'Forget' your Anglo prejudices, jury told

Charging the jury after 43 days of evidence, Judge Martin Nolan said that while Anglo is the most infamous of the Irish banks, it is not on trial.

“Whatever prejudices you might have for or against bankers you must leave at the courtroom door or the jury room door,” the judge said.

Twelve of the 15 jurors originally selected to hear the case at Dublin Circuit Criminal Court because of its expected duration will resume deliberations on Monday morning at 10.30am in what was one of the most awaited trials of boom-to-bust Ireland.

The scheme the three bankers are alleged to have authorised or permitted involved millions being lent out in July 2008 to unwind a secret 28% holding of Anglo shares built by bankrupt former business tycoon Sean Quinn in a doomed €2.4 bn punt.

He used investment banks to buy Contracts for Difference (CfD), a complex trading derivative which boiled down to gambling that Anglo’s share price would rise.

The select clients included five of Mr Quinn’s children and his wife Patricia and the so-called Maple 10 – a secret circle of trusted developers and investors known personally by senior Anglo bankers, two of whom the court heard were worth “north of a billion” at the time.

FitzPatrick pleaded not guilty to 10 charges over the Maple 10 loans and was found not guilty by direction of the judge on six charges related to the Quinn loans.

Whelan and McAteer pleaded not guilty to all 16 counts of providing unlawful financial assistance.

Entering its eleventh week, the trial centres on whether the loans – €450m to the Maple 10 and €169m to the Quinn family – were arranged by Anglo in the ordinary course of business.

The state’s case alleges the accused were involved in providing loans to individuals in July 2008 to buy shares in the bank, contrary to Section 60 of Ireland’s Companies Act. It is legal for companies to provide finance in the ordinary course of business, but it is alleged the Anglo share deal was extraordinary.

Following a lengthy and complex direction on company law and the issues at hand in the trial, Judge Nolan told jurors they must return unanimous verdicts. But he warned them they were dealing with a specific issue and not the wider financial and economic disaster visited on the people of Ireland.

“You are not entitled to visit on the accused men the financial calamity of the country... or what has occurred since, in layman’s terms, the crash of 2008, that would be incredibly unfair and wrong. You cannot do that,” the judge said.

Judge Nolan said jurors have to satisfy themselves beyond reasonable doubt in five key areas in relation to the charges: that the loans were for buying Anglo stock; the deal aimed to stabilise the share price; that the lending was not the ordinary course of business; that all three men knew of the scheme; and that they took no steps to stop it.

He told them to ignore a number of positions put forward during the trial. He said the attitude or actions of the financial regulator were totally irrelevant, as was the involvement of city of London investment bank Morgan Stanley, which completed the unwinding of the CfD position after the loans were secured.

He also warned that the defence of Anglo having legal advice for the deal was also irrelevant.

Outlining the background to the loans, Judge Nolan told the jury that the first Anglo knew about the scale of the Quinn holding was in a meeting FitzPatrick and then chief executive David Drumm had with Mr Quinn in the Ardboyne Hotel in Navan, Co Meath in September 2007.

At that stage Mr Quinn held about 24% of the bank’s stock in CfDs from several international banks. The bankrupt tycoon did not stop there despite losing hundreds of millions on margin calls and continued to buy CfDs, extending his on paper holding to about 29% by the following spring.

From then until March the following year, when the St Patrick’s Day Massacre wiped out a fifth of Anglo’s stock market value, the crisis became progressively worse until it began to effect the regulatory requirements for the moneyspinning Quinn Insurance and lending rules Anglo was bound by.

Judge Nolan set the scene for the thinking behind the loans-for-shares deal. “There was a terror in Anglo that if all the shares come on to the market as a result of Sean Quinn being knocked over that it would have a calamitous effect on the share price and what was needed for the bank was an orderly unwinding,” the judge said.

“It is also in evidence that a calamitous collapse in share price would have a huge effect on the bank and probably the entire banking system and that’s what the orderly unwind was there to take care of.”

Judge Nolan also had a few words for Mr Drumm, who fled to the US after the financial crisis, is not on trial and has not been interviewed by fraud investigators.

The judge said he was the author of the deal. “I think there’s evidence in this case that David Drumm was the author of the scheme and let’s accept that for the sake of argument and that he instructed Pat Whelan and Willie McAteer to carry it out,” the judge said.

“I think before you can convict Mr FitzPatrick of any offence you have to ask yourself this question – did Mr FitzPatrick know at the material time, that’s before the scheme was executed, that Anglo were going to provide substantial finance in the millions, hundreds of millions, to unwind the Quinn position by buying Anglo shares?”

Whelan was found not guilty earlier this week following a direction by the judge on seven separate charges of being privy to the fraudulent alteration of loan facility letters to seven individuals in October 2008.