Irish financial regulators were informed in March 2008 of Anglo Irish Bank Corp.’s plan to provide funds to the Quinn family to convert a derivative position in the bank into shares, a jury was told today.
Executives from the Quinns’ company told officials at the regulator that part of the the family’s 29.3 percent exposure, through contracts for difference, would be converted into stock, according to minutes of a March 31 2008 meeting, Brendan Grehan, lawyer for Pat Whelan, a one-time managing director of Anglo Irish, said in court today.
Whelan, former Anglo Irish Chairman Sean Fitzpatrick, Willie McAteer, the bank’s former finance director pleaded not guilty to charges of having authorized or permitted the bank to give unlawful financial assistance for the purchase of buying shares in the bank. The loans, granted in July 2008, were used by 16 customers, including the Quinns, to buy shares, as the family unwound their contracts for difference, also known as CFDs.
Businessman Sean Quinn, who founded the Quinn Group, ended up losing 2.4 billion euros ($3.3 billion) on a “spectacular punt,” Grehan asked McCaffrey.
“He paid a very high price for investing in that bank,” said McCaffrey, adding Quinn lost at least that amount.
CFDs enable speculators to make a leveraged bet, with as little as a 10 percent to 20 percent deposit, or margin, that a share price will rise or fall without owning any of the stock. The buyer and seller of a CFD agree to exchange the difference in an asset’s price between the time a contract is opened and its closing.
The bank set about trying to force Quinn to unwind his position after the so-called St Patrick’s Day Massacre hit the value of Anglo Irish, according to McCaffrey.
Anglo Irish shares fell as much as 23 percent on St. Patrick’s Day, March 17, 2008, meaning that the family of Quinn, then one of Ireland’s richest men, faced more losses.
As the contracts for difference were unwound, the Quinns took a 15 percent equity stake in the bank, in a transaction underpinned by loans from Anglo Irish.
The cases are DPP v William McAteer, DUDP1019/2012, DPP v Sean Fitzpatrick, DUDP1019/2012, DPP v Pat Whelan, DUDP1019/2012 (Dublin).