The graphic, showing a jagged orange line tumbling precipitously before nestling in the bottom right-hand corner, needed little explanation. The line represented Anglo Irish Bank’s share price in 2008.
On the first day of that year the figure stood at €10.72. By March 17th – described in court as “the St Patrick’s Day massacre” – it had fallen to €6.95. By December 31st the price stood at €0.171.
“The overall pattern is one of decline,” prosecuting counsel Úna Ní Raifeartaigh remarked to Aisling McArdle, regulation manager at the Irish Stock Exchange, who had compiled the figures.
Michael O'Higgins SC, representing former Anglo chairman Seán FitzPatrick, wanted to know whether his client and then Anglo chief executive David Drumm had reported back to the board the information they had gleaned from a meeting with Seán Quinn and Liam McCaffrey of the Quinn group at a hotel in Navan in the summer of 2007.
"To the best of my recollection, yes," Natasha Mercer, then Anglo company secretary, replied.
'A matter of concern'
What Anglo had learned at that meeting was that Quinn held 24 per cent of its shares through contracts for difference (CFDs). "It was a matter of concern to the board?" O'Higgins asked. Mercer agreed that it was.
FitzPatrick and his co-defendants, Pat Whelan and William McAteer, sat in the dock, listening attentively as the court was given a crash course in CFDs by UCC economics lecturer Séamus Coffey. He drew an analogy with a horse: the difference between owning shares outright and holding a CFD was akin to the difference between owning a racehorse and placing a bet on one at the bookie's. But CFDs can be much more complex than that.
Cross-examination from O’Higgins, Coffey remarked that when it comes to financial instruments, “the only limit is your imagination, and these people in the markets have very vivid imaginations.” O’Higgins stressed the lack of transparency around such instruments. “It’s called a grey market. Would black arts be a more accurate description?”
In Court 19 yesterday, much of the afternoon was devoted to the evidence of former Quinn group chief executive Liam McCaffrey. He wasn't involved in the Quinns' CFD investments or property portfolio but had worked with Quinn for more than 20 years. Inquiring about the group's management structure, defence counsel Brendan Grehan asked where Seán Quinn sat in the hierarchy.
“On top of me,” McCaffrey replied, prompting a ripple of laughter. Grehan asked who called the shots. “Seán Quinn was the boss.”
McCaffrey explained that the Quinn group was owned by the five Quinn children; in 2008, Seán Quinn didn’t own any shares in the company. “The idea, which went fatally wrong in the end, was to provide the Quinn family with independent wealth.”
Ardboyne Hotel meeting
McCaffrey attended the meeting in the Ardboyne Hotel in Navan in September 2007 at which Seán Quinn told FitzPatrick and Drumm that he had built up a 24 per cent holding of Anglo shares through CFDs. "They were concerned at the level, and somewhat surprised," McCaffrey said.
In the dock, five feet to McCaffrey’s right, FitzPatrick took notes.
By March 2008, McCaffrey said, the fall of the Anglo share price meant the margin calls on the CFD holding by Quinn “became extreme”. Quinn had to fund these calls, and the money came from Anglo. Since the Navan meeting, meanwhile, Quinn had continued to add to his CFD positions. By March his Anglo holding was 28 per cent.
Grehan asked if Quinn had taken an “eternal optimist’s view” of Anglo’s share price.
“I think his view of the scale of the recovery changed,” McCaffrey replied, “but ‘How low can it go?’ was one comment he made.”
On July 14th, 2008, McCaffrey took part in a conference call with Quinn and a number of Anglo figures. Quinn was reluctant to go ahead with the unwinding of his CFD positions because he was holding out for a recovery of the share price.
“It was a difficult and angry conversation,” McCaffrey told the court. “Either David Drumm walked out or Seán hung up. There was a row.”
He was asked whether things were patched up with Anglo after that conversation.
“I’m not sure they were patched up all that quickly.”
