A senior official at Anglo Irish Bank told an AIB banker that the financial regulator was aware of a proposed “back to back” transaction between them, a jury has heard.
John O’Donnell, former chief financial officer at AIB, said Matt Moran, Anglo’s chief financial officer, told him the financial regulator was aware, and said he could phone him about it.
“He backed off a bit then and said David Drumm was meeting the regulator the following day, and I could ring him after that,” Mr O’Donnell told Dublin Circuit Criminal Court.
Mr Drumm, the former Anglo chief executive, of Skerries, Co Dublin, has pleaded not guilty to conspiring with former bank officials Denis Casey, William McAteer, John Bowe and others to defraud depositors and investors at Anglo by “dishonestly” creating the impression that deposits in 2008 were €7.2 billion larger than they were.
He has also pleaded not guilty to false accounting on December 3rd, 2008, by furnishing information to the market that Anglo’s 2008 deposits were €7.2 billion larger than they were.
Mr Drumm accepts that multi-million euro transactions took place in between Anglo and Irish Life & Permanent (ILP) in 2008 but disputes that they were fraudulent or dishonest.
Mr O’Donnell told Paul O’Higgins SC, prosecuting, that in March 2008 Mr Moran approached him and asked if AIB was prepared to do a back to back transaction with Anglo.
On deposit
The witness said the deal involved placing money on deposit with AIB, who would transfer it to their asset management company, before it was passed back to Anglo.
“I contacted Colm Doherty, the head of AIB Capital Markets and Eugene Sheehy, the CEO, and Anglo’s approach was considered at a committee meeting,” Mr O’Donnell said.
The witness said the deal was declined, and said when he offered to raise the proposed transaction with the board of AIB, Mr Moran told him not to bother.
The jury viewed the minutes of a meeting held in AIB on March 27th, 2008, during which the proposed loan facility was discussed.
The note contained a line stating: “Anglo have indicated the financial regulator has been consulted.”
Mr O’Donnell told the court: “We talked about whether we should contact the financial regulator to see his position on it.”
The note also recorded that if such a deal were to take place, both regulatory and board approval would be required.
“The consensus was negative, but we agreed the appropriate course was to await the regulator’s view,” Mr O’Donnell told Mr O’Higgins.
Under cross examination, Mr O’Donnell told Brendan Grehan SC, defending, that the collapse in the banking world in 2008 was an horrendous shock to the system.
He said he recalled the financial regulator, Patrick Neary, using the term “green jersey” at a meeting in March 2008, and agreed with Mr Grehan that this meant “togging out for Ireland Inc”.
He said that the financial regulator asked AIB why Irish banks were not supporting each other in the way that European banks were.
The trial is now at the end of its 12th week and continues before Judge Karen O’Connor and a jury of 10 men and four women.