Yesterday Sean Fitzpatrick, Chairman of Anglo Irish Bank where he has worked for the last 33-odd years, resigned. From a statement issued on his behalf:
My decision to tender my resignation has been prompted by the fact that at the 30th September, 2008, I had fully secured loans, on normal commercial terms, with the Bank totalling €87 million which will be included in the annual report for 2008 in the note relating to Directors’ Loans. This balance is substantially higher than in the 2007 report because in prior years I had temporarily transferred my loans to another bank before each year end. I had done this on my own initiative over an eight year period.
So for the last 8 years Sean has had undeclared Director’s Loans which currently come to €87 million. In order to conceal this fact from the public, and presumably the Regulator, every year just before Anglo Irish’s financial year end he would transfer these loans to another financial institution, believed to be Irish Nationwide, and then transfer them back to Anglo Irish within three months so that they didn’t appear on the balance sheet of either Anglo or the other bank.
This action is not strictly illegal, but it is certainly against the principles of fair accounting.
Some may remember Sean Fitzpatrick pontificating in the media – shortly after the announcement that the Irish Government (using taxpayers money) was going to bail out the banks to the tune of €400 billion -
advising the government to cut corporation tax and tackle the sacred cows of universal child benefit, state pensions and medical cards for the over-70s.
He refused to apologise on any level for the banks practices, despite the fact that it was common knowledge in various financial communities around the world that the Irish property market was ridiculously over-valued (I’ll find the links if anyone wants them, there’s one article in particular in the Economist which would make you weep) and that many of the Irish banks were accordingly badly exposed. Anglo Irish in particular has come in for criticism in the past for not following best practices in terms of issuing loans.
He had the balls to criticise the government and the public sector (which in fairness enjoys a astonishingly high level of remuneration in comparison to its counterparts in the private sector) while holding €87 million in directors loans about which for some reason he didn’t want to inform investors.
There must have been some very uncomfortable internal accountants in Anglo Irish over the last few years who will have been put in extremely difficult positions by this practice. And lets not forget about their counterparts in Irish Nationwide(?) who were seeing these loans arrive and then depart, every year, at roughly the same time. And who gave approval for these loans? This act is far from over.
As these loans were on commercial terms, one wonders whether he provided personal security for them? If not, it would be interested to see what the assets were which did secure them – Anglo Irish is notorious for its stringent standards with regard to securities.
Sean was accompanied out of office by Lar Bradshaw, a non-executive director of Anglo Irish. Although he held one of the loans jointly with Fitzpatrick the latter insists that Bradshaw had no knowledge of the loans temporary annual emigration from the bank’s balance sheet. The Chief Executive of Anglo, David Drumm, today followed the chairman and director in resigning
in the best interests of Anglo.
One wonders how the Regulator failed to pick up on this behaviour for so long. Speculation today is that the Regulator has known about this since January, and it is only since and because PWC became involved – at the Regulator’s behest to audit loans to builders and property developers at Ireland’s banks that this has come to light.
Interestingly, Lar Bradshaw is (or was in October) the chairman of Dublin Docklands Development Authority. Sean Fitzpatrick is (or was then) on the board of DDDA. Donal O’Connor who has just succeeded David Drumm as chairman of Anglo Irish? Former chairman of DDDA.
…rotten…state…denmark
Oh and in case you missed it, these resignations were accepted “with regret” by the board of Anglo Irish.
As an aside to all this, the government continues to to tout its capital reinvestment program to shore up Irish banks. AIB however, are adamant that they for one do not need a capital injection. The Central Bank has been supporting AIB on this for several months now. PR on both sides? Consumer confidence is a pain in the ass.
Update: A month later the new chairman, Donal O’Connor, has apologised!
