David Drumm wanted to avoid ‘brutal’ Irish bankruptcy

Former Anglo Irish Bank chief David Drumm said he wanted to avoid bankruptcy in Ireland in 2010 because it was "pretty brutal" involving a 12-year process and "a debtors' prison-type approach".

On the second day of his bankruptcy trial in Boston, Mr Drumm (47) told a Massachusetts judge that an American property business he set up after resigning from Anglo in December 2008 and moving to the US struggled to carry out deals from 2009 because of his “prior association” with the lender.

In the second half of 2009 "things had just got worse and worse in Ireland" because of the National Asset Management Agency and because a lot of his customers in the US – whom he described as "friends" from working at Anglo – had debts to his former bank, he said.

‘Increasingly difficult’

“It became increasingly difficult for me to consummate anything with them because of my prior association,” Mr Drumm said at a trial to decide whether he is entitled to a discharge from bankruptcy.

Irish Bank Resolution Corporation, formerly Anglo, and Mr Drumm’s bankruptcy trustee Kathleen Dwyer, are seeking to block his discharge, claiming he concealed assets and defrauded creditors by moving $1.2 million (€876,000) in cash and property to his wife in 2008 and 2009 and that he made false oaths in his bankruptcy statements to the court by failing to disclose those transfers.

The former banker has debts of about €10.5 million, including €8.5 million to the bank.

Mr Drumm said he planned setting up his new business while his family took a “deep breath” after his resignation from Anglo during a holiday to France at Christmas 2008.

Asked by his lawyer David Mack about his relationship with his wife at the time, he said: “It was a tough time for us. The loss of the job and the attention around that and the worry was a bit of a strain.”

Mr Drumm said his wife loaned him $250,000 – a loan described by the bank and trustee in their case as “fictitious” – to invest in his new American business to secure a US “E-2” investor visa. He started paying himself a salary from his firm in 2009 because he was advised this was necessary to obtain a “H-1B” US visa that could lead to him securing a green card to live permanently in the US.

His wife gave him the money as a loan because she wanted it back in case the business “blew up” and they had to return to Ireland. There was no need to write down anything confirming the loan, he said.

“She was my wife – it was an agreement between the two of us,” he said.

Alert the media

Mr Drumm said the couple bought a new family home in January 2010 in Wellesley near Boston using a nominee trust, the Epiphany Nominee Trust, and her maiden name, Lorraine M Farrell, because they didn’t want the name “Drumm” to appear on property records which would alert the media.

The bank and trustee claim that the former banker failed to disclose his transfer of a 50 per cent interest in the trust to his wife.

He told the court that he received media attention in Ireland and that the family had “visitations” from the “tabloids” at their home on Cape Cod, south of Boston.

Mr Drumm said that he and his wife agreed a separate property agreement stating that Lorraine Drumm would receive the $831,000 cash deposit used to buy the house back when it was sold. He told the court that his memory was that this agreement was signed at the closing of the house purchase.

“Lorraine wasn’t going anywhere until she had that piece of paper signed,” he said.

Mr Drumm said he was advised in summer 2010 by his then Boston bankruptcy lawyer Stewart Grossman that bankruptcy in the US was “a process of getting naked in public”, that he “had to disclose everything” about his life and that asset transfers could be “clawed back”.

“Were you comfortable about getting naked in public?” Mr Mack asked.

“Yes – [I had] no choice,” replied Mr Drumm.

Mr Grossman understood his dispute with new management at Anglo and the potential that it would never be settled, he said, and that he was aware of the “political nature” of the situation between Mr Drumm and the State-owned bank.

The trial continues today when Mr Grossman and Mr Drumm’s trustee will give evidence.