Anglo trial: Bank appointed O'Neill head of compliance despite his lack of experience
The former head of compliance with Anglo Irish Bank has been granted immunity from prosecution by the Director of Public Prosecution (DPP), a court has heard.
The trial of former Anglo chairman Sean FitzPatrick and two other ex-directors has heard evidence from Fiachre O’Neill who was appointed group head of compliance at the bank in 2007.
At the start of his evidence Mr O’Neill confirmed that he made statements to the gardaí after being granted immunity from prosecution by the DPP.
Mr O’Neill is the second witness to testify under immunity after former Chief Financial Officer Matt Moran gave evidence two weeks ago.
Mr FitzPatrick and fellow ex-directors William McAteer and Pat Whelan, are accused of providing funding for the purchase of its own shares in contravention of the 1963 Companies Act.
The three men have been charged at Dublin Circuit Criminal Court with 16 counts of providing unlawful financial assistance to 16 individuals in July 2008 to buy shares in the bank. The 16 individuals are six members of the Quinn family and the Maple Ten group of investors.
Mr Whelan has also been charged with being privy to the fraudulent alteration of loan facility letters to seven individuals in October 2008.
Mr FitzPatrick (aged 65) of Greystones, Co Wicklow, Mr McAteer (aged 63) of Rathgar, Dublin and Mr Whelan (aged 51) of Malahide, Dublin have pleaded not guilty to all charges.
Mr O’Neill told prosecuting counsel Paul O’Higgins SC that he started with Anglo in 2005 and was appointed group head of compliance in 2007.
He said he had no experience with compliance or regulatory matters and he raised this concern with Mr McAteer, Mr Moran and then Anglo CEO David Drumm.
He said that their reaction was that he had the right skill set for the job and would be supported by experienced members of the compliance teams.
Mr O’Neill said his role as head of compliance was monitoring issues at the bank including monitoring regulatory developments “with an emphasis on customer facing regulation.”
He said he also trained staff and advised management about regulation and liaised with the Financial Regulator.
The court heard that in 2008 Anglo and the Financial Regulator were concerned about businessman Sean Quinn controlling 29.4% of the bank through investment instruments called Contracts for Difference (CFDs). They believed this stake was destabilising the bank’s share price and were anxious to dilute Mr Quinn’s control.
Mr O’Neill helped drew up an agreement between Mr Quinn and Anglo to unwind Quinn’s control by disposing of CFDs in the market.
He said he was told this deal had the approval of the regulator but that he was instructed by Mr Moran to remove any reference to this approval from the text of the agreement. He said he was not told why this was being removed.
Mr Moran also said that he was present during a conference call with the Financial Regulator when Anglo planned to have the Maple Ten buy the rest of the Quinn shares in July.
He said when Con Horan from regulator’s office was asked if they approved of the transaction he replied that they “have no objection.”
Mr O’Neill said he understood this comment to mean the regulator “was fully supportive of the transaction".
An investment banker also gave evidence that he believed the Maple plan was an “elegant solution” to the Quinn issue.
Morgan Stanley employee Joel Carter told the court that the deal appeared to be a “neat solution” to the Quinn problem.
The court heard that Anglo hired Morgan Stanley, to deal with the Quinn issue.
“It seemed on the face of it to be a very elegant solution,” he told court via video link from a London courtroom.
Mr Carter said that the Irish Financial Regulator’s approved of the deal gave Morgan Stanley “comfort” in proceeding with it. He said he believed the UK regulator was also made aware of the transaction.
Mr Carter, who was a vice president of a division of Morgan Stanley, agreed with prosecution counsel Úna Ni Raifeartaigh SC that an important part of the transaction was confidentiality.
He said it was important the Quinn family did not find out the identities of the Maple Ten investors and great care was taken during conference calls to not mention their names.
“It’s very normal for us to work under very strict confidentiality rules,” he said. “We deal with very sensitive information.”
Mr Carter agreed with Lorcan Staines BL, representing Mr Whelan, that “few if any institutions” have more experience in providing investment banking advice than Morgan Stanley.
He said that Morgan Stanley would not want to be seen to be doing anything that could be seen to breach the spirit of a banking regulation.
“We would also not want to put our client in that position,” he added.
The trial continues before Judge Martin Nolan and a jury of eight women and seven men.