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February 5, 2014 8:31 pm
Loans amounting to €625m made by Anglo Irish Bank to a group of wealthy individuals in 2008 “broke Irish company law”, a state prosecutor told a court in Dublin on Wednesday, as the biggest legal case in the nation’s corporate history began.
Three former executives of Anglo, which collapsed in 2008 despite receiving some €30bn of taxpayer money, are on trial on charges connected to loans that the bank made to buy its own shares at the height of the global financial crisis.
“There is no doubt that this lending was not in the normal course of the bank’s business but was lending in very extraordinary circumstances,” Paul O’Higgins, counsel for the prosecution, told a 15-member jury.
The courtroom, the largest in Dublin’s modern criminal courts complex, was crowded for the start of the trial, although it did not attract the huge public interest that had been expected. An overflow room set aside for the public to view the proceedings was almost empty by the afternoon.
The thin crowd may have been due to the highly technical nature of the case, in which prosecutors are expected to focus on a narrow set of loans rather than the wider issue of how and why Anglo collapsed. Much of the prosecution’s opening statement was concerned with the task of explaining to the jury what companies and shares were and how a company’s share price matters to the perception of its value.
Sean Fitzpatrick, Anglo’s former chairman, Pat Whelan, its former head of lending for Ireland, and William McAteer, former finance director and chief risk officer, face 16 charges connected to the loans. Mr Whelan faces seven further charges related to the alteration of loan documentation. The three men have pleaded not guilty to all the charges.
The case is the first in which senior executives at a financial company have come before a court in a trial concerned directly with the events that triggered the bursting of Ireland’s Celtic Tiger financial and property bubble. Anglo’s collapse ultimately forced Ireland to accept a €67.5bn bailout from international creditors.
The loans in question were made to the family of Sean Quinn, once Ireland’s richest man, and a group of 10 “high net worth” individuals to buy shares in Anglo. They were part of a scheme to unwind Mr Quinn’s roughly 25 per cent stake in Anglo because the bank was worried about being “exposed to the fortunes of one man,” Mr O’Higgins said in his opening statement.
The prosecution alleges that such loans broke Irish company law because the scheme was arranged by the bank on its own behalf. “The whole purpose was the purchase of Anglo shares in the context of a wider scheme . . . to unwind Mr Quinn’s position,” the jury heard.
Mr Quinn lost his financial and construction business empire following Anglo’s collapse. He is set to give evidence in the coming days.
Around 100 witnesses are expected to be called to give evidence, including police officers, officials from the Irish central bank, former employees of Anglo, which is now in liquidation, and bankers from Morgan Stanley.
The case has set legal precedent in Ireland by requiring 15 jurors, as opposed to the normal 12, due to its expected length. Martin Nolan, the judge hearing the case, said he did not expect it to end before May 31, which would make it one of the longest and most technically complex cases to be heard in an Irish courtroom.
Mr Fitzpatrick, 65, was chief executive of Anglo until 2004 when he stepped up to be chairman.
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