Lehman Pulled Money Out of Anglo Irish Days Before Bankruptcy

  • Last-minute withdrawl worsened Irish lender's funding problems
  • Both banks were victims of 2008 global financial crisis

Days before Lehman Brothers Holdings Inc. filed for bankruptcy in 2008, the U.S. investment bank pulled 350 million euros ($380 million) out of Anglo Irish Bank Corp., exacerbating the Irish lender’s funding crisis.
An internal e-mail circulated between Anglo Irish executives on Sept. 12, 2008, showed the lender lost 2 billion euros in deposits over seven days, including from Lehman Brothers, according to documents shown to jurors at a trial of former finance executives in Dublin Friday.

The U.S. bank’s withdrawal “was interesting as the Lehman crisis or collapse was only days away,” said Una Ni Raifeartaigh, a prosecutor in the case against four former Irish bankers, said in the Dublin Circuit Criminal Court.

Anglo Irish’s fast-deteriorating financial position in September 2008 caused it to increasingly target Irish Life & Permanent Plc, a bank and life assurance company, for funding as its fiscal year drew to a close at the end of that month, according to the documents.

Former Anglo Irish executives, Willie McAteer and John Bowe, and one-time directors of Irish Life & Permanent Plc, Denis Casey and Peter Fitzpatrick, have pleaded not guilty to illegally conspiring to create the impression Anglo Irish’s customer deposits were higher than they actually were in September 2008.

Prosecutors say Irish Life’s life assurance arm provided Anglo Irish with 7.2 billion euros of short-term deposits that month to deceive depositors and investors about Anglo Irish’s financial health. The deposits, backed by cash collateral from Anglo Irish, did nothing to help the bank’s liquidity position.

The case, which started Jan. 20, is the Director of Public Prosecutions vs Bowe, Fitzpatrick, McAteer and Casey, DUDP0529/2014, in the Dublin Circuit Criminal Court. It is expected to last 20 weeks.

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