Sean FitzPatrick “artificially” reduced multimillion bank loans, court hears

Former Anglo Irish Bank boss Sean FitzPatrick temporarily and “artificially” reduced his multimillion bank loans before declaring them at year end, the prosecution has alleged at his trial.

Barrister Dominic McGinn today spent 45 minutes opening the state's case against the former banker.

FitzPatrick, 68, of Whitshed Road in Greystones, Co Wicklow, is accused of misleading Anglo auditors Ernst & Young - now called EY - in relation to his loans from the bank between 2002 and 2007. He denies a total of 27 charges.

McGinn, told the jury it is the State's case that FitzPatrick's loans were “artificially” reduced around the financial year end, mostly through refinancing, at a time when they had to be declared under company law.

He said the Anglo loans were “swept out” for a couple of weeks and as a result the declarations only reflected what was in the accounts at that specific point. He said by way of example that €10 million might be reduced to €1 million.

“It's not about the loans, it's about the declarations at year end,” he told the jury.

Outlining the background to the case, he said between 2002 and 2007 Anglo Irish Bank was a licensed bank quoted on the stock exchange and therefore had reporting duties to shareholders, customers and potential investors. Anglo's year end returns fell on 30 September.

McGinn said Anglo was obliged by statute to disclose directors' loans from the bank and that the statements had to be audited to ensure they were a true reflection of what was going on. Letters of representation were given to accountants Ernst & Young every year.

The jury were told that the main dispute in the case is whether these letters were required to record what was accurate at the year end. “The prosecution's contention is...it should not be a simple snapshot. The bank was under a duty to furnish full and complete information about the real picture,” he said.

During the period of 2002 to 2007, FitzPatrick, a chartered accountant, was first chief executive of the bank and later Chairman of the board. He was one of the signatories on the letter of representation between 2002 and 2004. In other years they were signed by different board members.

The prosecution says he was responsible nonetheless for the contents of the statements as a “prominent member” of the board.

McGinn told the jury that FitzPatrick's loan portfolio increased substantially during the period at issue. There were loans to his wife and family members and partnerships he belonged to, and that €10 million became €100 million. Typical to the climate of the time there were investments in shopping centres, hotels, developments. Whether these were wise investments was not at issue he said, the jury had to consider the alleged failure to disclose the loans.

The trial before Judge John Aylmer at Dublin Circuit Criminal Court is listed to run for 12 weeks. An enlarged jury panel with 15 members was sworn in to hear the lengthy case in late September. Since then the case has spent weeks in legal argument. Two jurors have already been excused from the case for work and personal reasons.

75 witnesses have been lined up by the prosecution. Evidence is due to begin tomorrow.