Anglo executive asked if ILP transfers were ‘window dressing’, court hears

A senior executive with Anglo Irish Bank asked colleagues in November 2008 if a €7.2 billion transaction used to bolster the bank's deposits figures was "window dressing", a trial has heard.

Four former senior bankers from Anglo Irish Bank and Irish Life and Permanent (ILP) are alleged to have conspired to mislead investors by setting up a €7.2 billion circular transaction scheme to bolster Anglo's 2008 balance sheet.

Peter Fitzpatrick (63) of Convent Lane, Portmarnock, Dublin, John Bowe (52) from Glasnevin, Dublin, Willie McAteer (65) of Greenrath, Tipperary Town, Co. Tipperary and Denis Casey (56), from Raheny, Dublin have all pleaded not guilty at Dublin Circuit Criminal Court to conspiring together and with others to mislead investors through financial transactions between March 1st and September 30th, 2008.

On day 43 of the trial, Colin Golden, Anglo's head of group finance in 2008, told the jury that he attended a meeting of the bank's audit committee on November 18th, 2008.

He said that Donal O’Connor, a non-executive director and member of the audit committee, was also in attendance at the meeting, having dialled in from Australia. Mr McAteer, the bank’s then head of finance, and others attended in person.

Briefing note

During the meeting Mr Golden read out a briefing note prepared by Group Finance which dealt with the allegedly back-to-back transactions with ILP. Mr Golden testified that he then told the committee that "the transactions bolstered customer deposits".

The witness said Mr O’Connor then asked “was this window dressing?” and Mr McAteer answered using the words “balance sheet management”.

Mr Golden told Úna Ní­ Raifeartaigh SC, prosecuting, that he saw the transaction as a straight cash-for-cash transaction and that it was not collateralised.

He said he did not become aware until February 2009 that the sequence or timing of the multiple deposits and loans – who gave who the money first — had been incorrectly represented to Anglo’s auditors the previous October.

He said he did not see the significance of the sequence until he read about it in a newspaper report on Tuesday this week. He said he didn’t think it would affect the accounting treatment of the money.

The €7.2 billion figure was included in the bank’s balance sheet published as part of its preliminary annual results on December 3rd, 2008. Mr Golden told Ms Ní­ Raifeartaigh that the figures were treated as “gross”, meaning they were shown separately in the balance sheet.

This meant the balance sheet “customer accounts” figure and “loans and advances to banks” figure were both €7.2 billion greater that if the transaction had been accounted otherwise.

Counsel asked Mr Golden about the issue of netting or set off of the transactions. This is a financial term which means the transactions between parties would effectively cancel each out.

He said that he thought it was correct to say that if the deposits and loans had been set off against each other, the figures on the balance sheet would be €7.2 billion lower.

Mr Golden said he was unaware of any discussion, prior to the publication of the results, of adding a note to the accounts which would indicate to the public that the transactions were linked. He said he didn’t know why there was no note included.

He told the court that he was relying on what he was told by colleagues in deciding how to treat the transactions on the balance sheet.

The trial continues before Judge Martin Nolan and a jury.