€7.2bn Anglo-IL&P transaction lacked ‘commercial substance’

An accountant has told the trial of former Anglo Irish Bank chief executive David Drumm that the inclusion of a €7.2 billion transaction in a report by the bank to the stock exchange in 2008 was "misleading and inaccurate".

Dan Taylor, a partner at BDO accountants in London and an expert witness for the State, said the transactions between Anglo and Irish Life & Permanent (IL&P) lacked any commercial substance.

He was giving evidence on day 71 of Mr Drumm’s trial at Dublin Circuit Criminal Court.

Mr Drumm (51) of Skerries, Co Dublin, has pleaded not guilty to conspiring with former bank officials Denis Casey, William McAteer, John Bowe and others to defraud depositors and investors at Anglo by "dishonestly" creating the impression that deposits in 2008 were €7.2 billion larger than they were.

He has also pleaded not guilty to false accounting on December 3rd, 2008, by furnishing information to the market that Anglo’s 2008 deposits were €7.2 billion larger than they were.

On Wednesday, after Mr Taylor concluded his second day of evidence, Judge Karen O’Connor told the jury that it was entirely up to them to decide what weight to attach to it.

‘Trial by jury’

“It’s not trial by accountant, it’s trial by jury, and I want you to be aware of that,” she said.

Earlier, Paul O’Higgins SC, prosecuting, asked Mr Taylor for his opinion on the contents of Anglo’s preliminary announcement of their end of year accounts, published on December 3rd, 2008.

The jury viewed the ‘Chief Executive Review’ section of the document, which stated there had been an increase in customer deposits. The note next to the table of figures said this demonstrated the “strong performance of our customer deposits business”.

Mr Taylor said the announcement to the market contained no specific disclosure relating to the transactions with IL&P.

“There was no disclosure about the connection between the €7.2 billion of loans and advances to banks and the €7.2 billion of customer account balances,” he told the jury.

Mr Taylor said it was his view that the inclusion of €7.2 billion in the preliminary announcement was “misleading and inaccurate”.

Mr Drumm accepts that the multi-million euro transactions took place between Anglo and IL&P in 2008 but disputes that they were fraudulent or dishonest.

The trial is now in its 14th week, and continues before Judge O’Connor and a jury.