Former Anglo Irish Bank Corp. Chief Executive Officer David K. Drumm, sued by the defunct lender over an unpaid personal loan, conceded to a U.S. judge he made “a lot of errors” in his bankruptcy filing and wasn’t aware he needed to reveal $1.2 million in cash transfers to his wife.
Drumm, 47, filed for personal bankruptcy protection from creditors in 2010 in Boston, two years after he began moving money to a new account set up for his wife. Anglo Irish argues Drumm can’t use U.S. law to avoid repaying the Dublin-based bank 7.65 million euros ($10.5 million) because he lied to the court about his finances in a bid to dodge debts.
“There were a staggering number of omissions and errors, weren’t there?” Anglo Irish’s attorney, John Hutchinson, asked Drumm during the second day of a trial in bankruptcy court in Boston.
“That’s your word,” the former executive said.
‘There were voluminous errors?’’ Hutchinson asked.
“There were a lot of errors,” Drumm replied.
Drumm later amended his bankruptcy filing. He testified yesterday that he gave the bankruptcy trustee a detailed spreadsheet in 2011 showing every transfer to his wife.
Drumm, a Dublin native, bought a $4.6 million home in Chatham, Massachusetts, in March 2008, about nine months before resigning as Anglo Irish’s CEO, according to court papers. Ireland nationalized the lender weeks after he stepped down, in January 2009, as loan losses soared following the worst real estate crash in Western Europe. Drumm and his family moved to the U.S. five months later.
“I didn’t feel I had great prospects in Ireland and it made sense for us to go,” Drumm said on the stand. “It was a tough time for us -- the loss of the job and the attention around that and the worry was a bit of a strain.”
Drumm said he forgot to inform the bankruptcy court that he’d transferred two real-estate properties before the bankruptcy filing.
“Isn’t it true you knew and you always knew?” Hutchinson asked the former executive.
“It’s a long timeline and people can forget,” Drumm replied.
Under five hours of questioning by Hutchinson May 21, Drumm acknowledged that his wife, Lorraine, never had a bank account in her own name during their marriage until September 2008. Drumm also agreed that he told the bankruptcy trustee he hadn’t made loans to family members, even though he had lent his brother $6,000 10 days earlier. Proceeds from the sale of two luxury cars were also omitted, Drumm said.
Anglo Irish, renamed Irish Bank Resolution Corp., is seeking to recover cash for creditors after being placed into liquidation to restructure its 34.7 billion euro bailout. IBRC got U.S. bankruptcy court approval this year to sell loans with nominal balances totaling more than $19 billion.
The cost of saving Ireland’s banks later forced the government to seek a rescue from the International Monetary Fund and European Union.
In a related criminal probe in Ireland, Pat Whelan, a former top executive at the bank, along with ex-Anglo Irish Chairman Sean Fitzpatrick and Willie McAteer, the bank’s ex-finance director, pleaded not guilty to charges of having authorized or permitted the bank to give unlawful financial assistance for the purpose of buying shares in the bank.
The lawsuit is Anglo Irish Bank Corp. v. Drumm, 11-01266; and the bankruptcy case is In re David K. Drumm, 10-bk-21198, U.S. Bankruptcy Court, District of Massachusetts (Boston).