MINISTER FOR Finance Brian Lenihan has reserved ultimate control over dealings between the nationalised Anglo Irish Bank and its former chairman Seán FitzPatrick, and reserved control over its engagement with the legal inquiries into its affairs.
As Garda and regulatory investigations into the scandals that beset Anglo continue, a confidential agreement governing its relationship with the State essentially means that the bank’s board must defer to the Minister when dealing with the fallout from the controversies and when recruiting or removing any senior executive.
Sweeping in its scope, the agreement also reserves Mr Lenihan’s implicit power over Anglo’s dealings with the National Asset Management Agency (Nama). With €28 billion in property-related loans moving into the “bad bank”, Anglo will be the biggest participant in the Nama project.
The framework agreement between the Minister and Anglo, agreed in July, was released to The Irish Times under the Freedom of Information Act. Citing commercial sensitivity and the financial interests of the State, the Department of Finance blanked out a large volume of other material dealing with the bank’s €4 billion recapitalisation by the Government, its preparation of a new business plan and the recruitment of Australian banker Mike Aynsley as its new chief executive.
“Certain key issues (‘Reserved Matters’) will be reserved to the Minister and the board shall only engage in them on the instructions or with the prior consent of the Minister,” says the “relationship framework” pact between Anglo and Mr Lenihan.
A spokesman for the Minister said “he hasn’t invoked any of those powers yet”, adding that the document was drawn up to ensure there was no doubt over the respective roles of each party. “The Minister as shareholder has to represent the interests of the Irish people. He holds these powers to ensure political responsibility,” he said.
While not naming any individuals, the reserved matters give the Minister ultimate power whenever the bank is “entering into or varying any transaction or arrangement between a director or former director” on terms other than normal commercial arm’s-length terms agreed in the ordinary course of business.
The pact also gives the Minister ultimate power over all of Anglo’s material actions in respect of commencing, defending, conducting or settling legal actions “to which a director or former director or any connected persons of a director is a party”.
He has the same power over any legal proceedings relating to Anglo’s “legacy issues”, which are:
- the secretive placing in 2008 of a 10 per cent stake in Anglo to a group of investors when businessman Seán Quinn reduced his shareholding;
- the lodgement of multibillion-euro deposits at the end of Anglo's last fiscal year by Irish Life Permanent.
- the concealment of the true extent of directors' loans for up to €122 million to Mr FitzPatrick;
Although informed sources believe there may be no significant development in the various inquiries until late this year or next year, Director of Corporate Enforcement Paul Appleby has said in private correspondence with an Oireachtas committee that the circumstances surrounding the concealment of directors’ loans suggest “illegality”.
While not specifying Anglo’s participation in Nama, the Minister’s power is also reserved whenever Anglo enters into “any material acquisitions, disposals, investments, realisations or other transactions” other than in the ordinary course of its business.
The agreement, which says one of its purposes is to ensure Anglo remains separate from the Minister, gives him scope to amend the list of reserved matters from time to time.