THE BOTTOM LINE:Quinn in effect called 'pot' many times on the Anglo share price, lost and, cash-strapped, turned to Anglo as his ATM, writes SIMON CARSWELL
WE USED to play a card game in college called “In Between”. It’s a simple game. Everyone ponies up a euro or two to start with a decent-sized pot. Two cards are dealt face up and each player bets an amount, or not at all, that the third card will be “in between” the two. So if a two and a king are dealt, the third card dealt is most likely to be “in between”.
More often than not, a player could call “pot” when this happened and if a three was drawn, for example, the player took the pot. If it was an ace, the player would have to pay in their bet or the pot if they bet that sum.
If a two or a king were drawn, however, the player had to stump up double what was in the pot. This made the game exciting and nerve-racking. It was harmless fun and rarely did the pot go over a tenner when we played.
But the nature of the game meant the stakes could rise very quickly. A pal recalled playing one time when a player was driven to an ATM when a “pot” bet backfired and he didn’t have the cash to cover the loss.
The downfall of businessman Seán Quinn into bankruptcy and the threat of jail in the contempt proceedings taken by the former Anglo Irish Bank can be traced back to his reckless bet on the bank’s share price.
Had he not lost €3 billion on Anglo, he would not have had to dip in the cash reserves of his insurance company to cover his early gambling debts; he and his company would not have been fined a combined record amount by the Financial Regulator as a result; he would not have had to borrow more than €2 billion from Anglo to cover his later gambling debts; he might not have lost control of Quinn Insurance; he might not have been ejected from his Quinn Group; and he might not be “dealing with the risk to his liberty” as his new lawyer put it in court last week.
His side has maintained, as many small shareholders could also argue, that Anglo hoodwinked him, presenting its financial position to be far healthier than it actually was as markets turned against it during the start of the financial crash in 2007 and 2008.
Quinn and many others may have a case here, but Quinn is being kind to himself. His decision to invest so heavily in the bank, up to 28 per cent at its peak, and by way of a contract for difference (CDF), whereby he only put up a small cash proportion of the overall bet (between a fifth and a third) and was exposed to either the full profits or losses, meant he was betting with borrowings, not cash he had. Quinn in effect called “pot” many times on the Anglo share price, lost and, cash-strapped, turned to Anglo as his ATM.
The nature and size of his bet meant he was left recklessly exposed when the share price fell, as it did so dramatically in 2008. In fact, Quinn’s own gambling in the stock had in itself a destabilising effect on the bank.
Quinn said last year his mistake was to rely on Ireland’s banks and predictions for their continued growth by financial experts. Yet anyone who could be described as an expert in financial matters would point to the craziness of taking such a large position on one company in a highly leveraged bet.
The fact that CFDs allow investors to build stakes anonymously meant Quinn did this in secret until he showed his hand in September 2007. By then it was too late – the stake was too high and Quinn too exposed at a time when the deck was stacked against Ireland.
All the noise from the Quinn camp that his wife and children are not liable for what they claim are illegal loans drowns out the fact that Quinn has been ordered by a court to repay €2.2 billion in loans to the bank and that this debt ultimately tipped him into bankruptcy.
Quinn revealed a little about the psychology of his gambling in a recent interview with the Financial Times. “It was never our intention to own 25 per cent of the bank but, as it got cheaper, we just seemed to buy more and we got sucked in,” he said.
Now it has been shown in evidence before the court that he and other members of his family have been gambling with their liberty.
The extraordinary evidence produced by the bank in the contempt case shows that family members were directing affairs in their international property group at a time when court orders prohibited them from doing so.
The Supreme Court will reveal today why it rejected Seán Quinn jnr’s appeal against his contempt and three-month sentence, and next week the family will respond to the latest litany of allegations from the bank showing what the evidence suggests is a far deeper conspiracy to shift assets away from the bank.
The Quinn house of cards seems to becoming more unstable with each court date.
