Drumm admits lying in US mortgage application

Former Anglo Irish Bank chief executive David Drumm admitted lying in a mortgage application to buy a house outside Boston by failing to disclose that he was embroiled in litigation with his former bank.

Mr Drumm was testifying on the first day of a trial in the Massachusetts bankruptcy court in which his former bank, now Irish Bank Resolution Corporation, and the trustee managing his US bankruptcy case are seeking to block his discharge from bankruptcy to prevent him receiving a fresh financial start.

During a day of questioning by IBRC's attorney John Hutchinson, Mr Drumm admitted that he told Boston Private Bank in his application for a mortgage to buy a $2 million family home in the town of Wellesley in January 2010 that he was not facing any litigation when Anglo was suing him in Ireland.

At the time of the house purchase Anglo had taken legal action against him to recover loans of €8.5 million and a fraudulent action over his transfer of a house in Dublin into his wife’s name. Mr Drumm admitted the declaration on his mortgage application was false but said the bank filled out the form.

The bank's attorney told Judge Frank Bailey that Mr Drumm "flagrantly" lied on his mortgage application, showing his direct intent to defraud his creditors.

IBRC and the trustee claim he concealed assets and defrauded creditors by transferring money to his wife Lorraine in 2008 and 2009 and that he made false statements and oaths in his bankruptcy case about the transfers.

Attorney David Mack, for Mr Drumm, said the case against his client was limited to transfers made in the year before his bankruptcy when only $73,000 was transferred and that this went to his creditors.

Mr Drumm told the court that he completed financial statements in the bankruptcy case in 2010 “as best I could” but admitted that he “forgot” to disclose several large transfers among a total of about $1.2 million he made in his original bankruptcy statements.

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Mr Drumm said the car was in fact sold to raise $50,000. “I was under pressure that day – the room was full of media,” he told the court.

Mr Hutchinson described as “preposterous” Mr Drumm’s valuation of furniture at $10,000 when he spent $300,000 furnishing a house in Chatham, Cape Cod, south of Boston, in 2008.

Mr Drumm admitted that he started transferring cash to his wife in September 2008 when Anglo’s share price was plummeting and the bank faced the prospect of Government intervention.

“It was a very, very difficult time with a lot of unknowns,” said the former banker, who refused to answer questions about the recent Anglo criminal trial in Dublin as he entered the court building.

The court heard that he earned $18 million during his time as chief executive at Anglo between 2004 and 2009.

Advice Mr Drumm said on filing financial statements in his bankruptcy case that his US accountants advised him that he could get in trouble if he did not disclose all asset transfers over the previous two years before his bankruptcy petition.

Mr Drumm agreed that he knew “the buck stops” with him when it came to his disclosures.

He recalled being told by his advisers that he had to disclose all cash or property transfers in the bankruptcy process and that “you had to get naked in public,” he said.

Opening the case for the bank and the trustee before Mr Drumm’s testimony, Mr Hutchinson said Mr Drumm had engaged in “classic fraudulent transfers” to his wife.

He described him as a debtor who had “not earned his discharge” and “made a mockery” of the bankruptcy process by making false oaths and showing “callous indifference” to his responsibilities.

Mr Mack, for Mr Drumm, said that the judge would see the case against his client was “a lot of bluster and argument but short of true evidentiary substance.”