Drumm cash omissions not due to ‘mere oversight’, court told

A "mere oversight" could not explain why former Anglo Irish Bank chief executive David Drumm failed to disclose $1.2 million in cash transfers to his wife, his bankruptcy trustee told a US court.

Kathleen Dwyer, the court officer appointed to oversee Mr Drumm's US bankruptcy, told his bankruptcy trial it was "very unusual" that transfers of $1 million would be "overlooked".

Testifying on the fourth day of the trial in Boston, Ms Dwyer said the notion that Mr Drumm's failure to disclose cash transfers to Lorraine Drumm was a mistake was "kind of hard to imagine" given Mr Drumm's familiarity with financial matters.

She said it was “very unusual” that Mr Drumm did not have his financial statements “done right” for the first or the second time to include cash transfers in the two years before his bankruptcy in October 2010.

Wear you out

It was common for a debtor to try to “wear you out” and hope a trustee will “get tired of dragging you back in” to meetings, she said. “You had here a debtor who was an accountant, a businessman, a banker – someone like that wouldn’t be making mistakes: it was unusual.”

Mr Drumm was a “sophisticated debtor with good counsel”, she said, and it wasn’t her responsibility to spot omissions and warn him about them. Ms Dwyer, a bankruptcy lawyer who has administered 15,000 bankruptcies, said, based on her experience, Mr Drumm left out “a large amount” of information from his bankruptcy filings.

Asked by her own lawyer whether his sworn bankruptcy statements submitted to court were adequate, she replied: “Absolutely not.”

Ms Dwyer and the bank, now Irish Bank Resolution Corporation, are seeking to deny Mr Drumm a discharge from bankruptcy and a fresh financial start. They claim he defrauded creditors by transferring cash of $1.2 million (€876,000) and interests in property to his wife, in 2008 and 2009, and that he failed to disclose those transfers in his initial sworn statements about his financial affairs in October 2010.

Ms Dwyer claimed instead of disclosing everything up front, with Mr Drumm’s “things leaked out over time”.

Testifying after Ms Dwyer, Heather Zelevinsky, an associate at the Looney & Grossman law firm, which helped Mr Drumm compile his bankruptcy statements, said she first learned about his cash transfers to his wife in September 2010.

An employee of the firm from June 2010 to December 2011, Ms Zelevinsky said she believed that, under question 10 of Mr Drumm’s statement of financial affairs to the bankruptcy court, where he should have disclosed cash transfers to his wife going back to two years, she onlwas required only to disclose transfers of property other than cash.

Conceal transfers

She said she first learned after a creditors’ meeting in April 2011 that cash transfers should have been included in the statement. Referring to an email she sent to Mr Drumm after the meeting, she told the court she never believed he was trying to conceal transfers and told him in the email that she thought they had his financial statement correct the first time but if they needed to amend it, they could.

Earlier, under questioning from Mr Drumm’s lawyer David Mack, Ms Dwyer confirmed that she filed a legal challenge against the bank – her co-plaintiff in this trial – in November 2010 seeking to block Anglo appointing another lawyer as trustee in her place.

She claimed in that action that Anglo owed Mr Drumm $3.6 million, including $1.68 million in salary, $1 million in pension obligations, a deferred bonus of $926,000 from 2006 and benefits of $62,000.

The trial continues today when Ms Zelevinsky will be cross-examined by the plaintiffs and Mrs Drumm is due to testify.