Regulator was ‘full square behind’ Anglo deal, trial told

The financial regulator was "full square behind" a deal to unwind businessman Seán Quinn's large shareholding in Anglo Irish Bank, the trial of three former Anglo directors has been told.

Liam McCaffrey, former chief executive of the Quinn Group, said Mr Quinn reluctantly agreed to Anglo's plan for him to place his 29.3 per cent position in the bank's shares with his family and others. Mr McCaffrey said Mr Quinn "paid a high price for his investment", losing "at least" €2.4 billion by betting on the bank's share price through contracts for difference (CFDs – investment products based on share price).

Former Anglo directors Seán FitzPatrick, William McAteer and Pat Whelan are accused of providing unlawful financial assistance to members of Mr Quinn's family and the so-called Maple 10, a group of Anglo borrowers, to buy shares in the bank in July 2008.

Mr FitzPatrick (65) of Greystones, Co Wicklow; Mr McAteer (63) of Rathgar, Dublin and Mr Whelan (51) of Malahide, Dublin, have pleaded not guilty to all charges.

Mr McCaffrey told Dublin Circuit Criminal Court it was his understanding that Anglo had taken legal advice to clear a transaction that involved Mr Quinn selling his CFDs and for his family and other investors to buy the shares outright.

Concerns
Mr McCaffrey said the investment bank Morgan Stanley, which was to execute the transaction, did not raise any concerns about the deal's legality.

He said the financial regulator was familiar with the plan and also raised no concerns about its legality. Asked by Brendan Grehan SC, for Mr Whelan, if as far as he was concerned the regulator was “full square behind” the plan, Mr McCaffrey said: “Yes.”

During a meeting with senior officials at the regulator on February 28th, 2008, according to minutes read out, Mr Quinn said he had been “greedy” with regard to his involvement with CFDs and needed to be “reined in”. The court heard Anglo had lent Mr Quinn nearly €2 billion between November 2007 and July 2008 to fund the margin calls on his CFD holdings.

Mr McCaffrey said Mr Quinn was “reluctant” to sell his CFDs because he believed the share price would recover. However, he was forced to agree to the deal during Easter 2008 because he needed funding from Anglo Irish Bank.

Counsel exhibited a letter from Seán Quinn to Anglo's chief executive David Drumm dated July 26th, 2008. Mr Quinn wrote: "I'm not sure we were treated fairly. We were in effect forced to sell the shares regardless of market price on the downside while the purchasers were given a maximum price."

Mr Quinn is due to be called to give evidence on Monday.