FORMER ANGLO Irish Bank chief executive David Drumm has filed for bankruptcy in the United States after the State-owned bank rejected his proposal to settle its legal action in the High Court in Dublin over loans of €8.5 million.
Mr Drumm applied for bankruptcy in a Boston court in Massachusetts near his US home at 3pm Irish time yesterday in advance of the bank’s case starting on October 26th.
Lawyers for Mr Drumm told the commercial division of the High Court in Dublin a short time later that Anglo had last Friday rejected a final settlement offer that he had proposed on September 24th.
He had offered to hand over all assets to Anglo excluding personal effects such as clothes and jewellery, his lawyers said.
Anglo’s counsel told the Dublin court that the US bankruptcy application was “quite an extraordinary turn of events” and that the bank had only just become aware of it.
Lawyers for Mr Drumm said he had “bent over backwards” to reach a settlement of the action. Counsel for Anglo said that it was “a bit rich” for Mr Drumm to seek to take the “high moral ground”.
It is understood that Mr Drumm claims that he proposed handing over assets to Anglo valued at €10.8 million to settle the action.
The 44-year-old former bank chief had offered to put up his €5.4 million pension, under which he is entitled to annual payments of €271,000 from the age of 55.
The assets on offer included half the proceeds – estimated at €1 million – from the sale of a house at Abington in Malahide, Co Dublin, and the transfer of another property in Cape Cod, Massachusetts.
He also offered to hand over €200,000 covering his half-share of a property in Boston which his wife bought from her own funds.
His lawyers had claimed in their September 24th settlement offer that he was “frustrated with the un-commercial stance being adopted by the bank in relation to his proposals”. Following his application, Mr Drumm may retain his €5.4 million pension and could emerge from bankruptcy within a much shorter period than in Ireland. An official appointed by the US court will now liquidate all his assets through forced sales in a move which may result in Anglo recovering a lower amount.
Under the shareholder agreement with the State-owned bank, Minister for Finance Brian Lenihan has control over the bank’s dealings on the loans with former directors.
It is understood that the Minister instructed the bank to take whatever action necessary to secure full repayment of the debts. Anglo’s lawyers claimed in correspondence last July that the Minister was aware of Mr Drumm’s attempts to settle.
It had been anticipated that Mr Drumm would use the hearing of the bank’s action later this month to meet voluntarily with gardaí and other investigators examining the collapse of Anglo, which is costing the State up to €34.3 billion.
Planning such a meeting was now “up in the air” following Mr Drumm’s bankruptcy application, said a well-placed source.
The High Court was told the US court action may or may not disrupt Anglo’s case but this was out of Mr Drumm’s hands, his lawyers said.
It is understood that Mr Drumm has had extensive contact with the Garda Bureau of Fraud Investigation and the Office of the Director of Corporate Enforcement about their investigations and in relation to planning a meeting with them.
A source familiar with Mr Drumm's position had said that he had made contact with the Government’s commission of investigation, led by former senior Finnish civil servant Peter Nyberg, which is investigating the causes of the banking crisis.
However, the source later clarified that Mr Drumm had been in contact with international banking experts Max Watson and Klaus Regling for their investigation earlier this year into the causes of the banking crisis.
Anglo’s case will be returned before Mr Justice Peter Kelly, who has been managing the case, in the Commercial Court next Tuesday.