Quinn claims miss point of market abuse rules, Anglo tells court

THE QUINN family is advancing the “startling” proposition that public policy requires that Anglo Irish Bank should be deprived of security for loans of some €2.34 billion made to companies in the Quinn group, the bank has argued before the Commercial Court.

The claims by Patricia Quinn and her five adult children that Anglo is not entitled to recover the loans, on grounds including they were allegedly made for the illegal purpose of propping up the bank’s share price, missed the point of the purpose of the European market abuse regulations, Paul Gallagher SC, for the bank, submitted.

The family were completely ignoring the EU nature of the legislation and the public policy and legal requirements resulting from it, he said.

The measures could never have been intended to create doubt about ownership of shares or the market could not function.

The claim that Anglo should be deprived of security for the €2.3 billion loans would penalise most heavily the innocent bank shareholders whose shares were alleged to be the subject of market manipulation to their detriment, he argued.

Mr Gallagher said it was the family’s own case that it was Seán Quinn snr who had engaged in the criminal act of market manipulation, that he was responsible for the investment strategy and none of the decisions taken in that regard was ever discussed with them.

Part of the bank’s claim against Ms Quinn and her children related to substantial sums of several hundred million covered under share charges which both pre-dated and post-dated the transactions alleged to constitute market manipulation, he added.

Some of the share charges were affected in 2003 and 2005, while others were entered into either immediately before or shortly after the nationalisation of Anglo (now Irish Bank Resolution Corporation).

The family also sought to avoid being pursued under undated guarantees entered into as part of the tax-planning structure for the benefit of the children by which various Cypriot companies had purchased €108 million shares in the bank.

There was no actual plea that the share charges themselves were illegal, the claim was that alleged illegality in the loan transaction tainted the share charges and guarantees, Mr Gallagher said.

It was also crucial that the family did not seek to set aside any share transaction or contracts for difference (CFD) transaction, were not shareholders in Anglo and were not a party to the alleged illegal loan transactions.

The bank was entitled to exercise its rights under the share charges to appoint a receiver and did so without court intervention.

Mr Gallagher began his submissions yesterday in the continuing hearing before Mr Justice Peter Charleton of a preliminary issue in the family’s case aimed at avoiding liability for the loans.

That issue is whether the family have the legal standing to rely upon alleged breaches of the market abuse regulations and section 60 of the Companies Act 1963 in support of their claims that the guarantees and share pledges signed by them, on foot of which the bank is seeking to recover the €2.3 billion in loans, are invalid and unenforceable.

The family claim the loans and security given in relation to them were for an illegal purpose, to fund margin calls on CFD positions taken out in Anglo by Mr Quinn via a Madeira-registered company Bazzely so as to avoid the 24 per cent Quinn shareholding being made public knowledge and probably collapsing the bank.

They claim that there would have been no loans without a desire to manipulate the market. They also claim the bank was not entitled to appoint Kieran Wallace as receiver over the shareholdings in various Quinn companies last year.