Anglo Irish accounts did not link funding with €7.2bn ILP transactions

Accounts published by Anglo Irish Bank in December 2008 did not link the bank's funding with the €7.2 billion in transactions which were allegedly made to manipulate the bank's balance sheet, the trial of four senior bankers has heard.

Anglo's former head of finance, Willie McAteer (65) and the former chief executive of Irish Life & Permanent (ILP), Denis Casey (56), and two others are accused of conspiring to mislead investors by using interbank loans to manipulate Anglo Irish Bank's balance sheets.

The interbank loans allegedly involved money being transferred by Anglo to ILP and then being put back on deposit with Anglo via ILP's life assurance division.

The transfer would allegedly appear as a corporate deposit and not an interbank loan so the bank’s corporate funding figure would appear bigger for the bank’s year-end figures on 30th September, 2008.

ILP's former director of finance, Peter Fitzpatrick (63) of Convent Lane, Portmarnock, Dublin, John Bowe (52) from Glasnevin, Dublin, who had been Anglo's head of capital markets, Mr McAteer of Greenrath, Tipperary Town, Co Tipperary and Mr Casey 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.

Preliminary accounts

On day 37 of the trial, the jury was shown a copy of Anglo’s preliminary accounts, which were published to the markets on December 2nd, 2008. The accounts were accompanied by a report which included a statement from the then chairman, Sean FitzPatrick.

In this statement Mr FitzPatrick drew attention to the customer deposits figure of €51.5 billion representing 58 per cent of the bank’s total funding on the date of the end of year accounts, September 30th.

Matt Moran, Anglo's chief financial officer at the time, told Paul O'Higgins SC, prosecuting, that the detailed balance sheet showed a figure of €14 billion under "loans and advances to bank" and a figure of €51.5 billion under "customer accounts".

He said he believed the latter figure did include the figure of €7.2 billion in deposits placed into the bank in September by ILP, on behalf of its non-banking entity, Irish Life Assurance.

Asked if there was anything in the accounts which created any linkage between the figure on the balance sheet and loans or deposits by Anglo in any other financial institutions, the witness replied: “I don’t believe that there is a noted linkage in the accounts.”

A note

Mr Moran agreed with Michael O’Higgins SC, defending Mr Bowe, that he told gardaí that readers of the preliminary accounts would have benefited from such a note.

Counsel put it to him that “you were and are of the view that a note should have appeared” and Mr Moran replied: “I believe a note would be helpful,”

Mr Moran explained that the higher the level of customer funding at the balance sheet date, the better for the bank.

“This number indicates what amount people have placed on risk with the bank. A lower level is less good for the bank,” he said.

He agreed that the accounts were signed off, on behalf of the directors of the bank, by Mr McAteer and the then chief executive, David Drumm.

The trial continues on Monday before Judge Martin Nolan and a jury and will run until May.