Drumm forced into admissions about errors, omissions and mis-statements

Each day, David Drumm drove up to the John W McCormack post office and courthouse in downtown Boston in a black Jeep Cherokee, emerged from the driver's seat, retrieved a black backpack from the boot of the car and transferred the driving duties to his wife Lorraine after a loving kiss.

In front of the waiting scrum of reporters, photographers and cameramen, it was a very public display of affection for a couple, whose relationship – financial and otherwise – runs to the heart of his trial in this Massachusetts court to decide whether he should be entitled to a discharge from bankruptcy. Yesterday marked day three of this trial.

Drumm owes €10.5 million, including €8.5 million to Anglo Irish Bank, now called Irish Bank Resolution Corporation, where he was chief executive from 2004 until his resignation in December 2008, a day after the story broke about the concealed loans of bank chairman Sean FitzPatrick.

For heavily indebted individuals like Drumm, a discharge from bankruptcy allows him to escape his debts with a new financial beginning. A discharge would give him an invaluable court-stamped record saying that he is not liable to any outstanding legal actions or any other kind of challenge from creditors on debt predating October 14th, 2010, the day he filed his bankruptcy petition in Massachusetts.

Drumm has jeopardised that discharge by transferring assets worth $1.2 million (€876,000) to his wife and by failing to disclose them. IBRC and Boston lawyer Kathleen Dwyer, the court-appointed officer or trustee overseeing his bankruptcy, claim he tried to conceal assets and defraud creditors with these transfers and made false oaths by omitting them from his official bankruptcy statements to the court.

The bulk of the cash transferred, €680,000, was lodged to his wife’s bank accounts in November and December 2008, when Anglo’s future without Government support was looking increasingly uncertain. The biggest lump sum transferred to Mrs Drumm was €372,561, moved from a joint account held by the couple in AIB to a sole account in her name at the same bank just four days before Drumm resigned.

Forensic questioning Late on Thursday afternoon, the second day of his bankruptcy trial, Drumm left the witness box after more than 10 hours of testimony that accounted for almost all of the first two days' proceedings. Most of the time he testified under gruelling and forensic questioning by a skilled litigation attorney, John Hutchinson, of the New York law firm Sidley Austin, who is leading the case for IBRC.

Hutchinson expertly walked Drumm through the cash transfers to his wife, the transfer of €56,000 in proceeds from the sale of two cars (a BMW and a Range Rover) in Ireland in 2009, the transfer of a half- share in a $2 million house in upmarket Chatham on Cape Cod, south of Boston, and another half-share in a nominee trust that owned their $2 million home in Wellesley, a suburb of the city.

Probing questions from Hutchinson forcing either an affirmative or negative response from Drumm left him exposed in the witness box. The experience confirmed the advice he said his bankruptcy lawyer gave him before he chose this route. Going through bankruptcy was indeed like “getting naked in public”. Drumm told the court that he was comfortable about getting naked; he had no choice, he said.

Hutchinson referred back to the multitude of statements Drumm made in his official bankruptcy filings to the court, at any of the six creditors’ “341” meetings he attended between November 2010 and August 2011 as part of the bankruptcy, or in the video-taped deposition that Drumm had given.

At the centre of this trial are the statements the former banker filed on October 29th, 2010, that should have given a complete picture of finances. The critical document that has landed Drumm in hot water are the schedules and statement of financial affairs, or “Sofa” as it is referred during this trial.

Under question 10 on the “Sofa” form, he should have disclosed all of the transfers to his wife. His original statement mentioned just two transfers; his amended statement in May 2011 contained 14.

In his opening statement Hutchinson characterised Drumm not as an open or honest debtor but as a “business negotiator dribbling out information” to the trustee.

While questioning Drumm, he pointed to an email the former banker sent his advisers on December 14th, 2010, that, after being asked to provide more information about his finances to his bankruptcy trustee, he wanted to meet them “before I hand over the documents”.

“I need to clearly understand our strategy as regards each of the assets and to examine my stance in relation to transfers to Lorraine, Wellesley, etc,” Drumm told his advisers.

Late on Thursday, Hutchinson returned to question Drumm. He reminded him of his testimony in the witness box: that his advisers had not asked him to fill out a draft Sofa in the run-up to his bankruptcy petition.

State of panic Drumm's defence to the claims that he made false oaths is that he relied on his financial advisers and that he did not know he had to include cash transfers to his wife until April 2011.

When he realised he should have included them, he was “in a state of panic” and “absolutely devastated.”

Hutchinson played video from testimony Drumm had given in February 2011. He then put it to Drumm that he had testified four times on that occasion that his advisers had asked him to fill out the draft statement that included the detail of the transfers to his wife.

“Correct,” Drumm replied.

“And now you are taking that back?”

“Correct.”

“And you were under oath in February?

“Correct.”

It was one of a number of startling admissions about errors, omissions and mis-statements over two days from a man described in these proceedings as a “sophisticated banker” who had led what was once Ireland’s third-largest bank.