DAVID DRUMM, former chief executive of Anglo Irish Bank, yesterday lost a legal challenge against his bankruptcy case in the United States.
Mr Drumm did not attend the hearing and will not be required to appear in court until his bankruptcy trial, which should occur in late spring or early summer.
Yesterday, he lost his motion to dismiss proceedings by the court-appointed trustee Kathleen Dwyer to void what she regards as his fraudulent claim of bankruptcy.
The deadline for opposing discharge of Mr Drumm’s debts of more than €8.6 million under section 727 of the bankruptcy code had been set for August 31st, 2011. Mr Drumm’s lawyer, Frank Morrissey, said: “The rule in this district is that papers must be filed by 4.30pm . . . It’s a black or white rule.”
The Irish Bank Resolution Corporation (IBRC), the successor bank to Anglo, filed its 727 action prior to 4.30pm that day. Mr Morrissey argued that allowing both 727 actions to go ahead was prejudicial to Mr Drumm because “it adds another party and makes it more protracted and more expensive”.
Judge Frank Bailey had specified the deadline as “to and including August 31st”.
“Our position is that means 4.30pm,” Mr Morrissey said.
Judge Bailey asked what time Ms Dwyer filed her motion. “5.21 pm,” Mr Morrissey said. “From 4.30 to 5.21 is 51 minutes.”
“We may not be math stars, but we can agree on that,” Judge Bailey said, provoking laughter in the courtroom.
Ms Dwyer’s lawyer, Charles Bennett, said the deadline meant midnight on August 31st. Dismissing Ms Dwyer’s case would be prejudicial to lesser creditors who are not included in the IBRC action, he argued.
Ken Leonetti, a lawyer for IBRC, said the deadlines had been extended “for the sole reason to accommodate Mr Drumm’s slow dribble of documents”. During the section 341 bankruptcy hearings last year, Mr Drumm repeatedly failed to meet deadlines to produce documents requested by the trustee.
Judge Bailey said he “could not ignore we are in the electronic age” and that in his mind, “the trustee could reasonably have believed she had more time. So I am going to deny the motion and allow the 727 to proceed.”
Mr Drumm’s lawyers succeeded on a motion to obtain access to some of the IBRC’s evidence in a different action under section 523. The 523 action may be abandoned if the bank and trustee win under section 727.
“It doesn’t make sense to get going with 523 at this point. But all the evidence is preserved,” said John Hutchinson, a lawyer for IBRC.
IBRC is represented by prestigious law firms in Chicago, Boston and New York. Mr Drumm retains two Boston lawyers.
The separate issue of the trustee’s action to liquidate property held in the name of Mr Drumm’s wife Lorraine has been postponed at least until February 2nd. The Drumms are believed to have left their $2 million home in Wellesley, near Boston.