán FitzPatrick’s loans of up to €120 million off Anglo’s books was “fully and properly signed off by the bank’s credit committee as well as several non-executive directors” (see for instance this report in the Irish Times).
I have written about this previously, but I continue to be mystified as to how the bank reported its “loans to key management personnel” in its annual reports to shareholders. Take, for instance, the 2007 report, which includes the extraordinarily incorrect statement that “Loans to key management personnel are made in the ordinary course of business on normal commercial terms”.
Here we have a bank which gave its former chief executive (a) tens of millions of euros in loans (b) on an interest-only basis, (c) without adequate security, and (d) allowed him the facility to re-draw the loans after temporarily repaying them for concealment purposes at year-end. And the board were satisfied that this was “in the ordinary course of business on normal commercial terms”?
It seems to me that either the board (including Fitzpatrick) were guilty of a default in their duty to shareholders, and perhaps of a statutory offence, in allowing this to be published, or the management were guilty of concealing from non-executive directors what they knew about Fitzpatrick’s loans. David Drumm now appears to be saying that the former is the case. He could, of course, be “mistaken”.
By the way, false accounting is a criminal offence under the Criminal Justice (Theft and Fraud Offences) Act, 2001. It arises inter alia where somebody, intending to make a gain, or to cause loss to another, “falsifies any account or any document made or required for any accounting purpose” or “in furnishing information for any purpose produces or makes use of any account, or any such document, which to his or her knowledge is or may be misleading, false or deceptive in a material particular.”
The Director of Corporate Enforcement said last week that his office is preparing a fourth file to be sent to the Director of Public Prosecutions in relation to Anglo-Irish Bank. I would like to think that midnight oil is being burnt in the DPP’s office on this case, but I have a horrible feeling that it just ain’t so. The DPP tried to defend his lack of speed earlier this year, but the points he made seemed to me to be less than convincing.
Incidentally, the current DPP, James Hamilton, takes early retirement this month, and the Government have appointed Claire Loftus as his successor. She has been promoted from her role as the Head of the Directing Division in the DPP’s office, and before that she was the DPP’s chief prosecution solicitor from 2001 to 2009. I hope she can move things forward at a faster rate than her predecessor, but unfortunately I can find no reason to believe that a long and successful career in our DPP’s office is an indicator of a dynamic and energetic character. Maybe I will be proved wrong. For the sake of the morale of the general populace, I hope so.