David Drumm's latest bankruptcy hearing was in a familiar monied setting but the money at stake now is his own, writes LARA MARLOWEin Boston
THE SETTING must have reminded David Drumm, the fallen chief executive of Anglo Irish Bank, of old times.
His hearing under section 341 of the bankruptcy code was held in lawyers’ offices on the 21st floor of a gleaming tower block, with a commanding view over Boston Common.
The handful of participants sat at one end of a 30ft inlaid wooden table, in cognac-coloured leather swivel chairs, beneath a brightly coloured abstract painting. The surroundings seemed to breathe money.
Only seven people took part in the two-hour session, including the court stenographer, after whom Drumm repeated the oath “to tell the whole truth and nothing but the truth”.
The court-appointed trustee, a dour lawyer named Kathleen Dwyer, grappled with the difficulty of untangling what belonged to David Drumm and what belonged to his wife Lorraine.
What had been the source of funds for the first house which the couple had purchased in Cape Cod, she asked.
“My own equity, household accounts, cash that we had from my job,” Drumm said. “It has always been our practice; we had joint accounts and shared the money. We’ve always owned property jointly.”
“You list Mrs Drumm as a creditor, having loaned you $210,347,” Dwyer noted an hour or so later.
“They are amounts she loaned me during the last 12 months or so,” Drumm said.
“I am a little puzzled,” the trustee continued. “I understood that monies went into the household?”
“That is money I invested in my company, Harborlight, now Delta,” Drumm explained.
He started the limited liability company the month after he resigned from Anglo, to “provide consulting services to business clients, mergers and acquisitions, financing, debt restructuring and so forth”, but it took nine or 10 months to snag his first client.
Drumm draws a monthly salary of $9,000 from Delta.
Dwyer was still puzzled.
“These were amounts she had herself but which she derived from our joint accounts,” Drumm said.
“I’m looking for facts supporting that this is Mrs Drumm’s money rather yours,” Dwyer continued.
“The only thing that will get us to completion is to see Mrs Drumm’s records as well, because there was money going back and forth.”
Two years after he resigned as Anglo’s chief executive, two months after he filed for bankruptcy in Boston, Drumm and his family continue to maintain two luxury homes, their principal home in Wellesley, Massachusetts, and a holiday home in Cape Cod, where they spend weekends and summers.
The Cape Cod home is now surrounded by a high fence, to keep out nosy reporters. The Wellesley home was purchased through a “nominee trust” called Epiphany, with the intention of preserving the Drumms’ privacy.
The trust belongs 50 per cent to himself and 50 per cent to his wife, he said yesterday.
The Drumm children continue to attend private school, which Drumm pays for out of his salary from Delta.
Gone though are the two Mercedes cars they bought when they moved to the US in January 2009. Drumm bought a 2005 Ford Taurus from a friend for $1,000 this year, while his wife rents a Ford Explorer SUV on a monthly basis.
Dwyer yesterday performed the legal equivalent of turning Drumm’s desk drawers upside down and searching under the sofa cushions for small change.
The trawl through his assets – including a query as to whether any relatives might die soon and leave him money – was dwarfed by the losses of up to €34 billion at Anglo.
Ms Dwyer wanted to know about furniture.
“We don’t know what his sofa or chairs are worth,” said Stewart Grossman, Drumm’s lawyer.
“You say furnishing and fixtures jointly owned are worth $10,000?” Dwyer said to Drumm. “Yes,” he answered.
“It’s a best guess,” Grossman said.
With amazing recall, Drumm listed mortgages, purchase and sale prices on every property he had owned in the US and Ireland – the house in Skerries, with a €930 monthly mortgage, for which his sister Susan pays €800 in monthly rent, the deed of covenant whereby he is paying his mother Mary €10,125 over a seven-year period.
Grossman whispered in his ear and Drumm said he wasn’t sure whether his name was on the mortgage for the house in Wellesley.
The family had taken out a second mortgage, a $200,000 equity loan, on the Wellesley house.
“We split the proceeds – half to my account; half to Lorraine’s,” Drumm said. “We used it to live on.”
Only two or three times did one detect a hint of the “mental distress” for which Drumm is suing Anglo Irish Bank. It showed on the lower part of his face, a tightening or grimace affecting the chin only, as if he were swallowing very hard.
I saw it again when Dwyer asked him about his wife’s jewellery. Her wedding band and engagement rings may have been insured in Ireland, he said. Were there birthday gifts to the children worth over $500?
Yes, computers, Drumm answered. Had he listed even those assets which he thought to have no value? Yes: shares in Anglo Irish Bank.
Dwyer scheduled Drumm’s next section 341 hearing for January 5th at 10 am.
Anglo Irish Bank will question Drumm in a separate hearing, in connection with the €8.5 million which it says Drumm owes his former employers, in the middle of January.
Drumm’s lawyers meanwhile have raised the possibility of a protection order, which could ban journalists from future hearings.