Ex-Anglo bank due to start defence of action by Quinn family

THE FORMER Anglo Irish Bank is due to start its defence of a legal action taken by the family of businessman Seán Quinn tomorrow…

THE FORMER Anglo Irish Bank is due to start its defence of a legal action taken by the family of businessman Seán Quinn tomorrow.

Part of the bank’s defence will focus on claims that certain loans to the family were not used to buy Anglo shares but to cover losses on Mr Quinn’s Anglo contracts for differences (CFDs) investments and were therefore legally advanced.

The Commercial Court will hear preliminary issues on whether the family can argue that the bank’s loans were in breach of company law and market abuse regulations.

Mr Quinn’s wife, Patricia, and their five children are challenging the bank’s claim they owe €2.3 billion, arguing the loans are unenforceable as they were advanced for the illegal objective of manipulating the stock market to prop up the bank’s share price.

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Central to the case are EU market abuse regulations and section 60 of the Companies Act 1963, which prohibits lending by a company to buy shares in the company unless it is in the ordinary course of the company’s business.

The bank is expected to claim that Anglo advanced loans to Mr Quinn, backed by personal guarantees from his family, to cover margin calls on his CFDs in Anglo.

The bank is expected to argue that many loans were not illegal as they were advanced to cover losses on CFD investments, which were built up unbeknownst to the bank, and not directly on the shares.

Mr Quinn’s investment of €750 million in the CFDs meant he did not own the shares directly but had control over up to 28 per cent of Anglo through the investments.

As the share price fell in 2008, Anglo made loans amounting to hundreds of millions of euro to Mr Quinn to cover margin calls from the brokers/dealers holding the shares and to maintain the pre-agreed cash margin on the CFDs.

Anglo advanced loans to the Quinn family to buy a 15 per cent stake in July 2008 as part of the unwinding of Mr Quinn’s CFDs.

Loans were also provided by the bank to the “Maple 10” group of investors who acquired a further 10 per cent stake held by Mr Quinn through his CFD stake.

The bank, since renamed IBRC, said it strongly contested the family’s claims and it wanted full repayment of the debt. The family had no comment to make last night.

The outcome of the preliminary hearing, which has been scheduled for three days in the Commercial Court lists, may shorten the complex legal action and substantially reduce the costs in the case.

The court has deferred consideration of applications to discover information and records until it rules on the preliminary issues.

The hearing will probe areas that are the subject of ongoing investigations into Anglo by the Office of the Director of Corporate Enforcement and the Garda Bureau of Fraud Investigation.

IBRC has drawn Mr Quinn, who was declared bankrupt last month arising from debts of €2 billion to Anglo, into the family’s action as a third party.

Simon Carswell

Simon Carswell

Simon Carswell is News Editor of The Irish Times