Two former Anglo Irish Bank Corp. executives were found guilty of allowing the lender to make loans to 10 clients to buy the company’s shares, the first convictions of bankers since the near collapse of the nation’s financial system.
A Dublin jury found Willie McAteer, the bank’s former finance director, and Pat Whelan, its one-time head of Irish lending, guilty of authorizing or permitting 450 million euros ($622 million) of loans to buy the shares, as executives sought to avoid a stake of about 28 percent flooding on to the market in 2008. The pair were cleared of six other charges.
While Judge Martin Nolan will listen to arguments on sentencing on April 28, he said it’s unlikely he’ll make his decision that day. McAteer, 64, and Whelan, 52, declined to comment to reporters as they left court.
The verdicts come a day after Sean Fitzpatrick, the bank’s former chairman, was acquitted of similar charges. The case centered on loans to clients to buy Anglo Irish shares as the family of Sean Quinn, then Ireland’s richest man, were forced to reduce exposure to the nation’s third-biggest bank.
The two men were cleared of allowing illegal lending of 170 million euros to the Quinn family to buy some of the shares underpinning the position they built up through derivatives.
A disorderly unwinding of the Quinns’ holding would have risked the bank failing, the lender’s one-time chief financial officer Matt Moran testified during the trial. Moran, granted immunity from prosecution, said the strategy was a “last roll of the dice” for bank executives.
The roots of the case lay in a wager by self-made tycoon Quinn on Anglo Irish shares, using instruments called contracts for difference. During the trial, Quinn said he had first become interested in the instruments in 2006, building the family’s exposure over the following two years.
As the value of the shares underpinning the bet plunged amid the worsening credit squeeze, the Quinns were forced to cut their exposure.
Anglo Irish lent cash to 10 of its wealthiest clients, known as the Maple 10, to help soak up the shares underlying the derivatives.
As the trial got underway almost three months ago, Whelan said that he helped put together the deal, in the belief that the loans were part of the bank’s ordinary course of business. He said he understood that the nation’s financial regulator had agreed to the plan, and the company had “positive legal advice” that the loans could go ahead.
“He did not have the slightest inkling that anything was wrong,” Brendan Grehan, Whelan’s lawyer, said on April 10.
Judge Nolan told the jury before they started deliberating that the financial regulator’s attitude was irrelevant, as was any legal advice that bank had received before the loans.
“That may seem unfair, but that is the case,” he said. “This is a matter of law.”
The maximum penalty for the offenses is as long as five years in prison, according to the country’s corporate enforcement office.
Ultimately, the deal only provided a temporary respite for the bank and did little to save it, Sean Quinn or Irish taxpayers. In January 2009, the state nationalized the lender as it came close to collapse. While the government is liquidating the bank, its bailout cost taxpayers over 30 billion euros.
Police and the nation’s corporate law enforcement agency began an investigation into Anglo Irish in February 2009, with Fitzpatrick, Whelan and McAteer charged in 2012.
Sean Quinn has since been declared bankrupt, after losing about 3.2 billion euros on the Anglo Irish wager.
“I was a fool,” Quinn testified during the trial. “I’ve got a right beating in the last two or three years.”