ANGLO/IBRC – IRISH BANKING’S ROTTEN CORE A Tale of Lies, Damned Lies and Anglo/IBRC Lies The Understanding Anglo Group Dublin, Ireland. November 2012. 1 Draft - version 3 PREVIEW This is the story which the ‘Crooks in Suits’ – the self-serving politicians and the pen- pushing bureaucrats - in the new Ireland hoped would never be told. It contains truths, which they would want to keep hidden, in order to protect themselves and their lackeys. It is the story of a bank, which precipitated the collapse of a nation’s finances and made every Irish man and woman ashamed and poorer; it is the story of how blame is being deflected to protect vested interests in the public sector. This is a research report, written by researchers, but designed to do what has not yet been done: it unveils the truth, the real truth and nothing but the truth. Much of it is as dry as the proverbial dust – not an easy read for most people. We apologise for that, but we considered it necessary to report the facts honestly and comprehensively. We recognise that our conclusions will shake out some of the cobwebs within the Irish public sector and the country’s financial system – and that they will cause embarrassment to some people in positions of authority, who will attempt to rubbish its findings. Let them produce the evidence to contradict what is included her – if they can! We are satisfied that they can not, but we accept that they will try their damnedest This is a story of collusion, conspiracy and corruption at the highest levels in Irish public life. It shows how the government, the Department of Finance, the governance authorities, parts of the legal system and the entire media conspired to deprive the people of Ireland of the facts about what happened, is happening and is likely to happen in the future. It names the guilty parties. It identifies the conspirators. It uncovers the background. It nails the lies. But most important of all, it provides the facts – facts, which others have managed to keep hidden for far too long, facts to which the Irish people are entitled and facts which should change perceptions and attitudes, but probably will not. 2 Draft - version 3 But be prepared to choke on your porridge, as you read each chapter. It makes for uncomfortable reading. If ever the adage ‘The Truth Hurts’ applied to any story in modern Ireland, it applies to this one. It would be impossible to forget the Kerry Babies, or the refusal to accept the reality of sexual abuse in Kilkenny, or Sligo, or in other places, or the McBrearty case, or the Magdalene Laundries; in many ways, this is worse than any of them. The reality is that this involves conspiracy at the highest levels of Irish government and governmental agencies. It is a national disgrace, but very few people have seen that until now. This is about state-sponsored corruption. Its telling will shake the very foundations of the Irish political system and the incestuous Irish Public Sector, and tell how power is being abused and has been abused. You may find the early chapters heavy going, but they are there only to provide context. Much of the rest of it is heavy going too, but please stick with it. You will learn what you were never meant to know; you will be told the ‘who’, as well as the ‘what’ and the ‘when’; and it will be different from what you have been told by the conspirators until now. Enjoy it - if you can! At least, it’s free. Tune in, friends, and stay with it. The Understanding Anglo Group has already started on their next report; it will reveal even greater injustices, bigger rip-offs and more evil conspiracies at other levels; it will disclose the existence of banking contracts not so far disclosed and involving several banks, both local and foreign. It should be mind-boggling – explosive as far as Ireland’s financial system is concerned and is likely to have major implications for the Irish financial system and Ireland’s position in Europe, for the Irish political system and for crucial parts of the public sector. In our view, the Irish people are entitled to know the full story; it should not be the preserve of the elite few, who are using it to their own advantage and to disadvantage others. 3 Draft - version 3 TABLE OF CONTENTS FOREWORD 5 1. LOSING THE RUN OF OURSELVES 7 2. THE DEVELOPMENT OF BANKING IN IRELAND 15 3. THE GENESIS OF ANGLO 21 4. IGNORING THE CONCERNS 34 5. ANGLO’S BUSINESS MODEL 50 6. CREATING AND EXPLOITING STRENGTHS 58 7. BALANCING STRENGTHS AND WEAKNESSES 66 8. IDENTIFYING CORPORATE FRAUD 79 9. ANGLO’S ACCOUNTING AND GOVERNANCE PRACTICES 93 10. DIRECTORS’ LOANS AND INFLATED DEPOSITS 109 11. MISSING! AUDIT AND REGULATORY OVERSIGHT 127 12. HOODWINKING ANALYSTS, COMMENTATORS AND QUINN 132 13. SHARE PRICE COLLAPSE LEADS TO MARKET MANIPULATION 145 14. THE DIRECTORS AND THEIR NETWORKS 166 15. SHORT-TERM ‘CAPITAL’ AND CAPITALISED INTEREST 174 16. WHEN IS A ‘PROFIT’ REALLY A LOSS? 184 17. QUINN’S CFDS - WHO KNEW WHAT? 200 18. PATHETIC PERFORMANCE TO DATE 214 19. REGULATORY FAILURES RESULT IN NATIONALISATION 227 20. ‘CYNICAL DISREGARD OF LAWS AND REGULATIONS’ 233 21. IN A GULAG, CAN ANYONE BE TRUSTED? 249 22. THE HIGH COST OF SELF-CONGRATULATION 252 23. WILL THE REAL ‘CROOKS IN SUITS’ EVER BE EXPOSED? 255 4 Draft - version 3 FOREWORD The following notice appeared earlier this year in a number of Irish newspapers: ‘I invested €1M of my pension in Anglo’s Whitgift Geared Property Fund and am unhappy with the level of information being provided. I have requested without success that the bank organise a meeting of investors. I have undertaken my own investigations and now have further information. I am keen to meet up with like- minded investors to share views’. Last year a somewhat similar, but broader, concern regarding Anglo resulted in the assembly of the group responsible for this report. It was undertaken by people with an interest in understanding what precisely had happened to give rise to the catastrophic collapse of Anglo Irish Bank Corporation Ltd., Ireland’s third biggest bank at the time. It was prompted by a view that, despite some of them having a background in finance, not many really understood what had happened. Their collective view was that if they did not fully comprehend it, probably others, with even less financial and legal knowledge, did not either. As they saw it, there were far too many loose ends, which had never been explained. The research commenced through a series of unstructured discussions and, over time, evolved into an organised, extensive literature search of information in the public domain, from which an ‘issues document’ emerged. Through further group interaction, that issues document was developed and ultimately converted into a draft document for a number of small workshops. That latter document was eventually amended to incorporate the contributions from the ‘Understanding Anglo’ workshops and additional material which had been sourced, in the interim. Despite what some people might think, the writing of this report was definitely not an attempt to apportion blame; neither was it an attempt to justify or to condemn any individual or any entity. There was no desire to divert blame or to criticise. This project started from a totally open and unbiased view, in the full appreciation that a bit of constructive research might provide some understanding – it was simple as that. It ended entirely differently to what we had expected. Data presented in court cases suggested that the story was much more complex than we had believed – or possibly than we were persuaded, by a combination of interests, to believe. Our 5 Draft - version 3 conclusions, some of which are based on transcripts of court proceedings, have led us to believe that an organisation, which is now owned by the State and which was supposed to be regulated by the State, committed some of the most serious breaches of the law of the land and of European Regulations, in the history of Ireland, in so far as the rules applicable to financial institutions and financial activities are concerned. Worse again, there is, in our view, a serious possibility of a concerted cover-up and of an attempt to transfer the guilt to some people who certainly acted injudiciously, but not illegally. By any standards, that is a shocking conclusion; we would hope that we were wrong in arriving at that conclusion, but we fear that we were not. The ‘Understanding Anglo’ report can best be described as collaborative and interpretative research, undertaken on a cross-border basis. 6 Draft - version 3 1. LOSING THE RUN OF OURSELVES. Anglo-Irish Bank (Anglo) was the fastest growing and ostensibly the most profitable of Ireland’s banks (in relative terms) for the best part of two decades, but especially during the period of the so-called Celtic Tiger. Its share price rose faster than that of any other financial institution in Ireland; its loan portfolio increased more rapidly; it became the ‘bank of choice’ for the burgeoning property and construction sector; it was the envy of not just other banks, but of a wide raft of other businesses, as Ireland’s economy expanded; its management team was seen as exemplars of how to grow a bank, or any other business, when opportunities arose. Overall, its achievements were seen as stellar – an organisation to be admired and emulated.