Poor trading forced Anglo into €7.2 billion deal, court told

Anglo Irish Bank engaged in a €7.2 billion back to back deal to boost their balance sheet for the year ending September 2008 because it was such a bad month for the bank, a court has heard.

Four former senior bankers from Anglo Irish Bank and Irish Life and Permanent (ILP) are on trial for allegedly conspiring to mislead investors by setting up a €7.2 billion circular transaction scheme to bolster Anglo’s 2008 balance sheet.

John Bowe (52) from Glasnevin, Dublin, Willie McAteer (65) of Greenrath, Tipperary Town, Co. Tipperary, Denis Casey (56), from Raheny, Dublin and Peter Fitzpatrick (63) of Convent Lane, Portmarnock, Dublin have all pleaded not (NOT) guilty at Dublin Circuit Criminal Court to conspiring together and with others to mislead investors through financial transactions between March 1st and September 30th, 2008.

On day 54 Diarmaid McGuinness SC, defending Mr Bowe, Anglo’s former head of capital markets, began cross-examining Mark Hunt, an expert witness for the State.

On Thursday Mr Hunt, a chartered accountant who has worked for the Bank of England and the UK’s financial conduct authority, told the jury that the €7.2 billion deal had no commercial or economic substance, both of which are technical accounting terms.

He told Mr Guinness that he was not an expert in Irish Financial regulation.

Counsel put it to him that another witness from Anglo had testified that part of the objective of the deal was to give a better view of the overall performance of the bank over the year than simply the previous weeks.

“September was a particularly bad month for the bank,” counsel said. The jury has already heard that markets were in a potentially catastrophic state of chaos around this time and that the international financial firm Lehman Brothers was allowed to fail in September.

Mr Hunt agreed that balance sheet management was a normal and legitimate activity by the bank but it was not legitimate to do by “artificial means”.

Mr McGuinness said he would use a golfing analogy. “It’s like coming to the 18th hole and finding the course conditions have changed. You’d like to be judged on how you did on the previous 17 holes,” he said.

Mr Hunt replied: “The balance sheet is not an average financial statement. It’s a list of assets and liabilities at a particular point in time.” He added that there were other places in the bank’s annual statement of results where they could set out the levels of deposits during the course of the year.

The trial continues on Monday before Judge Martin Nolan and a jury. It is due to finish next month.