Ireland’s most-wanted bankers go on trial

Ireland’s most-wanted bankers go on trial

Six years after Ireland’s financial crash, three former executives at the collapsed Anglo Irish Bank appeared in a Dublin court on Wednesday. The trial follows the first of many probes into the events that brought the Irish economy to its knees.

The criminal proceedings will determine whether the bank’s top executives acted illegally when sanctioning loans and share dealings at the heart of the process that led to Anglo Irish Bank’s forced nationalization, costing the Irish taxpayer an estimated 30 billion euros.

The Dublin criminal court is dedicating two of its largest courtrooms to the case against Anglo Irish Bank’s former chairman Seán Fitzpatrick, chief financial officer Pat Whelan and finance director William McAteer.

A dedicated computer system will facilitate access to the 24 million documents in the evidence file and new legislation is being used to add substitutes to the jury in case some jurors become ill during the trial’s expected six-month duration – the longest in Irish history.

Prosecutors have charged the three former executives with 16 offences in their dealings with investors who bought shares in the bank as it was on the verge of insolvency in 2008. The defendants are pleading not guilty.

At the time, the influential self-made billionaire Seán Quinn had quietly gained control of a quarter of the bank’s stock through complex derivatives. When it emerged that Quinn’s construction materials and insurance businesses were hit by the growing crisis and he might not be able to hold his position, Anglo Irish Bank executives approached a friendly group of its own customers, codenamed the Maple Ten.

Shares bought with bank’s own loans

The bank loaned the Maple Ten and the Quinn family hundreds of millions of euros so that they could buy back Anglo Irish Bank shares and unwind Seán Quinn’s untenable derivatives.

“The director of public prosecution argues that by providing loans to investors to buy the bank’s shares, the bank's executives were manipulating the market, and that keeping it secret pushed the share price up while it should have been unraveling,” Dublin-based financial journalist Ian Kehoe told FRANCE 24. A co-author of the book Citizen Quinn on the family’s affairs, he added: “Nobody is disputing the facts. The question is: was it legal?”

Defense lawyers have petitioned for the bank’s compliance experts as well as staff of the national financial regulatory body to be called as witnesses. They are likely to argue that the bank’s executives received the green light from their legal advisors and informed the authorities of the transactions.

This expected line of defense exposes ramifications in the Irish banking crisis far beyond the criminal trial’s narrow focus on the Quinn and Maple Ten decisions.

Many other cases are under way in the Anglo Irish Bank debacle alone – Fitzpatrick and other executives will go on trial on separate criminal charges later this year, and the High Court has just given investigators one more year to complete their file before commercial judges rule on potential violations of corporate law.

Seán Quinn and two of his relatives received several weeks’ jail terms in 2012 for failing to hand over international properties to the Irish Bank Resolution Corporation – the new name of the nationalized Anglo Irish Bank, now in liquidation.

Former executives at other Irish banks are also facing criminal charges.

Anger and austerity

Yet it remains to be seen whether the public will feel vindicated by such prosecutions. Anger spread after the government’s decision to guarantee mounting bank debts in 2008 destroyed Ireland’s reputation on the global bond market and forced the country into a drastic austerity program in exchange for emergency funding from the European Union and the International Monetary Fund.

“I have very low expectations for this trial,” Diarmuid O’Flynn told FRANCE 24 from the southwestern Irish town of Ballyhea. He belongs to a local citizens’ group that has staged weekly marches for the last three years in protest against the 70 billion euros spent by the Irish exchequer to bail out the country’s banks, “more than 15,000 euros for every man, woman and child in Ireland.”

“We have not been pushing for trials or retribution. What we are looking for is the money back,” O’Flynn said. “It is good to see those people brought to justice, but we don’t want to see them jailed – it would cost us money. We would like to see them stripped of all their assets, put on community service and live on the dole,” he added.

In the meantime, the Ballyhea protest group has a more pressing demand: the cancellation of 28 billion euros in debt contracted by the Irish Central Bank from the European Central Bank to save Anglo Irish Bank from bankruptcy in 2009.

The Irish government negotiated the conversion of those infamously expensive promissory notes into long-term government debt at a more reasonable rate last year. This means multi-billion repayments will not choke the country’s budget this year, but the money must still be refunded over several decades.

O’Flynn wants Irish politicians to fight for those funds: “Most went to Anglo so that it could pay its bondholders” – mostly European financial institutions that funded the bank with little regard for its reckless lending practices during the Irish property bubble at the turn of the millennium.

From ‘Anglo, the Musical’ to the ‘Anglo tapes’

The culture of greedy gambling that brought down the national economy has taken centre stage in Irish conversations – from pub chatter to newspaper columns and presidential speeches.

In 2012, a satirical stage show used puppetry and song to mock the irresponsible bankers, gullible borrowers and complicit politicians who drove the country off the cliff. Through biting dialogue, ‘Anglo, the Musical’ identified unified, under-regulated Euro area money markets as the source of poisonous cheap credit that fuelled the Irish bubble:

“Where does the money come from?”
“Germany – they’ve got loads and they want us to borrow it.”
“Why?”
(pause)
“Who the f**k cares!”

In recent years, each new scandalous revelation about Anglo Irish Bank revived popular indignation. Last June, the Irish Independent newspaper obtained routine recordings from the bank’s phone system.

In the so-called ‘Anglo tapes’, head of capital markets John Bowe can be heard saying that the relatively low 7 billion euros initially sought from the state to keep the bank afloat was “picked out of his arse”. “If they saw the enormity of it upfront, they might decide they have a choice,” Bowe adds.

Director of retail banking Peter Fitzgerald replies: “Yeah. They’ve got skin in the game and that is the key.”

In another tape, bankers laugh at the easy money supply they get from Germany and sing the country’s old national anthem.

Irish Times columnist Róisín Ingle wrote at the time: “When I watched ‘Anglo, the Musical’ I was vaguely comforted (...) by the fact that it was a comedy and therefore exaggerated for laughs, and then I listen to a figure of seven billion being pulled out of someone’s arise and someone else’s ‘hilarious’ rendition of Deutschland Über Alles and I realize that the musical wasn’t satire – it was pretty much straight reporting.”

Parliamentary inquiry

Yet the Irish authorities did not regard the Anglo tapes as strong enough evidence to launch fresh prosecutions. Instead, Taoiseach (Prime Minister) Enda Kenny promised to establish a parliamentary inquiry “to determine without fear or favour and with dispassion and integrity all of the true material facts and the material circumstances that led to the collapse of the banking sector which continues to cause profound hardship, loss and suffering to people.”

“It would be completely separate from criminal trials and could not make adversary findings against anyone,” Ciaran Lynch told FRANCE 24. A Labour member of parliament and chairman of its finance committee, Lynch supports the ruling coalition and Irish media have tipped him as the potential chairman of the banking inquiry.

Lynch wants the inquiry to focus on the 2008 decision by the previous government to cover all liabilities by all Irish banks. “The blanket guarantee had a full effect on the country, there needs to be an explanation of why this was decided, what it has achieved and what information was available to the government at the time,” he said, adding that the inquiry should then “make recommendations for the future.”

Writer Ian Kehoe said the various investigations could bring closure to a population bruised by the crisis: “The country has moved on, we have a new government, we’ve been through a bailout and are now on the other side of that. But there’s still this thirst among the people to understand what went on: were there systematic flaws in financial regulation?”

Protester Diarmuid O’Flynn, however, fears the parliamentary inquiry will become politicized – with today’s majority blaming yesterday’s government – and do nothing to alleviate the massive debt that hangs over the country’s future.

“A wrong will never become a right, no matter how many people believe so,” he said. “In normal capitalism, when someone makes a bad investment, they pay the price. It has not happened here.”