Anglo Irish Bank hidden loans controversy
Encyclopedia
The Anglo Irish Bank hidden loans controversy (also known as the circular transactions controversy) began in the Republic of Ireland
in December 2008 when the chairman of Anglo Irish Bank
, Ireland's third largest bank, admitted he had hidden a total of €
87 million in loans from the bank, triggering a series of incidents which led to the eventual nationalisation
of Anglo on 21 January 2009. Sean FitzPatrick
subsequently resigned his position and was followed within twenty-four hours by the bank's non-executive director, Lar Bradshaw and chief executive, David Drumm. A new chairman of Anglo, Donal O'Connor, was quickly appointed from the board, a move welcomed by the Irish Minister for Finance
, Brian Lenihan
. A number of investigations have been launched into the reasons behind the three resignations. The Central Bank of Ireland is carrying out a review of the bank's dealings, although its head of the Financial Regulation, Patrick Neary, has also since resigned his position. So too have a number of other chairmen, directors and executives involved with Anglo, Irish Life and Permanent
and Irish Nationwide
.
Within days of the initial admission, an announcement was made that Anglo Irish Bank would be one of three (alongside Allied Irish Bank and Bank of Ireland
) that would be recapitalised by the Irish government
. The recapitalisation of Anglo Irish Bank was expected to be effected in mid-January 2009, following an Extraordinary General Meeting
(EGM). Lenihan instead unexpectedly announced the nationalisation of Anglo Irish Bank the night before the EGM due to difficulties he encountered with the recapitalisation process. Recapitalisations of the other two banks mentioned were expected by the end of March 2009 but, according to Taoiseach
Brian Cowen
, were expected to be finalised in early February 2009 at a total of €7 billion. The nationalisation of Anglo Irish Bank on 21 January 2009 followed two more resignations earlier that month. On 7 January 2009, another director, Willie McAteer, resigned, becoming the fourth casualty of the controversy. Two days later the Financial Regulator Patrick Neary retired amidst much criticism over his handling of the affair. After Anglo nationalisation, the Chairman of Irish Nationwide, Dr Michael Walsh
, resigned on 17 February, one week to the day that government-appointed directors announced they were investigating a deposit of billions of euro by Irish Life and Permanent
, placed in Anglo Irish Bank before the end of its financial year.
Taoiseach Brian Cowen has denied claims that he is protecting a "Golden Circle" of wealthy financiers from being identified. This mysterious group of ten businessmen is said to have received loans from Anglo Irish Bank in return for buying shares, in a move designed to keep the bank afloat.
The Financial Regulator first uncovered the €87 million loans in January 2008 when inspectors from the regulator's offices carried out an inspection into the loan book of rival lender, Irish Nationwide Building Society. The inspectors noticed that a large loan was provided to FitzPatrick at Anglo Irish Bank and later repaid. The Regulator discovered at a later date that similar loans were provided to FitzPatrick in September 2008 and repaid by him in October 2008. When the issue was raised with Anglo Irish Bank it was discovered that there were further loans between the two banks over an extended period of eight years.
It is uncertain which officials, if any, within the bank knew about the loans.
Every Anglo annual report contains a note displaying the total loans given to directors of the bank. This total is measured at a single point in time. In the case of Anglo this occurs on 30 September. FitzPatrick, instead of revealing the true figures of his loans, transferred some of them to Irish Nationwide Building Society, returning them to Anglo at a later date. He acted in a manner that thwarted transparency of Anglo's loan book. Financial authorities are investigating if there have been breaches of corporate governance. The Chief Executive of the Financial Regulator said that "a lay person would expect that issues of this nature and this magnitude would have been picked up" by the external auditors, Ernst & Young
. After receiving legal advice Ernst & Young declined to appear before a parliamentary committee.
This in turn led to inaccurate figures for the total directors' loans given for eight consecutive years in the end of year Anglo accounts. 2008 was the first occasion on which FitzPatrick revealed his true figure, that of €87 million or twice the total of the other twelve directors' loan figures.
The situation has been described as Ireland's version of Enron
, the American energy company which went bankrupt in 2001, and it has been said that the principals would be immediately arrested if this had occurred in the United States.
On 7 January 2009, Willie McAteer resigned his position as finance director and chief risk officer.
On 15 January 2009 the Government of Ireland nationalised
Anglo Irish Bank and its shares were suspended on the Dublin and London Stock Exchanges.
On 19 January 2009, the balance of the Board, who had served while FitzPatrick was chairman, resigned. The consequence of Anglo's nationalisation caused steep falls, up to 50%, in the market value of the other two large banks on January 19, 2009
Senator Dan Boyle
calling for a strengthening of powers within the organisation and saying that confidence in Irish financial services had been eroded by events of the previous six months. Financial observers indicated that a replacement for Neary might have to be located in the United States or in Britain.
There were also reports that the Financial Regulator may have known of the loans for eight years prior to their revelation. The Fine Gael finance spokesman Richard Bruton called for the board and senior management of the Financial Regulator to be sacked. The Financial Regulator hired a partner from Ernst & Young, to advise on the €440 billion bank guarantee scheme in January 2009, despite the fact that serious questions have been asked about why Ernst & Young did not spot the massive loans that former chief executive Sean FitzPatrick concealed from his shareholders for eight years. Consultants Mazars
, which reviewed their operations said "that regulatory expertise was lacking in some areas".
, Dr Michael Walsh, resigned his position.
director Anne Heraty unexpectedly resigned from the board of the Irish Stock Exchange
. The following morning, Dublin's ISEQ
index fell over 3% to stand at 1,987, a 14-year low. The last time it stood under the 2,000 level was the middle of 1995.
(DAA), Gary McGann, announced his decision to step down from the board, stating that his decision had been influenced by his former non-executive directorship of Anglo Irish Bank.
The Chartered Accountants Regulatory Board (CARB) has initiated an investigation into the "circumstances around the issue of inappropriate directors' loans at Anglo Irish"and into the performance of Ernst and Young.
. The Irish Association of Investment Managers expressed how it was "surprised and disappointed" at the controversy and announced it would be writing to Anglo's new chairman to describe its worries.
The Irish State subsequently announced it was to become the majority shareholder in Anglo Irish Bank by injecting €3 billion into the bank. Opposition party Fine Gael
opposed this move and stated on 14 January 2009 that the bank should be shut down but the following evening the Irish government announced that recapitalisation was no longer a serious option and nationalised the bank instead. Lenihan stated that "clear blue water" had been inserted between the old and new versions of Anglo and defended the nationalisation by saying that if the government were to let the bank fail it would be saying to Ireland and other economies that the country was "closed for business". At an Emergency General Meeting held at the Mansion House
, Dublin on 16 January 2009, the bank's shareholders angrily voiced their opinions on FitzPatrick's involvement in the bank's downfall and their lack of confidence in the banking sector. The auditors, Ernst & Young were also criticised for failing to detect the loans during their audits. At the EGM the total level of loans to directors was announced as €179 million.
, was voted through Dáil Éireann
, being approved by 79 – 67 before passing in Seanad Éireann
without a vote on 20 January 2009. During the Seanad's debate on the bill, Senator Shane Ross
claimed that "no-one was being told the truth about Anglo Irish Bank" and called the EGM of the previous Friday "a disgrace show[ing] corporate Ireland at its worst, as there were no answers to any questions". Senator Joe O'Toole
advocated the chasing of those responsible for the bank's nationalisation "even into the courts", saying that a person could be imprisoned for failure to pay a household bill, yet those who caused the loss of jobs and pensions might not. President Mary McAleese then signed the Anglo Irish Bank Bill at Áras an Uachtaráin the following day.
. The bank's head of internal audit, Walter Tyrrell, told the Oireachtas committee that the movement of loans by Seán FitzPatrick into the bank and back out again could only have been known by FitzPatrick himself and the executive of his account, claiming that loans were tested by means of random sampling and that FitzPatrick's loans had not once been selected - however one loan he held with a partner was chosen. Fine Gael's Kieran O'Donnell
expressed his amazement that each of the directors' loans were not tested.
On 11 February 2009, Lenihan revealed plans under which €3.5 billion ($4.5 billion, £3.1 billion) each would be provided by the government's purchase of options intended to re-capitalise Allied Irish Bank and the Bank of Ireland.
Mary Hanafin
said the Financial Regulator had "serious questions" to answer over its supposed lack of knowledge of the loans and the Irish Minister for the Environment, Heritage and Local Government John Gormley
asked the Financial Regulator to explain what he termed "extraordinary complacency" in relation to the situation at Anglo Irish Bank. The opposition party Fine Gael
's deputy leader and finance representative Richard Bruton
quizzed the Minister for Finance on his announcement that he would provide the necessary capital to Anglo Irish Bank.
leader John Gormley
calling for the names to be made public if a legal way of doing so could be found. Anglo Irish Bank's annual report alongside the PricewaterhouseCooper report on the bank were both published on 20 February but Tánaiste
Mary Coughlan stated beforehand that the ten would not be named in either report. The Anglo report revealed that the bank lent €451 million to the ten "Golden Circle" clients, a 50% increase on previous estimates of €300 million. That same evening, Brian Lenihan also issued a statement containing extracts from the report carried out by PricewaterhouseCooper for the Financial Regulator. The morning before its publication, Ulick McEvaddy
appeared on RTÉ Radio 1
alongside the Socialist Party
's Joe Higgins
, where he stated that the ten were "heroes" in his opinion. The Sunday Times
published the names of four of the Golden Circle members on 22 February. The four members of the elite are Gerry Gannon
, Joe O'Reilly, Seamus Ross and Jerry Conlan. The same article declared that Sean Mulryan, Patrick Doherty, Sean Dunne
, Derek Quinlan
, Denis O'Brien
, JP McManus, John Magnier
, Noel Smyth, Michael Whelan
, Jim Mansfield
, Richard Barrett
, Johnny Ronan and Fintan Drury were not among the chosen ten. Minister Dick Roche
has since stated that the ten cannot be named.
{|class="collapsible collapsed" style="width:1075px;"
!style="background:#D4AF37"|Golden Circle
|-
|style="background:#ffc;"|
The Anglo Irish Bank hidden loans controversy (also known as the circular transactions controversy) began in the Republic of Ireland
in December 2008 when the chairman of Anglo Irish Bank
, Ireland's third largest bank, admitted he had hidden a total of €
87 million in loans from the bank, triggering a series of incidents which led to the eventual nationalisation
of Anglo on 21 January 2009. Sean FitzPatrick
subsequently resigned his position and was followed within twenty-four hours by the bank's non-executive director, Lar Bradshaw and chief executive, David Drumm. A new chairman of Anglo, Donal O'Connor, was quickly appointed from the board, a move welcomed by the Irish Minister for Finance
, Brian Lenihan
. A number of investigations have been launched into the reasons behind the three resignations. The Central Bank of Ireland is carrying out a review of the bank's dealings, although its head of the Financial Regulation, Patrick Neary, has also since resigned his position. So too have a number of other chairmen, directors and executives involved with Anglo, Irish Life and Permanent
and Irish Nationwide
.
Within days of the initial admission, an announcement was made that Anglo Irish Bank would be one of three (alongside Allied Irish Bank and Bank of Ireland
) that would be recapitalised by the Irish government
. The recapitalisation of Anglo Irish Bank was expected to be effected in mid-January 2009, following an Extraordinary General Meeting
(EGM). Lenihan instead unexpectedly announced the nationalisation of Anglo Irish Bank the night before the EGM due to difficulties he encountered with the recapitalisation process. Recapitalisations of the other two banks mentioned were expected by the end of March 2009 but, according to Taoiseach
Brian Cowen
, were expected to be finalised in early February 2009 at a total of €7 billion. The nationalisation of Anglo Irish Bank on 21 January 2009 followed two more resignations earlier that month. On 7 January 2009, another director, Willie McAteer, resigned, becoming the fourth casualty of the controversy. Two days later the Financial Regulator Patrick Neary retired amidst much criticism over his handling of the affair. After Anglo nationalisation, the Chairman of Irish Nationwide, Dr Michael Walsh
, resigned on 17 February, one week to the day that government-appointed directors announced they were investigating a deposit of billions of euro by Irish Life and Permanent
, placed in Anglo Irish Bank before the end of its financial year.
Taoiseach Brian Cowen has denied claims that he is protecting a "Golden Circle" of wealthy financiers from being identified. This mysterious group of ten businessmen is said to have received loans from Anglo Irish Bank in return for buying shares, in a move designed to keep the bank afloat.
The Financial Regulator first uncovered the €87 million loans in January 2008 when inspectors from the regulator's offices carried out an inspection into the loan book of rival lender, Irish Nationwide Building Society. The inspectors noticed that a large loan was provided to FitzPatrick at Anglo Irish Bank and later repaid. The Regulator discovered at a later date that similar loans were provided to FitzPatrick in September 2008 and repaid by him in October 2008. When the issue was raised with Anglo Irish Bank it was discovered that there were further loans between the two banks over an extended period of eight years.
It is uncertain which officials, if any, within the bank knew about the loans.
Every Anglo annual report contains a note displaying the total loans given to directors of the bank. This total is measured at a single point in time. In the case of Anglo this occurs on 30 September. FitzPatrick, instead of revealing the true figures of his loans, transferred some of them to Irish Nationwide Building Society, returning them to Anglo at a later date. He acted in a manner that thwarted transparency of Anglo's loan book. Financial authorities are investigating if there have been breaches of corporate governance. The Chief Executive of the Financial Regulator said that "a lay person would expect that issues of this nature and this magnitude would have been picked up" by the external auditors, Ernst & Young
. After receiving legal advice Ernst & Young declined to appear before a parliamentary committee.
This in turn led to inaccurate figures for the total directors' loans given for eight consecutive years in the end of year Anglo accounts. 2008 was the first occasion on which FitzPatrick revealed his true figure, that of €87 million or twice the total of the other twelve directors' loan figures.
The situation has been described as Ireland's version of Enron
, the American energy company which went bankrupt in 2001, and it has been said that the principals would be immediately arrested if this had occurred in the United States.
On 7 January 2009, Willie McAteer resigned his position as finance director and chief risk officer.
On 15 January 2009 the Government of Ireland nationalised
Anglo Irish Bank and its shares were suspended on the Dublin and London Stock Exchanges.
On 19 January 2009, the balance of the Board, who had served while FitzPatrick was chairman, resigned. The consequence of Anglo's nationalisation caused steep falls, up to 50%, in the market value of the other two large banks on January 19, 2009
Senator Dan Boyle
calling for a strengthening of powers within the organisation and saying that confidence in Irish financial services had been eroded by events of the previous six months. Financial observers indicated that a replacement for Neary might have to be located in the United States or in Britain.
There were also reports that the Financial Regulator may have known of the loans for eight years prior to their revelation. The Fine Gael finance spokesman Richard Bruton called for the board and senior management of the Financial Regulator to be sacked. The Financial Regulator hired a partner from Ernst & Young, to advise on the €440 billion bank guarantee scheme in January 2009, despite the fact that serious questions have been asked about why Ernst & Young did not spot the massive loans that former chief executive Sean FitzPatrick concealed from his shareholders for eight years. Consultants Mazars
, which reviewed their operations said "that regulatory expertise was lacking in some areas".
, Dr Michael Walsh, resigned his position.
director Anne Heraty unexpectedly resigned from the board of the Irish Stock Exchange
. The following morning, Dublin's ISEQ
index fell over 3% to stand at 1,987, a 14-year low. The last time it stood under the 2,000 level was the middle of 1995.
(DAA), Gary McGann, announced his decision to step down from the board, stating that his decision had been influenced by his former non-executive directorship of Anglo Irish Bank.
The Chartered Accountants Regulatory Board (CARB) has initiated an investigation into the "circumstances around the issue of inappropriate directors' loans at Anglo Irish"and into the performance of Ernst and Young.
. The Irish Association of Investment Managers expressed how it was "surprised and disappointed" at the controversy and announced it would be writing to Anglo's new chairman to describe its worries.
The Irish State subsequently announced it was to become the majority shareholder in Anglo Irish Bank by injecting €3 billion into the bank. Opposition party Fine Gael
opposed this move and stated on 14 January 2009 that the bank should be shut down but the following evening the Irish government announced that recapitalisation was no longer a serious option and nationalised the bank instead. Lenihan stated that "clear blue water" had been inserted between the old and new versions of Anglo and defended the nationalisation by saying that if the government were to let the bank fail it would be saying to Ireland and other economies that the country was "closed for business". At an Emergency General Meeting held at the Mansion House
, Dublin on 16 January 2009, the bank's shareholders angrily voiced their opinions on FitzPatrick's involvement in the bank's downfall and their lack of confidence in the banking sector. The auditors, Ernst & Young were also criticised for failing to detect the loans during their audits. At the EGM the total level of loans to directors was announced as €179 million.
, was voted through Dáil Éireann
, being approved by 79 – 67 before passing in Seanad Éireann
without a vote on 20 January 2009. During the Seanad's debate on the bill, Senator Shane Ross
claimed that "no-one was being told the truth about Anglo Irish Bank" and called the EGM of the previous Friday "a disgrace show[ing] corporate Ireland at its worst, as there were no answers to any questions". Senator Joe O'Toole
advocated the chasing of those responsible for the bank's nationalisation "even into the courts", saying that a person could be imprisoned for failure to pay a household bill, yet those who caused the loss of jobs and pensions might not. President Mary McAleese then signed the Anglo Irish Bank Bill at Áras an Uachtaráin the following day.
. The bank's head of internal audit, Walter Tyrrell, told the Oireachtas committee that the movement of loans by Seán FitzPatrick into the bank and back out again could only have been known by FitzPatrick himself and the executive of his account, claiming that loans were tested by means of random sampling and that FitzPatrick's loans had not once been selected - however one loan he held with a partner was chosen. Fine Gael's Kieran O'Donnell
expressed his amazement that each of the directors' loans were not tested.
On 11 February 2009, Lenihan revealed plans under which €3.5 billion ($4.5 billion, £3.1 billion) each would be provided by the government's purchase of options intended to re-capitalise Allied Irish Bank and the Bank of Ireland.
Mary Hanafin
said the Financial Regulator had "serious questions" to answer over its supposed lack of knowledge of the loans and the Irish Minister for the Environment, Heritage and Local Government John Gormley
asked the Financial Regulator to explain what he termed "extraordinary complacency" in relation to the situation at Anglo Irish Bank. The opposition party Fine Gael
's deputy leader and finance representative Richard Bruton
quizzed the Minister for Finance on his announcement that he would provide the necessary capital to Anglo Irish Bank.
leader John Gormley
calling for the names to be made public if a legal way of doing so could be found. Anglo Irish Bank's annual report alongside the PricewaterhouseCooper report on the bank were both published on 20 February but Tánaiste
Mary Coughlan stated beforehand that the ten would not be named in either report. The Anglo report revealed that the bank lent €451 million to the ten "Golden Circle" clients, a 50% increase on previous estimates of €300 million. That same evening, Brian Lenihan also issued a statement containing extracts from the report carried out by PricewaterhouseCooper for the Financial Regulator. The morning before its publication, Ulick McEvaddy
appeared on RTÉ Radio 1
alongside the Socialist Party
's Joe Higgins
, where he stated that the ten were "heroes" in his opinion. The Sunday Times
published the names of four of the Golden Circle members on 22 February. The four members of the elite are Gerry Gannon
, Joe O'Reilly, Seamus Ross and Jerry Conlan. The same article declared that Sean Mulryan, Patrick Doherty, Sean Dunne
, Derek Quinlan
, Denis O'Brien
, JP McManus, John Magnier
, Noel Smyth, Michael Whelan
, Jim Mansfield
, Richard Barrett
, Johnny Ronan and Fintan Drury were not among the chosen ten. Minister Dick Roche
has since stated that the ten cannot be named.
{|class="collapsible collapsed" style="width:1075px;"
!style="background:#D4AF37"|Golden Circle
|-
|style="background:#ffc;"|
The Anglo Irish Bank hidden loans controversy (also known as the circular transactions controversy) began in the Republic of Ireland
in December 2008 when the chairman of Anglo Irish Bank
, Ireland's third largest bank, admitted he had hidden a total of €
87 million in loans from the bank, triggering a series of incidents which led to the eventual nationalisation
of Anglo on 21 January 2009. Sean FitzPatrick
subsequently resigned his position and was followed within twenty-four hours by the bank's non-executive director, Lar Bradshaw and chief executive, David Drumm. A new chairman of Anglo, Donal O'Connor, was quickly appointed from the board, a move welcomed by the Irish Minister for Finance
, Brian Lenihan
. A number of investigations have been launched into the reasons behind the three resignations. The Central Bank of Ireland is carrying out a review of the bank's dealings, although its head of the Financial Regulation, Patrick Neary, has also since resigned his position. So too have a number of other chairmen, directors and executives involved with Anglo, Irish Life and Permanent
and Irish Nationwide
.
Within days of the initial admission, an announcement was made that Anglo Irish Bank would be one of three (alongside Allied Irish Bank and Bank of Ireland
) that would be recapitalised by the Irish government
. The recapitalisation of Anglo Irish Bank was expected to be effected in mid-January 2009, following an Extraordinary General Meeting
(EGM). Lenihan instead unexpectedly announced the nationalisation of Anglo Irish Bank the night before the EGM due to difficulties he encountered with the recapitalisation process. Recapitalisations of the other two banks mentioned were expected by the end of March 2009 but, according to Taoiseach
Brian Cowen
, were expected to be finalised in early February 2009 at a total of €7 billion. The nationalisation of Anglo Irish Bank on 21 January 2009 followed two more resignations earlier that month. On 7 January 2009, another director, Willie McAteer, resigned, becoming the fourth casualty of the controversy. Two days later the Financial Regulator Patrick Neary retired amidst much criticism over his handling of the affair. After Anglo nationalisation, the Chairman of Irish Nationwide, Dr Michael Walsh
, resigned on 17 February, one week to the day that government-appointed directors announced they were investigating a deposit of billions of euro by Irish Life and Permanent
, placed in Anglo Irish Bank before the end of its financial year.
Taoiseach Brian Cowen has denied claims that he is protecting a "Golden Circle" of wealthy financiers from being identified. This mysterious group of ten businessmen is said to have received loans from Anglo Irish Bank in return for buying shares, in a move designed to keep the bank afloat.
The Financial Regulator first uncovered the €87 million loans in January 2008 when inspectors from the regulator's offices carried out an inspection into the loan book of rival lender, Irish Nationwide Building Society. The inspectors noticed that a large loan was provided to FitzPatrick at Anglo Irish Bank and later repaid. The Regulator discovered at a later date that similar loans were provided to FitzPatrick in September 2008 and repaid by him in October 2008. When the issue was raised with Anglo Irish Bank it was discovered that there were further loans between the two banks over an extended period of eight years.
It is uncertain which officials, if any, within the bank knew about the loans.
Every Anglo annual report contains a note displaying the total loans given to directors of the bank. This total is measured at a single point in time. In the case of Anglo this occurs on 30 September. FitzPatrick, instead of revealing the true figures of his loans, transferred some of them to Irish Nationwide Building Society, returning them to Anglo at a later date. He acted in a manner that thwarted transparency of Anglo's loan book. Financial authorities are investigating if there have been breaches of corporate governance. The Chief Executive of the Financial Regulator said that "a lay person would expect that issues of this nature and this magnitude would have been picked up" by the external auditors, Ernst & Young
. After receiving legal advice Ernst & Young declined to appear before a parliamentary committee.
This in turn led to inaccurate figures for the total directors' loans given for eight consecutive years in the end of year Anglo accounts. 2008 was the first occasion on which FitzPatrick revealed his true figure, that of €87 million or twice the total of the other twelve directors' loan figures.
The situation has been described as Ireland's version of Enron
, the American energy company which went bankrupt in 2001, and it has been said that the principals would be immediately arrested if this had occurred in the United States.
On 7 January 2009, Willie McAteer resigned his position as finance director and chief risk officer.
On 15 January 2009 the Government of Ireland nationalised
Anglo Irish Bank and its shares were suspended on the Dublin and London Stock Exchanges.
On 19 January 2009, the balance of the Board, who had served while FitzPatrick was chairman, resigned. The consequence of Anglo's nationalisation caused steep falls, up to 50%, in the market value of the other two large banks on January 19, 2009
Senator Dan Boyle
calling for a strengthening of powers within the organisation and saying that confidence in Irish financial services had been eroded by events of the previous six months. Financial observers indicated that a replacement for Neary might have to be located in the United States or in Britain.
There were also reports that the Financial Regulator may have known of the loans for eight years prior to their revelation. The Fine Gael finance spokesman Richard Bruton called for the board and senior management of the Financial Regulator to be sacked. The Financial Regulator hired a partner from Ernst & Young, to advise on the €440 billion bank guarantee scheme in January 2009, despite the fact that serious questions have been asked about why Ernst & Young did not spot the massive loans that former chief executive Sean FitzPatrick concealed from his shareholders for eight years. Consultants Mazars
, which reviewed their operations said "that regulatory expertise was lacking in some areas".
, Dr Michael Walsh, resigned his position.
director Anne Heraty unexpectedly resigned from the board of the Irish Stock Exchange
. The following morning, Dublin's ISEQ
index fell over 3% to stand at 1,987, a 14-year low. The last time it stood under the 2,000 level was the middle of 1995.
(DAA), Gary McGann, announced his decision to step down from the board, stating that his decision had been influenced by his former non-executive directorship of Anglo Irish Bank.
The Chartered Accountants Regulatory Board (CARB) has initiated an investigation into the "circumstances around the issue of inappropriate directors' loans at Anglo Irish"and into the performance of Ernst and Young.
. The Irish Association of Investment Managers expressed how it was "surprised and disappointed" at the controversy and announced it would be writing to Anglo's new chairman to describe its worries.
The Irish State subsequently announced it was to become the majority shareholder in Anglo Irish Bank by injecting €3 billion into the bank. Opposition party Fine Gael
opposed this move and stated on 14 January 2009 that the bank should be shut down but the following evening the Irish government announced that recapitalisation was no longer a serious option and nationalised the bank instead. Lenihan stated that "clear blue water" had been inserted between the old and new versions of Anglo and defended the nationalisation by saying that if the government were to let the bank fail it would be saying to Ireland and other economies that the country was "closed for business". At an Emergency General Meeting held at the Mansion House
, Dublin on 16 January 2009, the bank's shareholders angrily voiced their opinions on FitzPatrick's involvement in the bank's downfall and their lack of confidence in the banking sector. The auditors, Ernst & Young were also criticised for failing to detect the loans during their audits. At the EGM the total level of loans to directors was announced as €179 million.
, was voted through Dáil Éireann
, being approved by 79 – 67 before passing in Seanad Éireann
without a vote on 20 January 2009. During the Seanad's debate on the bill, Senator Shane Ross
claimed that "no-one was being told the truth about Anglo Irish Bank" and called the EGM of the previous Friday "a disgrace show[ing] corporate Ireland at its worst, as there were no answers to any questions". Senator Joe O'Toole
advocated the chasing of those responsible for the bank's nationalisation "even into the courts", saying that a person could be imprisoned for failure to pay a household bill, yet those who caused the loss of jobs and pensions might not. President Mary McAleese then signed the Anglo Irish Bank Bill at Áras an Uachtaráin the following day.
. The bank's head of internal audit, Walter Tyrrell, told the Oireachtas committee that the movement of loans by Seán FitzPatrick into the bank and back out again could only have been known by FitzPatrick himself and the executive of his account, claiming that loans were tested by means of random sampling and that FitzPatrick's loans had not once been selected - however one loan he held with a partner was chosen. Fine Gael's Kieran O'Donnell
expressed his amazement that each of the directors' loans were not tested.
On 11 February 2009, Lenihan revealed plans under which €3.5 billion ($4.5 billion, £3.1 billion) each would be provided by the government's purchase of options intended to re-capitalise Allied Irish Bank and the Bank of Ireland.
Mary Hanafin
said the Financial Regulator had "serious questions" to answer over its supposed lack of knowledge of the loans and the Irish Minister for the Environment, Heritage and Local Government John Gormley
asked the Financial Regulator to explain what he termed "extraordinary complacency" in relation to the situation at Anglo Irish Bank. The opposition party Fine Gael
's deputy leader and finance representative Richard Bruton
quizzed the Minister for Finance on his announcement that he would provide the necessary capital to Anglo Irish Bank.
leader John Gormley
calling for the names to be made public if a legal way of doing so could be found. Anglo Irish Bank's annual report alongside the PricewaterhouseCooper report on the bank were both published on 20 February but Tánaiste
Mary Coughlan stated beforehand that the ten would not be named in either report. The Anglo report revealed that the bank lent €451 million to the ten "Golden Circle" clients, a 50% increase on previous estimates of €300 million. That same evening, Brian Lenihan also issued a statement containing extracts from the report carried out by PricewaterhouseCooper for the Financial Regulator. The morning before its publication, Ulick McEvaddy
appeared on RTÉ Radio 1
alongside the Socialist Party
's Joe Higgins
, where he stated that the ten were "heroes" in his opinion. The Sunday Times
published the names of four of the Golden Circle members on 22 February. The four members of the elite are Gerry Gannon
, Joe O'Reilly, Seamus Ross and Jerry Conlan. The same article declared that Sean Mulryan, Patrick Doherty, Sean Dunne
, Derek Quinlan
, Denis O'Brien
, JP McManus, John Magnier
, Noel Smyth, Michael Whelan
, Jim Mansfield
, Richard Barrett
, Johnny Ronan and Fintan Drury were not among the chosen ten. Minister Dick Roche
has since stated that the ten cannot be named.
{|class="collapsible collapsed" style="width:1075px;"
!style="background:#D4AF37"|Golden Circle
|-
|style="background:#ffc;"|
Sunday Times list: Gerry Gannon
• Joe O'Reilly • Seamus Ross • Jerry Conlan • _____ • _____ • _____ • _____ • _____ • _____
|}
warrant at the headquarters of Anglo Irish Bank on St Stephen's Green, Dublin. The warrant, issued the previous day, allowed the Gardaí, acting on behalf of the Office of the Director of Corporate Enforcement
, to enter the premises and seize documents that may show crimes committed under section 20 of the Companies' Acts.
Republic of Ireland
Ireland , described as the Republic of Ireland , is a sovereign state in Europe occupying approximately five-sixths of the island of the same name. Its capital is Dublin. Ireland, which had a population of 4.58 million in 2011, is a constitutional republic governed as a parliamentary democracy,...
in December 2008 when the chairman of Anglo Irish Bank
Anglo Irish Bank
Anglo Irish Bank was a bank based in Ireland with its headquarters in Dublin from 1964 to 2011. It went into wind-down mode after nationalisation in 2009....
, Ireland's third largest bank, admitted he had hidden a total of €
Euro
The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,...
87 million in loans from the bank, triggering a series of incidents which led to the eventual nationalisation
Nationalization
Nationalisation, also spelled nationalization, is the process of taking an industry or assets into government ownership by a national government or state. Nationalization usually refers to private assets, but may also mean assets owned by lower levels of government, such as municipalities, being...
of Anglo on 21 January 2009. Sean FitzPatrick
Sean FitzPatrick
Seán FitzPatrick was chairman of Anglo Irish Bank until he resigned in December 2008 amid mounting revelations over hidden loans...
subsequently resigned his position and was followed within twenty-four hours by the bank's non-executive director, Lar Bradshaw and chief executive, David Drumm. A new chairman of Anglo, Donal O'Connor, was quickly appointed from the board, a move welcomed by the Irish Minister for Finance
Minister for Finance (Ireland)
The Minister for Finance is the title held by the Irish government minister responsible for all financial and monetary matters. The office-holder controls the Department of Finance and is considered one of the most important members of the Government of Ireland.The current Minister for Finance is...
, Brian Lenihan
Brian Lenihan, Jnr
Brian Joseph Lenihan was an Irish Fianna Fáil politician and barrister who served in the government of Ireland as Minister for Justice, Equality and Law Reform from 2007 to 2008 and as Minister for Finance from 2008 to 2011...
. A number of investigations have been launched into the reasons behind the three resignations. The Central Bank of Ireland is carrying out a review of the bank's dealings, although its head of the Financial Regulation, Patrick Neary, has also since resigned his position. So too have a number of other chairmen, directors and executives involved with Anglo, Irish Life and Permanent
Irish Life and Permanent
Irish Life and Permanent, Plc or IL&P is a provider of personal financial services in Ireland. IL&P enjoys limited liability....
and Irish Nationwide
Irish Nationwide
Irish Nationwide Building Society was a financial institution in Ireland from 1873 to 2011. One of the country's oldest financial institutions, it was originally called the Irish Industrial Building Society; it changed its name in 1975 when it had just five staff...
.
Within days of the initial admission, an announcement was made that Anglo Irish Bank would be one of three (alongside Allied Irish Bank and Bank of Ireland
Bank of Ireland
The Bank of Ireland is a commercial bank operation in Ireland, which is one of the 'Big Four' in both parts of the island.Historically the premier banking organisation in Ireland, the Bank occupies a unique position in Irish banking history...
) that would be recapitalised by the Irish government
Irish Government
The Government of Ireland is the cabinet that exercises executive authority in Ireland.-Members of the Government:Membership of the Government is regulated fundamentally by the Constitution of Ireland. The Government is headed by a prime minister called the Taoiseach...
. The recapitalisation of Anglo Irish Bank was expected to be effected in mid-January 2009, following an Extraordinary General Meeting
Extraordinary General Meeting
An extraordinary general meeting, commonly abbreviated as EGM, is a meeting of members of an organisation, shareholders of a company, or employees of an official body, which occurs at an irregular time. The term is usually used where the group would ordinarily hold an annual general meeting , but...
(EGM). Lenihan instead unexpectedly announced the nationalisation of Anglo Irish Bank the night before the EGM due to difficulties he encountered with the recapitalisation process. Recapitalisations of the other two banks mentioned were expected by the end of March 2009 but, according to Taoiseach
Taoiseach
The Taoiseach is the head of government or prime minister of Ireland. The Taoiseach is appointed by the President upon the nomination of Dáil Éireann, the lower house of the Oireachtas , and must, in order to remain in office, retain the support of a majority in the Dáil.The current Taoiseach is...
Brian Cowen
Brian Cowen
Brian Cowen is a former Irish politician who served as Taoiseach of Ireland from 7 May 2008 to 9 March 2011. He was head of a coalition government led by Fianna Fáil which until 23 January 2011 had the support of the Green Party and independent TDs.Cowen was also leader of Fianna Fáil from 7 May...
, were expected to be finalised in early February 2009 at a total of €7 billion. The nationalisation of Anglo Irish Bank on 21 January 2009 followed two more resignations earlier that month. On 7 January 2009, another director, Willie McAteer, resigned, becoming the fourth casualty of the controversy. Two days later the Financial Regulator Patrick Neary retired amidst much criticism over his handling of the affair. After Anglo nationalisation, the Chairman of Irish Nationwide, Dr Michael Walsh
Michael Walsh
- Sportspeople :* Michael Walsh , retired English soccer player* Michael Walsh , English football player with Bangor City who played professionally for Chester City...
, resigned on 17 February, one week to the day that government-appointed directors announced they were investigating a deposit of billions of euro by Irish Life and Permanent
Irish Life and Permanent
Irish Life and Permanent, Plc or IL&P is a provider of personal financial services in Ireland. IL&P enjoys limited liability....
, placed in Anglo Irish Bank before the end of its financial year.
Taoiseach Brian Cowen has denied claims that he is protecting a "Golden Circle" of wealthy financiers from being identified. This mysterious group of ten businessmen is said to have received loans from Anglo Irish Bank in return for buying shares, in a move designed to keep the bank afloat.
Background
Starting in 1986, Sean "Seanie" FitzPatrick spent eighteen years as chief executive of Anglo Irish Bank, during which time the bank grew from a small operator into the third-largest bank in Ireland. When he became the bank's chairman in 2005, handing over the position of chief executive to David Drumm, the bank was recording annual profits of over €500 million. The Anglo share price peaked at €17.60 in May 2007, an increase from under €1 ten years previously. Anglo was valued at nearly €13 billion and FitzPatrick's 4.5 million Anglo shares were worth nearly €80 million at this time. Prior to FitzPatrick's resignation, the Anglo share price had already dropped to €0.32, a drop of 98% with the entire bank valued at a low €242 million and FitzPatrick's stake reduced to €1.5 million.The Financial Regulator first uncovered the €87 million loans in January 2008 when inspectors from the regulator's offices carried out an inspection into the loan book of rival lender, Irish Nationwide Building Society. The inspectors noticed that a large loan was provided to FitzPatrick at Anglo Irish Bank and later repaid. The Regulator discovered at a later date that similar loans were provided to FitzPatrick in September 2008 and repaid by him in October 2008. When the issue was raised with Anglo Irish Bank it was discovered that there were further loans between the two banks over an extended period of eight years.
It is uncertain which officials, if any, within the bank knew about the loans.
Every Anglo annual report contains a note displaying the total loans given to directors of the bank. This total is measured at a single point in time. In the case of Anglo this occurs on 30 September. FitzPatrick, instead of revealing the true figures of his loans, transferred some of them to Irish Nationwide Building Society, returning them to Anglo at a later date. He acted in a manner that thwarted transparency of Anglo's loan book. Financial authorities are investigating if there have been breaches of corporate governance. The Chief Executive of the Financial Regulator said that "a lay person would expect that issues of this nature and this magnitude would have been picked up" by the external auditors, Ernst & Young
Ernst & Young
Ernst & Young is one of the largest professional services networks in the world and one of the "Big Four" accountancy firms, along with Deloitte, KPMG and PricewaterhouseCoopers ....
. After receiving legal advice Ernst & Young declined to appear before a parliamentary committee.
This in turn led to inaccurate figures for the total directors' loans given for eight consecutive years in the end of year Anglo accounts. 2008 was the first occasion on which FitzPatrick revealed his true figure, that of €87 million or twice the total of the other twelve directors' loan figures.
The situation has been described as Ireland's version of Enron
Enron
Enron Corporation was an American energy, commodities, and services company based in Houston, Texas. Before its bankruptcy on December 2, 2001, Enron employed approximately 22,000 staff and was one of the world's leading electricity, natural gas, communications, and pulp and paper companies, with...
, the American energy company which went bankrupt in 2001, and it has been said that the principals would be immediately arrested if this had occurred in the United States.
Anglo Irish Bank
FitzPatrick issued a statement on the evening of 18 December, linking his resignation with a €87 million loan he had from the bank. Ireland's Minister for Finance, Brian Lenihan welcomed the appointment of a new chairman, Donal O'Connor, an official with a substantial commercial track record, saying he "seems a natural choice" for the role. FitzPatrick's resignation came little over two months after he had admitted that his former bank had made mistakes but insisted it had not been "reckless". Alongside FitzPatrick's resignation came that of Bradshaw who had held a loan jointly with FitzPatrick, a loan that was temporarily transferred to another bank prior to a year end audit without the knowledge of Bradshaw. On the evening of 19 December, Drumm announced he would step down with immediate effect, but said he will continue to work with the chairman through a transition phase until a replacement chief executive is agreed upon.It is appropriate for me to step down today given last evening's announcement in relation to the resignation of Sean FitzPatrick and given the strong statement of support for the Bank and its recapitalisation programme by the Minister for Finance. Good progress is being made on the recapitalisation. It is undoubtedly in the best interests of Anglo that a new Chief Executive is appointed to lead the Bank through its next phase of development. The appointment of Donal O'Connor as Chairman together with a new Chief Executive augurs well for the Bank and for all its stakeholders. It gives the Bank fresh impetus and an upward trajectory. I would like to thank all of my colleagues for their intense commitment and honest endeavour and for their friendship over the last 15 years.
On 7 January 2009, Willie McAteer resigned his position as finance director and chief risk officer.
On 15 January 2009 the Government of Ireland nationalised
Anglo Irish Bank and its shares were suspended on the Dublin and London Stock Exchanges.
On 19 January 2009, the balance of the Board, who had served while FitzPatrick was chairman, resigned. The consequence of Anglo's nationalisation caused steep falls, up to 50%, in the market value of the other two large banks on January 19, 2009
Financial Regulator
Following reports of a communication breakdown at the office of the Financial Services Regulatory Authority, the Financial Regulator Patrick Neary on 9 January 2009 announced his decision to retire as of 31 January that year. Neary's weakness in dealing with the issue has received much criticism, with Green PartyGreen Party (Ireland)
The Green Party is a green political party in Ireland. It was founded as the Ecology Party of Ireland in 1981 by Dublin teacher Christopher Fettes. The party became the Green Alliance in 1983 and in 1987 was renamed to its current title in English...
Senator Dan Boyle
Dan Boyle (politician)
Dan Boyle is an Irish Green Party politician and party chairperson. He was a Teachta Dála for Cork South Central from 2002–07 and was a member of Seanad Éireann from 2007–11.-Early life and education:...
calling for a strengthening of powers within the organisation and saying that confidence in Irish financial services had been eroded by events of the previous six months. Financial observers indicated that a replacement for Neary might have to be located in the United States or in Britain.
There were also reports that the Financial Regulator may have known of the loans for eight years prior to their revelation. The Fine Gael finance spokesman Richard Bruton called for the board and senior management of the Financial Regulator to be sacked. The Financial Regulator hired a partner from Ernst & Young, to advise on the €440 billion bank guarantee scheme in January 2009, despite the fact that serious questions have been asked about why Ernst & Young did not spot the massive loans that former chief executive Sean FitzPatrick concealed from his shareholders for eight years. Consultants Mazars
Mazars
Mazars is a global audit, accounting and consulting group employing more than 13,000 professionals in 61 countries through member firms. With head offices in France, Mazars is the 14th largest accounting firm in the world...
, which reviewed their operations said "that regulatory expertise was lacking in some areas".
Irish Nationwide
On the evening of 17 February 2009, the Chairman of the building society Irish NationwideIrish Nationwide
Irish Nationwide Building Society was a financial institution in Ireland from 1873 to 2011. One of the country's oldest financial institutions, it was originally called the Irish Industrial Building Society; it changed its name in 1975 when it had just five staff...
, Dr Michael Walsh, resigned his position.
Irish Stock Exchange
On 23 February 2009, the former Anglo Irish BankAnglo Irish Bank
Anglo Irish Bank was a bank based in Ireland with its headquarters in Dublin from 1964 to 2011. It went into wind-down mode after nationalisation in 2009....
director Anne Heraty unexpectedly resigned from the board of the Irish Stock Exchange
Irish Stock Exchange
-History:The Irish Stock Exchange is Ireland's only stock exchange and has been in existence since 1793. It is an Irish private company limited by guarantee. It was first recognised by legislation in 1799 when the Irish Parliament passed the Stock Exchange Act...
. The following morning, Dublin's ISEQ
Irish Stock Exchange
-History:The Irish Stock Exchange is Ireland's only stock exchange and has been in existence since 1793. It is an Irish private company limited by guarantee. It was first recognised by legislation in 1799 when the Irish Parliament passed the Stock Exchange Act...
index fell over 3% to stand at 1,987, a 14-year low. The last time it stood under the 2,000 level was the middle of 1995.
Dublin Airport Authority
On the evening of 24 February 2009, the chairman of the Dublin Airport AuthorityDublin Airport Authority
Dublin Airport Authority plc is the state-owned airport authority in the Republic of Ireland. With a head office on the grounds of Dublin Airport in Fingal, County Dublin, the authority also owned the Great Southern Hotels which had nine sites throughout the island of Ireland and international...
(DAA), Gary McGann, announced his decision to step down from the board, stating that his decision had been influenced by his former non-executive directorship of Anglo Irish Bank.
Outcome and nationalisation
Anglo Irish Bank has said it would review its policy on directors' loans following FitzPatrick's resignation. The Financial Regulator announced he would be examining the loans issued by Anglo Irish Bank to all its directors, claiming he became aware of the existence of the loans "following an inspection earlier this year". Ultimately he became a victim of the controversy and subsequently announced his retirement.The Chartered Accountants Regulatory Board (CARB) has initiated an investigation into the "circumstances around the issue of inappropriate directors' loans at Anglo Irish"and into the performance of Ernst and Young.
. The Irish Association of Investment Managers expressed how it was "surprised and disappointed" at the controversy and announced it would be writing to Anglo's new chairman to describe its worries.
The Irish State subsequently announced it was to become the majority shareholder in Anglo Irish Bank by injecting €3 billion into the bank. Opposition party Fine Gael
Fine Gael
Fine Gael is a centre-right to centrist political party in the Republic of Ireland. It is the single largest party in Ireland in the Oireachtas, in local government, and in terms of Members of the European Parliament. The party has a membership of over 35,000...
opposed this move and stated on 14 January 2009 that the bank should be shut down but the following evening the Irish government announced that recapitalisation was no longer a serious option and nationalised the bank instead. Lenihan stated that "clear blue water" had been inserted between the old and new versions of Anglo and defended the nationalisation by saying that if the government were to let the bank fail it would be saying to Ireland and other economies that the country was "closed for business". At an Emergency General Meeting held at the Mansion House
Mansion House, Dublin
The Mansion House on Dawson Street, Dublin, is the official residence of the Lord Mayor of Dublin since 1715.-Features:The Mansion House's most famous features include the "Round Room", where the First Dáil assembled on 21 January 1919 to proclaim the Irish Declaration of Independence...
, Dublin on 16 January 2009, the bank's shareholders angrily voiced their opinions on FitzPatrick's involvement in the bank's downfall and their lack of confidence in the banking sector. The auditors, Ernst & Young were also criticised for failing to detect the loans during their audits. At the EGM the total level of loans to directors was announced as €179 million.
Legislation
Emergency legislation to nationalise the bank, titled the Anglo Irish Bank Corporation Bill 2009Anglo Irish Bank Corporation Bill 2009
The Anglo Irish Bank Corporation Act 2009 is a piece of emergency legislation composed by the Irish government in January 2009. The Act provides for the emergency nationalisation of Anglo Irish Bank which had been subject to a controversy regarding hidden loans in December 2008...
, was voted through Dáil Éireann
Dáil Éireann
Dáil Éireann is the lower house, but principal chamber, of the Oireachtas , which also includes the President of Ireland and Seanad Éireann . It is directly elected at least once in every five years under the system of proportional representation by means of the single transferable vote...
, being approved by 79 – 67 before passing in Seanad Éireann
Seanad Éireann
Seanad Éireann is the upper house of the Oireachtas , which also comprises the President of Ireland and Dáil Éireann . It is commonly called the Seanad or Senate and its members Senators or Seanadóirí . Unlike Dáil Éireann, it is not directly elected but consists of a mixture of members chosen by...
without a vote on 20 January 2009. During the Seanad's debate on the bill, Senator Shane Ross
Shane Ross
Shane Peter Nathaniel Ross is an independent Irish politician and Business Editor of the Sunday Independent. He was the longest-serving member of Seanad Éireann , until he was elected to Dáil Éireann for the constituency of Dublin South at the 2011 general election.-Early life and career:Born in...
claimed that "no-one was being told the truth about Anglo Irish Bank" and called the EGM of the previous Friday "a disgrace show[ing] corporate Ireland at its worst, as there were no answers to any questions". Senator Joe O'Toole
Joe O'Toole
Joseph John "Joe" O'Toole is a former Irish independent politician, who was a member of Seanad Éireann from 1987 to 2011.He was born and brought up in Dingle, County Kerry, O'Toole was a teacher for ten years and then a school principal in County Dublin...
advocated the chasing of those responsible for the bank's nationalisation "even into the courts", saying that a person could be imprisoned for failure to pay a household bill, yet those who caused the loss of jobs and pensions might not. President Mary McAleese then signed the Anglo Irish Bank Bill at Áras an Uachtaráin the following day.
Discussion
The bank's internal auditors appeared before the Oireachtas Joint Committee on Economic Regulatory Affairs on 3 February 2009 to discuss the nationalisation of Anglo Irish BankAnglo Irish Bank
Anglo Irish Bank was a bank based in Ireland with its headquarters in Dublin from 1964 to 2011. It went into wind-down mode after nationalisation in 2009....
. The bank's head of internal audit, Walter Tyrrell, told the Oireachtas committee that the movement of loans by Seán FitzPatrick into the bank and back out again could only have been known by FitzPatrick himself and the executive of his account, claiming that loans were tested by means of random sampling and that FitzPatrick's loans had not once been selected - however one loan he held with a partner was chosen. Fine Gael's Kieran O'Donnell
Kieran O'Donnell
Kieran O'Donnell is an Irish Fine Gael politician. He is currently a Teachta Dála for the Limerick City constituency.Before becoming a full-time public representative, O'Donnell worked as an accountant. He is nephew of former Minister and TD for Limerick East Tom O'Donnell.O'Donnell was an...
expressed his amazement that each of the directors' loans were not tested.
On 11 February 2009, Lenihan revealed plans under which €3.5 billion ($4.5 billion, £3.1 billion) each would be provided by the government's purchase of options intended to re-capitalise Allied Irish Bank and the Bank of Ireland.
Review
The Financial Regulator, on the recommendation of the Irish Finance Minister, ordered an "urgent review" of directors' loans at Anglo Irish Bank, saying it has a "very serious view" of the issue. It claims the loans were "first brought to its attention on December 17th 2008" and that a committee had been established to investigate the matter. Irish Minister for Social and Family AffairsMinister for Social and Family Affairs (Ireland)
The Minister for Social Protection is the senior minister at the Department of Social Protection in the Government of Ireland.The current Minister for Social Protection is Joan Burton, TD.-Overview:...
Mary Hanafin
Mary Hanafin
Mary Hanafin is an Irish Fianna Fáil politician who was a Teachta Dála for Dún Laoghaire from 1997 to 2011. She served as Government Chief Whip , Minister for Education and Science , Minister for Social and Family Affairs , Minister for Tourism, Culture and Sport and Minister for Enterprise,...
said the Financial Regulator had "serious questions" to answer over its supposed lack of knowledge of the loans and the Irish Minister for the Environment, Heritage and Local Government John Gormley
John Gormley
John Gormley is an Irish politician. He was the leader of the Irish Green Party from 2007 to 2011, and was a Teachta Dála for the Dublin South East constituency from 1997 to 2011. He served as Minister for the Environment, Heritage and Local Government from 2007–11...
asked the Financial Regulator to explain what he termed "extraordinary complacency" in relation to the situation at Anglo Irish Bank. The opposition party Fine Gael
Fine Gael
Fine Gael is a centre-right to centrist political party in the Republic of Ireland. It is the single largest party in Ireland in the Oireachtas, in local government, and in terms of Members of the European Parliament. The party has a membership of over 35,000...
's deputy leader and finance representative Richard Bruton
Richard Bruton
Richard Bruton is an Irish Fine Gael politician and has been a Teachta Dála for the Dublin North Central constituency since 1982. He was appointed as Minister for Jobs, Enterprise and Innovation on 9 March 2011...
quizzed the Minister for Finance on his announcement that he would provide the necessary capital to Anglo Irish Bank.
Further Hidden Loans (Deposits) Controversy Involving Irish Life & Permanent
On 12 February 2009, details of a further controversial transaction which had the effect of misrepresenting the end-of-year accounts of Anglo-Irish Bank came into the public domain. Anglo-Irish Bank lent €4bn to Irish Life & Permanent (IL&P) for 1 day by way of inter-bank loan, and a subsidiary of Irish Life placed a deposit of a similar amount with Anglo, which was recorded as a customer deposit. Following a discussion with the Minister for Finance, a board meeting of IL&P accepted the resignation of two senior IL&P executives..The "Golden Circle"
On 17 February, Taoiseach Brian Cowen informed Dáil Éireann of his knowledge of a group of ten wealthy businessmen who had come together to buy shares in Anglo Irish Bank in 2008 in a transaction which is now at the centre of an investigation by the Office of Corporate Enforcement. Cowen has since denied suggestions put forth by the Opposition that he was attempting to protect anyone involved in this so-called "Golden Circle". The mystery has been discussed in Dáil Éireann since its revelation, with Minister for the Environment, Heritage and Local Government and Green PartyGreen Party (Ireland)
The Green Party is a green political party in Ireland. It was founded as the Ecology Party of Ireland in 1981 by Dublin teacher Christopher Fettes. The party became the Green Alliance in 1983 and in 1987 was renamed to its current title in English...
leader John Gormley
John Gormley
John Gormley is an Irish politician. He was the leader of the Irish Green Party from 2007 to 2011, and was a Teachta Dála for the Dublin South East constituency from 1997 to 2011. He served as Minister for the Environment, Heritage and Local Government from 2007–11...
calling for the names to be made public if a legal way of doing so could be found. Anglo Irish Bank's annual report alongside the PricewaterhouseCooper report on the bank were both published on 20 February but Tánaiste
Tánaiste
The Tánaiste is the deputy prime minister of Ireland. The current Tánaiste is Eamon Gilmore, TD who was appointed on 9 March 2011.- Origins and etymology :...
Mary Coughlan stated beforehand that the ten would not be named in either report. The Anglo report revealed that the bank lent €451 million to the ten "Golden Circle" clients, a 50% increase on previous estimates of €300 million. That same evening, Brian Lenihan also issued a statement containing extracts from the report carried out by PricewaterhouseCooper for the Financial Regulator. The morning before its publication, Ulick McEvaddy
Ulick McEvaddy
Ulick McEvaddy, a former Irish army officer and native of Swinford County Mayo.In 1984, along with his brother Desmond McEvaddy, he established Omega Air Inc; a Washington-based US Corporation that specialises in the sale and lease of aircraft. Omega Air has become one of the biggest supplier and...
appeared on RTÉ Radio 1
RTÉ Radio 1
RTÉ Radio 1 is the principal radio channel of Irish public-service broadcaster Raidió Teilifís Éireann and is the direct descendant of Dublin radio station 2RN, which began broadcasting on a regular basis on 1 January 1926...
alongside the Socialist Party
Socialist Party (Ireland)
The Socialist Party is a socialist political party active in Ireland. It is a member of the Committee for a Workers' International .Formerly known as Militant Tendency, then Militant Labour, it adopted the name The Socialist Party in 1996. From their foundation in 1972 until the 1980s, members of...
's Joe Higgins
Joe Higgins
Joe Higgins is an Irish Socialist Party politician. In the 2011 general election he was elected to Dáil Éireann as Teachta Dála for the Dublin West constituency, having previously served in that capacity from 1997–2007...
, where he stated that the ten were "heroes" in his opinion. The Sunday Times
The Sunday Times
The Sunday Times is a British Sunday newspaper.The Sunday Times may also refer to:*The Sunday Times *The Sunday Times *The Sunday Times *The Sunday Times...
published the names of four of the Golden Circle members on 22 February. The four members of the elite are Gerry Gannon
Gerry Gannon
Gerry Gannon, so-called 'man in the hat', is an Irish builder and property developer since the 1980s. Gannon plays a significant and leading role in the build-up and demise of the Irish property bubble...
, Joe O'Reilly, Seamus Ross and Jerry Conlan. The same article declared that Sean Mulryan, Patrick Doherty, Sean Dunne
Seán Dunne
Seán Dunne was an Irish Labour Party politician. He was a TD from 1948–1957 and from 1961–1969....
, Derek Quinlan
Derek Quinlan
Derek M Quinlan is an Irish businessman prominent in the field of real estate investment and development. A former tax inspector at the Irish Revenue Commission, he formed investment syndicates of high-net worth individuals and to buy properties across the world. His principal investment vehicle...
, Denis O'Brien
Denis O'Brien
Denis O'Brien is an Irish businessman with international connections. An Arts graduate of University College Dublin, O'Brien has received a MBA in corporate finance from Boston College in 1982, and was later given an honorary doctorate by University College Dublin.O'Brien has involvement with...
, JP McManus, John Magnier
John Magnier
John Magnier is Ireland's leading thoroughbred stud owner and has extensive business interests outside of the horse breeding industry....
, Noel Smyth, Michael Whelan
Michael Whelan
Michael Whelan is an American artist of imaginative realism. For more than 30 years he worked as an illustrator specializing in science fiction and fantasy cover art...
, Jim Mansfield
Jim Mansfield
James Mansfield is an Irish businessman, with a property portfolio that included the Citywest Hotel and Resort, several developments local to the Tallaght and Saggart areas, and Weston Airport....
, Richard Barrett
Richard Barrett
Richard Barrett was an American lawyer, white nationalist, and self-proclaimed leader in the nationalist Skinheadz movement. Barrett was a speaker and editor of the All The Way monthly newsletter...
, Johnny Ronan and Fintan Drury were not among the chosen ten. Minister Dick Roche
Dick Roche
Dick Roche is a former Irish Fianna Fáil politician. He was a Teachta Dála for the Wicklow constituency, and also served in Seanad Éireann from 1992 to 1997.-Early and private life:...
has since stated that the ten cannot be named.
{|class="collapsible collapsed" style="width:1075px;"
!style="background:#D4AF37"|Golden Circle
|-
|style="background:#ffc;"|
The Anglo Irish Bank hidden loans controversy (also known as the circular transactions controversy) began in the Republic of Ireland
Republic of Ireland
Ireland , described as the Republic of Ireland , is a sovereign state in Europe occupying approximately five-sixths of the island of the same name. Its capital is Dublin. Ireland, which had a population of 4.58 million in 2011, is a constitutional republic governed as a parliamentary democracy,...
in December 2008 when the chairman of Anglo Irish Bank
Anglo Irish Bank
Anglo Irish Bank was a bank based in Ireland with its headquarters in Dublin from 1964 to 2011. It went into wind-down mode after nationalisation in 2009....
, Ireland's third largest bank, admitted he had hidden a total of €
Euro
The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,...
87 million in loans from the bank, triggering a series of incidents which led to the eventual nationalisation
Nationalization
Nationalisation, also spelled nationalization, is the process of taking an industry or assets into government ownership by a national government or state. Nationalization usually refers to private assets, but may also mean assets owned by lower levels of government, such as municipalities, being...
of Anglo on 21 January 2009. Sean FitzPatrick
Sean FitzPatrick
Seán FitzPatrick was chairman of Anglo Irish Bank until he resigned in December 2008 amid mounting revelations over hidden loans...
subsequently resigned his position and was followed within twenty-four hours by the bank's non-executive director, Lar Bradshaw and chief executive, David Drumm. A new chairman of Anglo, Donal O'Connor, was quickly appointed from the board, a move welcomed by the Irish Minister for Finance
Minister for Finance (Ireland)
The Minister for Finance is the title held by the Irish government minister responsible for all financial and monetary matters. The office-holder controls the Department of Finance and is considered one of the most important members of the Government of Ireland.The current Minister for Finance is...
, Brian Lenihan
Brian Lenihan, Jnr
Brian Joseph Lenihan was an Irish Fianna Fáil politician and barrister who served in the government of Ireland as Minister for Justice, Equality and Law Reform from 2007 to 2008 and as Minister for Finance from 2008 to 2011...
. A number of investigations have been launched into the reasons behind the three resignations. The Central Bank of Ireland is carrying out a review of the bank's dealings, although its head of the Financial Regulation, Patrick Neary, has also since resigned his position. So too have a number of other chairmen, directors and executives involved with Anglo, Irish Life and Permanent
Irish Life and Permanent
Irish Life and Permanent, Plc or IL&P is a provider of personal financial services in Ireland. IL&P enjoys limited liability....
and Irish Nationwide
Irish Nationwide
Irish Nationwide Building Society was a financial institution in Ireland from 1873 to 2011. One of the country's oldest financial institutions, it was originally called the Irish Industrial Building Society; it changed its name in 1975 when it had just five staff...
.
Within days of the initial admission, an announcement was made that Anglo Irish Bank would be one of three (alongside Allied Irish Bank and Bank of Ireland
Bank of Ireland
The Bank of Ireland is a commercial bank operation in Ireland, which is one of the 'Big Four' in both parts of the island.Historically the premier banking organisation in Ireland, the Bank occupies a unique position in Irish banking history...
) that would be recapitalised by the Irish government
Irish Government
The Government of Ireland is the cabinet that exercises executive authority in Ireland.-Members of the Government:Membership of the Government is regulated fundamentally by the Constitution of Ireland. The Government is headed by a prime minister called the Taoiseach...
. The recapitalisation of Anglo Irish Bank was expected to be effected in mid-January 2009, following an Extraordinary General Meeting
Extraordinary General Meeting
An extraordinary general meeting, commonly abbreviated as EGM, is a meeting of members of an organisation, shareholders of a company, or employees of an official body, which occurs at an irregular time. The term is usually used where the group would ordinarily hold an annual general meeting , but...
(EGM). Lenihan instead unexpectedly announced the nationalisation of Anglo Irish Bank the night before the EGM due to difficulties he encountered with the recapitalisation process. Recapitalisations of the other two banks mentioned were expected by the end of March 2009 but, according to Taoiseach
Taoiseach
The Taoiseach is the head of government or prime minister of Ireland. The Taoiseach is appointed by the President upon the nomination of Dáil Éireann, the lower house of the Oireachtas , and must, in order to remain in office, retain the support of a majority in the Dáil.The current Taoiseach is...
Brian Cowen
Brian Cowen
Brian Cowen is a former Irish politician who served as Taoiseach of Ireland from 7 May 2008 to 9 March 2011. He was head of a coalition government led by Fianna Fáil which until 23 January 2011 had the support of the Green Party and independent TDs.Cowen was also leader of Fianna Fáil from 7 May...
, were expected to be finalised in early February 2009 at a total of €7 billion. The nationalisation of Anglo Irish Bank on 21 January 2009 followed two more resignations earlier that month. On 7 January 2009, another director, Willie McAteer, resigned, becoming the fourth casualty of the controversy. Two days later the Financial Regulator Patrick Neary retired amidst much criticism over his handling of the affair. After Anglo nationalisation, the Chairman of Irish Nationwide, Dr Michael Walsh
Michael Walsh
- Sportspeople :* Michael Walsh , retired English soccer player* Michael Walsh , English football player with Bangor City who played professionally for Chester City...
, resigned on 17 February, one week to the day that government-appointed directors announced they were investigating a deposit of billions of euro by Irish Life and Permanent
Irish Life and Permanent
Irish Life and Permanent, Plc or IL&P is a provider of personal financial services in Ireland. IL&P enjoys limited liability....
, placed in Anglo Irish Bank before the end of its financial year.
Taoiseach Brian Cowen has denied claims that he is protecting a "Golden Circle" of wealthy financiers from being identified. This mysterious group of ten businessmen is said to have received loans from Anglo Irish Bank in return for buying shares, in a move designed to keep the bank afloat.
Background
Starting in 1986, Sean "Seanie" FitzPatrick spent eighteen years as chief executive of Anglo Irish Bank, during which time the bank grew from a small operator into the third-largest bank in Ireland. When he became the bank's chairman in 2005, handing over the position of chief executive to David Drumm, the bank was recording annual profits of over €500 million. The Anglo share price peaked at €17.60 in May 2007, an increase from under €1 ten years previously. Anglo was valued at nearly €13 billion and FitzPatrick's 4.5 million Anglo shares were worth nearly €80 million at this time. Prior to FitzPatrick's resignation, the Anglo share price had already dropped to €0.32, a drop of 98% with the entire bank valued at a low €242 million and FitzPatrick's stake reduced to €1.5 million.The Financial Regulator first uncovered the €87 million loans in January 2008 when inspectors from the regulator's offices carried out an inspection into the loan book of rival lender, Irish Nationwide Building Society. The inspectors noticed that a large loan was provided to FitzPatrick at Anglo Irish Bank and later repaid. The Regulator discovered at a later date that similar loans were provided to FitzPatrick in September 2008 and repaid by him in October 2008. When the issue was raised with Anglo Irish Bank it was discovered that there were further loans between the two banks over an extended period of eight years.
It is uncertain which officials, if any, within the bank knew about the loans.
Every Anglo annual report contains a note displaying the total loans given to directors of the bank. This total is measured at a single point in time. In the case of Anglo this occurs on 30 September. FitzPatrick, instead of revealing the true figures of his loans, transferred some of them to Irish Nationwide Building Society, returning them to Anglo at a later date. He acted in a manner that thwarted transparency of Anglo's loan book. Financial authorities are investigating if there have been breaches of corporate governance. The Chief Executive of the Financial Regulator said that "a lay person would expect that issues of this nature and this magnitude would have been picked up" by the external auditors, Ernst & Young
Ernst & Young
Ernst & Young is one of the largest professional services networks in the world and one of the "Big Four" accountancy firms, along with Deloitte, KPMG and PricewaterhouseCoopers ....
. After receiving legal advice Ernst & Young declined to appear before a parliamentary committee.
This in turn led to inaccurate figures for the total directors' loans given for eight consecutive years in the end of year Anglo accounts. 2008 was the first occasion on which FitzPatrick revealed his true figure, that of €87 million or twice the total of the other twelve directors' loan figures.
The situation has been described as Ireland's version of Enron
Enron
Enron Corporation was an American energy, commodities, and services company based in Houston, Texas. Before its bankruptcy on December 2, 2001, Enron employed approximately 22,000 staff and was one of the world's leading electricity, natural gas, communications, and pulp and paper companies, with...
, the American energy company which went bankrupt in 2001, and it has been said that the principals would be immediately arrested if this had occurred in the United States.
Anglo Irish Bank
FitzPatrick issued a statement on the evening of 18 December, linking his resignation with a €87 million loan he had from the bank. Ireland's Minister for Finance, Brian Lenihan welcomed the appointment of a new chairman, Donal O'Connor, an official with a substantial commercial track record, saying he "seems a natural choice" for the role. FitzPatrick's resignation came little over two months after he had admitted that his former bank had made mistakes but insisted it had not been "reckless". Alongside FitzPatrick's resignation came that of Bradshaw who had held a loan jointly with FitzPatrick, a loan that was temporarily transferred to another bank prior to a year end audit without the knowledge of Bradshaw. On the evening of 19 December, Drumm announced he would step down with immediate effect, but said he will continue to work with the chairman through a transition phase until a replacement chief executive is agreed upon.It is appropriate for me to step down today given last evening's announcement in relation to the resignation of Sean FitzPatrick and given the strong statement of support for the Bank and its recapitalisation programme by the Minister for Finance. Good progress is being made on the recapitalisation. It is undoubtedly in the best interests of Anglo that a new Chief Executive is appointed to lead the Bank through its next phase of development. The appointment of Donal O'Connor as Chairman together with a new Chief Executive augurs well for the Bank and for all its stakeholders. It gives the Bank fresh impetus and an upward trajectory. I would like to thank all of my colleagues for their intense commitment and honest endeavour and for their friendship over the last 15 years.
On 7 January 2009, Willie McAteer resigned his position as finance director and chief risk officer.
On 15 January 2009 the Government of Ireland nationalised
Anglo Irish Bank and its shares were suspended on the Dublin and London Stock Exchanges.
On 19 January 2009, the balance of the Board, who had served while FitzPatrick was chairman, resigned. The consequence of Anglo's nationalisation caused steep falls, up to 50%, in the market value of the other two large banks on January 19, 2009
Financial Regulator
Following reports of a communication breakdown at the office of the Financial Services Regulatory Authority, the Financial Regulator Patrick Neary on 9 January 2009 announced his decision to retire as of 31 January that year. Neary's weakness in dealing with the issue has received much criticism, with Green PartyGreen Party (Ireland)
The Green Party is a green political party in Ireland. It was founded as the Ecology Party of Ireland in 1981 by Dublin teacher Christopher Fettes. The party became the Green Alliance in 1983 and in 1987 was renamed to its current title in English...
Senator Dan Boyle
Dan Boyle (politician)
Dan Boyle is an Irish Green Party politician and party chairperson. He was a Teachta Dála for Cork South Central from 2002–07 and was a member of Seanad Éireann from 2007–11.-Early life and education:...
calling for a strengthening of powers within the organisation and saying that confidence in Irish financial services had been eroded by events of the previous six months. Financial observers indicated that a replacement for Neary might have to be located in the United States or in Britain.
There were also reports that the Financial Regulator may have known of the loans for eight years prior to their revelation. The Fine Gael finance spokesman Richard Bruton called for the board and senior management of the Financial Regulator to be sacked. The Financial Regulator hired a partner from Ernst & Young, to advise on the €440 billion bank guarantee scheme in January 2009, despite the fact that serious questions have been asked about why Ernst & Young did not spot the massive loans that former chief executive Sean FitzPatrick concealed from his shareholders for eight years. Consultants Mazars
Mazars
Mazars is a global audit, accounting and consulting group employing more than 13,000 professionals in 61 countries through member firms. With head offices in France, Mazars is the 14th largest accounting firm in the world...
, which reviewed their operations said "that regulatory expertise was lacking in some areas".
Irish Nationwide
On the evening of 17 February 2009, the Chairman of the building society Irish NationwideIrish Nationwide
Irish Nationwide Building Society was a financial institution in Ireland from 1873 to 2011. One of the country's oldest financial institutions, it was originally called the Irish Industrial Building Society; it changed its name in 1975 when it had just five staff...
, Dr Michael Walsh, resigned his position.
Irish Stock Exchange
On 23 February 2009, the former Anglo Irish BankAnglo Irish Bank
Anglo Irish Bank was a bank based in Ireland with its headquarters in Dublin from 1964 to 2011. It went into wind-down mode after nationalisation in 2009....
director Anne Heraty unexpectedly resigned from the board of the Irish Stock Exchange
Irish Stock Exchange
-History:The Irish Stock Exchange is Ireland's only stock exchange and has been in existence since 1793. It is an Irish private company limited by guarantee. It was first recognised by legislation in 1799 when the Irish Parliament passed the Stock Exchange Act...
. The following morning, Dublin's ISEQ
Irish Stock Exchange
-History:The Irish Stock Exchange is Ireland's only stock exchange and has been in existence since 1793. It is an Irish private company limited by guarantee. It was first recognised by legislation in 1799 when the Irish Parliament passed the Stock Exchange Act...
index fell over 3% to stand at 1,987, a 14-year low. The last time it stood under the 2,000 level was the middle of 1995.
Dublin Airport Authority
On the evening of 24 February 2009, the chairman of the Dublin Airport AuthorityDublin Airport Authority
Dublin Airport Authority plc is the state-owned airport authority in the Republic of Ireland. With a head office on the grounds of Dublin Airport in Fingal, County Dublin, the authority also owned the Great Southern Hotels which had nine sites throughout the island of Ireland and international...
(DAA), Gary McGann, announced his decision to step down from the board, stating that his decision had been influenced by his former non-executive directorship of Anglo Irish Bank.
Outcome and nationalisation
Anglo Irish Bank has said it would review its policy on directors' loans following FitzPatrick's resignation. The Financial Regulator announced he would be examining the loans issued by Anglo Irish Bank to all its directors, claiming he became aware of the existence of the loans "following an inspection earlier this year". Ultimately he became a victim of the controversy and subsequently announced his retirement.The Chartered Accountants Regulatory Board (CARB) has initiated an investigation into the "circumstances around the issue of inappropriate directors' loans at Anglo Irish"and into the performance of Ernst and Young.
. The Irish Association of Investment Managers expressed how it was "surprised and disappointed" at the controversy and announced it would be writing to Anglo's new chairman to describe its worries.
The Irish State subsequently announced it was to become the majority shareholder in Anglo Irish Bank by injecting €3 billion into the bank. Opposition party Fine Gael
Fine Gael
Fine Gael is a centre-right to centrist political party in the Republic of Ireland. It is the single largest party in Ireland in the Oireachtas, in local government, and in terms of Members of the European Parliament. The party has a membership of over 35,000...
opposed this move and stated on 14 January 2009 that the bank should be shut down but the following evening the Irish government announced that recapitalisation was no longer a serious option and nationalised the bank instead. Lenihan stated that "clear blue water" had been inserted between the old and new versions of Anglo and defended the nationalisation by saying that if the government were to let the bank fail it would be saying to Ireland and other economies that the country was "closed for business". At an Emergency General Meeting held at the Mansion House
Mansion House, Dublin
The Mansion House on Dawson Street, Dublin, is the official residence of the Lord Mayor of Dublin since 1715.-Features:The Mansion House's most famous features include the "Round Room", where the First Dáil assembled on 21 January 1919 to proclaim the Irish Declaration of Independence...
, Dublin on 16 January 2009, the bank's shareholders angrily voiced their opinions on FitzPatrick's involvement in the bank's downfall and their lack of confidence in the banking sector. The auditors, Ernst & Young were also criticised for failing to detect the loans during their audits. At the EGM the total level of loans to directors was announced as €179 million.
Legislation
Emergency legislation to nationalise the bank, titled the Anglo Irish Bank Corporation Bill 2009Anglo Irish Bank Corporation Bill 2009
The Anglo Irish Bank Corporation Act 2009 is a piece of emergency legislation composed by the Irish government in January 2009. The Act provides for the emergency nationalisation of Anglo Irish Bank which had been subject to a controversy regarding hidden loans in December 2008...
, was voted through Dáil Éireann
Dáil Éireann
Dáil Éireann is the lower house, but principal chamber, of the Oireachtas , which also includes the President of Ireland and Seanad Éireann . It is directly elected at least once in every five years under the system of proportional representation by means of the single transferable vote...
, being approved by 79 – 67 before passing in Seanad Éireann
Seanad Éireann
Seanad Éireann is the upper house of the Oireachtas , which also comprises the President of Ireland and Dáil Éireann . It is commonly called the Seanad or Senate and its members Senators or Seanadóirí . Unlike Dáil Éireann, it is not directly elected but consists of a mixture of members chosen by...
without a vote on 20 January 2009. During the Seanad's debate on the bill, Senator Shane Ross
Shane Ross
Shane Peter Nathaniel Ross is an independent Irish politician and Business Editor of the Sunday Independent. He was the longest-serving member of Seanad Éireann , until he was elected to Dáil Éireann for the constituency of Dublin South at the 2011 general election.-Early life and career:Born in...
claimed that "no-one was being told the truth about Anglo Irish Bank" and called the EGM of the previous Friday "a disgrace show[ing] corporate Ireland at its worst, as there were no answers to any questions". Senator Joe O'Toole
Joe O'Toole
Joseph John "Joe" O'Toole is a former Irish independent politician, who was a member of Seanad Éireann from 1987 to 2011.He was born and brought up in Dingle, County Kerry, O'Toole was a teacher for ten years and then a school principal in County Dublin...
advocated the chasing of those responsible for the bank's nationalisation "even into the courts", saying that a person could be imprisoned for failure to pay a household bill, yet those who caused the loss of jobs and pensions might not. President Mary McAleese then signed the Anglo Irish Bank Bill at Áras an Uachtaráin the following day.
Discussion
The bank's internal auditors appeared before the Oireachtas Joint Committee on Economic Regulatory Affairs on 3 February 2009 to discuss the nationalisation of Anglo Irish BankAnglo Irish Bank
Anglo Irish Bank was a bank based in Ireland with its headquarters in Dublin from 1964 to 2011. It went into wind-down mode after nationalisation in 2009....
. The bank's head of internal audit, Walter Tyrrell, told the Oireachtas committee that the movement of loans by Seán FitzPatrick into the bank and back out again could only have been known by FitzPatrick himself and the executive of his account, claiming that loans were tested by means of random sampling and that FitzPatrick's loans had not once been selected - however one loan he held with a partner was chosen. Fine Gael's Kieran O'Donnell
Kieran O'Donnell
Kieran O'Donnell is an Irish Fine Gael politician. He is currently a Teachta Dála for the Limerick City constituency.Before becoming a full-time public representative, O'Donnell worked as an accountant. He is nephew of former Minister and TD for Limerick East Tom O'Donnell.O'Donnell was an...
expressed his amazement that each of the directors' loans were not tested.
On 11 February 2009, Lenihan revealed plans under which €3.5 billion ($4.5 billion, £3.1 billion) each would be provided by the government's purchase of options intended to re-capitalise Allied Irish Bank and the Bank of Ireland.
Review
The Financial Regulator, on the recommendation of the Irish Finance Minister, ordered an "urgent review" of directors' loans at Anglo Irish Bank, saying it has a "very serious view" of the issue. It claims the loans were "first brought to its attention on December 17th 2008" and that a committee had been established to investigate the matter. Irish Minister for Social and Family AffairsMinister for Social and Family Affairs (Ireland)
The Minister for Social Protection is the senior minister at the Department of Social Protection in the Government of Ireland.The current Minister for Social Protection is Joan Burton, TD.-Overview:...
Mary Hanafin
Mary Hanafin
Mary Hanafin is an Irish Fianna Fáil politician who was a Teachta Dála for Dún Laoghaire from 1997 to 2011. She served as Government Chief Whip , Minister for Education and Science , Minister for Social and Family Affairs , Minister for Tourism, Culture and Sport and Minister for Enterprise,...
said the Financial Regulator had "serious questions" to answer over its supposed lack of knowledge of the loans and the Irish Minister for the Environment, Heritage and Local Government John Gormley
John Gormley
John Gormley is an Irish politician. He was the leader of the Irish Green Party from 2007 to 2011, and was a Teachta Dála for the Dublin South East constituency from 1997 to 2011. He served as Minister for the Environment, Heritage and Local Government from 2007–11...
asked the Financial Regulator to explain what he termed "extraordinary complacency" in relation to the situation at Anglo Irish Bank. The opposition party Fine Gael
Fine Gael
Fine Gael is a centre-right to centrist political party in the Republic of Ireland. It is the single largest party in Ireland in the Oireachtas, in local government, and in terms of Members of the European Parliament. The party has a membership of over 35,000...
's deputy leader and finance representative Richard Bruton
Richard Bruton
Richard Bruton is an Irish Fine Gael politician and has been a Teachta Dála for the Dublin North Central constituency since 1982. He was appointed as Minister for Jobs, Enterprise and Innovation on 9 March 2011...
quizzed the Minister for Finance on his announcement that he would provide the necessary capital to Anglo Irish Bank.
Further Hidden Loans (Deposits) Controversy Involving Irish Life & Permanent
On 12 February 2009, details of a further controversial transaction which had the effect of misrepresenting the end-of-year accounts of Anglo-Irish Bank came into the public domain. Anglo-Irish Bank lent €4bn to Irish Life & Permanent (IL&P) for 1 day by way of inter-bank loan, and a subsidiary of Irish Life placed a deposit of a similar amount with Anglo, which was recorded as a customer deposit. Following a discussion with the Minister for Finance, a board meeting of IL&P accepted the resignation of two senior IL&P executives..The "Golden Circle"
On 17 February, Taoiseach Brian Cowen informed Dáil Éireann of his knowledge of a group of ten wealthy businessmen who had come together to buy shares in Anglo Irish Bank in 2008 in a transaction which is now at the centre of an investigation by the Office of Corporate Enforcement. Cowen has since denied suggestions put forth by the Opposition that he was attempting to protect anyone involved in this so-called "Golden Circle". The mystery has been discussed in Dáil Éireann since its revelation, with Minister for the Environment, Heritage and Local Government and Green PartyGreen Party (Ireland)
The Green Party is a green political party in Ireland. It was founded as the Ecology Party of Ireland in 1981 by Dublin teacher Christopher Fettes. The party became the Green Alliance in 1983 and in 1987 was renamed to its current title in English...
leader John Gormley
John Gormley
John Gormley is an Irish politician. He was the leader of the Irish Green Party from 2007 to 2011, and was a Teachta Dála for the Dublin South East constituency from 1997 to 2011. He served as Minister for the Environment, Heritage and Local Government from 2007–11...
calling for the names to be made public if a legal way of doing so could be found. Anglo Irish Bank's annual report alongside the PricewaterhouseCooper report on the bank were both published on 20 February but Tánaiste
Tánaiste
The Tánaiste is the deputy prime minister of Ireland. The current Tánaiste is Eamon Gilmore, TD who was appointed on 9 March 2011.- Origins and etymology :...
Mary Coughlan stated beforehand that the ten would not be named in either report. The Anglo report revealed that the bank lent €451 million to the ten "Golden Circle" clients, a 50% increase on previous estimates of €300 million. That same evening, Brian Lenihan also issued a statement containing extracts from the report carried out by PricewaterhouseCooper for the Financial Regulator. The morning before its publication, Ulick McEvaddy
Ulick McEvaddy
Ulick McEvaddy, a former Irish army officer and native of Swinford County Mayo.In 1984, along with his brother Desmond McEvaddy, he established Omega Air Inc; a Washington-based US Corporation that specialises in the sale and lease of aircraft. Omega Air has become one of the biggest supplier and...
appeared on RTÉ Radio 1
RTÉ Radio 1
RTÉ Radio 1 is the principal radio channel of Irish public-service broadcaster Raidió Teilifís Éireann and is the direct descendant of Dublin radio station 2RN, which began broadcasting on a regular basis on 1 January 1926...
alongside the Socialist Party
Socialist Party (Ireland)
The Socialist Party is a socialist political party active in Ireland. It is a member of the Committee for a Workers' International .Formerly known as Militant Tendency, then Militant Labour, it adopted the name The Socialist Party in 1996. From their foundation in 1972 until the 1980s, members of...
's Joe Higgins
Joe Higgins
Joe Higgins is an Irish Socialist Party politician. In the 2011 general election he was elected to Dáil Éireann as Teachta Dála for the Dublin West constituency, having previously served in that capacity from 1997–2007...
, where he stated that the ten were "heroes" in his opinion. The Sunday Times
The Sunday Times
The Sunday Times is a British Sunday newspaper.The Sunday Times may also refer to:*The Sunday Times *The Sunday Times *The Sunday Times *The Sunday Times...
published the names of four of the Golden Circle members on 22 February. The four members of the elite are Gerry Gannon
Gerry Gannon
Gerry Gannon, so-called 'man in the hat', is an Irish builder and property developer since the 1980s. Gannon plays a significant and leading role in the build-up and demise of the Irish property bubble...
, Joe O'Reilly, Seamus Ross and Jerry Conlan. The same article declared that Sean Mulryan, Patrick Doherty, Sean Dunne
Seán Dunne
Seán Dunne was an Irish Labour Party politician. He was a TD from 1948–1957 and from 1961–1969....
, Derek Quinlan
Derek Quinlan
Derek M Quinlan is an Irish businessman prominent in the field of real estate investment and development. A former tax inspector at the Irish Revenue Commission, he formed investment syndicates of high-net worth individuals and to buy properties across the world. His principal investment vehicle...
, Denis O'Brien
Denis O'Brien
Denis O'Brien is an Irish businessman with international connections. An Arts graduate of University College Dublin, O'Brien has received a MBA in corporate finance from Boston College in 1982, and was later given an honorary doctorate by University College Dublin.O'Brien has involvement with...
, JP McManus, John Magnier
John Magnier
John Magnier is Ireland's leading thoroughbred stud owner and has extensive business interests outside of the horse breeding industry....
, Noel Smyth, Michael Whelan
Michael Whelan
Michael Whelan is an American artist of imaginative realism. For more than 30 years he worked as an illustrator specializing in science fiction and fantasy cover art...
, Jim Mansfield
Jim Mansfield
James Mansfield is an Irish businessman, with a property portfolio that included the Citywest Hotel and Resort, several developments local to the Tallaght and Saggart areas, and Weston Airport....
, Richard Barrett
Richard Barrett
Richard Barrett was an American lawyer, white nationalist, and self-proclaimed leader in the nationalist Skinheadz movement. Barrett was a speaker and editor of the All The Way monthly newsletter...
, Johnny Ronan and Fintan Drury were not among the chosen ten. Minister Dick Roche
Dick Roche
Dick Roche is a former Irish Fianna Fáil politician. He was a Teachta Dála for the Wicklow constituency, and also served in Seanad Éireann from 1992 to 1997.-Early and private life:...
has since stated that the ten cannot be named.
{|class="collapsible collapsed" style="width:1075px;"
!style="background:#D4AF37"|Golden Circle
|-
|style="background:#ffc;"|
The Anglo Irish Bank hidden loans controversy (also known as the circular transactions controversy) began in the Republic of Ireland
Republic of Ireland
Ireland , described as the Republic of Ireland , is a sovereign state in Europe occupying approximately five-sixths of the island of the same name. Its capital is Dublin. Ireland, which had a population of 4.58 million in 2011, is a constitutional republic governed as a parliamentary democracy,...
in December 2008 when the chairman of Anglo Irish Bank
Anglo Irish Bank
Anglo Irish Bank was a bank based in Ireland with its headquarters in Dublin from 1964 to 2011. It went into wind-down mode after nationalisation in 2009....
, Ireland's third largest bank, admitted he had hidden a total of €
Euro
The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,...
87 million in loans from the bank, triggering a series of incidents which led to the eventual nationalisation
Nationalization
Nationalisation, also spelled nationalization, is the process of taking an industry or assets into government ownership by a national government or state. Nationalization usually refers to private assets, but may also mean assets owned by lower levels of government, such as municipalities, being...
of Anglo on 21 January 2009. Sean FitzPatrick
Sean FitzPatrick
Seán FitzPatrick was chairman of Anglo Irish Bank until he resigned in December 2008 amid mounting revelations over hidden loans...
subsequently resigned his position and was followed within twenty-four hours by the bank's non-executive director, Lar Bradshaw and chief executive, David Drumm. A new chairman of Anglo, Donal O'Connor, was quickly appointed from the board, a move welcomed by the Irish Minister for Finance
Minister for Finance (Ireland)
The Minister for Finance is the title held by the Irish government minister responsible for all financial and monetary matters. The office-holder controls the Department of Finance and is considered one of the most important members of the Government of Ireland.The current Minister for Finance is...
, Brian Lenihan
Brian Lenihan, Jnr
Brian Joseph Lenihan was an Irish Fianna Fáil politician and barrister who served in the government of Ireland as Minister for Justice, Equality and Law Reform from 2007 to 2008 and as Minister for Finance from 2008 to 2011...
. A number of investigations have been launched into the reasons behind the three resignations. The Central Bank of Ireland is carrying out a review of the bank's dealings, although its head of the Financial Regulation, Patrick Neary, has also since resigned his position. So too have a number of other chairmen, directors and executives involved with Anglo, Irish Life and Permanent
Irish Life and Permanent
Irish Life and Permanent, Plc or IL&P is a provider of personal financial services in Ireland. IL&P enjoys limited liability....
and Irish Nationwide
Irish Nationwide
Irish Nationwide Building Society was a financial institution in Ireland from 1873 to 2011. One of the country's oldest financial institutions, it was originally called the Irish Industrial Building Society; it changed its name in 1975 when it had just five staff...
.
Within days of the initial admission, an announcement was made that Anglo Irish Bank would be one of three (alongside Allied Irish Bank and Bank of Ireland
Bank of Ireland
The Bank of Ireland is a commercial bank operation in Ireland, which is one of the 'Big Four' in both parts of the island.Historically the premier banking organisation in Ireland, the Bank occupies a unique position in Irish banking history...
) that would be recapitalised by the Irish government
Irish Government
The Government of Ireland is the cabinet that exercises executive authority in Ireland.-Members of the Government:Membership of the Government is regulated fundamentally by the Constitution of Ireland. The Government is headed by a prime minister called the Taoiseach...
. The recapitalisation of Anglo Irish Bank was expected to be effected in mid-January 2009, following an Extraordinary General Meeting
Extraordinary General Meeting
An extraordinary general meeting, commonly abbreviated as EGM, is a meeting of members of an organisation, shareholders of a company, or employees of an official body, which occurs at an irregular time. The term is usually used where the group would ordinarily hold an annual general meeting , but...
(EGM). Lenihan instead unexpectedly announced the nationalisation of Anglo Irish Bank the night before the EGM due to difficulties he encountered with the recapitalisation process. Recapitalisations of the other two banks mentioned were expected by the end of March 2009 but, according to Taoiseach
Taoiseach
The Taoiseach is the head of government or prime minister of Ireland. The Taoiseach is appointed by the President upon the nomination of Dáil Éireann, the lower house of the Oireachtas , and must, in order to remain in office, retain the support of a majority in the Dáil.The current Taoiseach is...
Brian Cowen
Brian Cowen
Brian Cowen is a former Irish politician who served as Taoiseach of Ireland from 7 May 2008 to 9 March 2011. He was head of a coalition government led by Fianna Fáil which until 23 January 2011 had the support of the Green Party and independent TDs.Cowen was also leader of Fianna Fáil from 7 May...
, were expected to be finalised in early February 2009 at a total of €7 billion. The nationalisation of Anglo Irish Bank on 21 January 2009 followed two more resignations earlier that month. On 7 January 2009, another director, Willie McAteer, resigned, becoming the fourth casualty of the controversy. Two days later the Financial Regulator Patrick Neary retired amidst much criticism over his handling of the affair. After Anglo nationalisation, the Chairman of Irish Nationwide, Dr Michael Walsh
Michael Walsh
- Sportspeople :* Michael Walsh , retired English soccer player* Michael Walsh , English football player with Bangor City who played professionally for Chester City...
, resigned on 17 February, one week to the day that government-appointed directors announced they were investigating a deposit of billions of euro by Irish Life and Permanent
Irish Life and Permanent
Irish Life and Permanent, Plc or IL&P is a provider of personal financial services in Ireland. IL&P enjoys limited liability....
, placed in Anglo Irish Bank before the end of its financial year.
Taoiseach Brian Cowen has denied claims that he is protecting a "Golden Circle" of wealthy financiers from being identified. This mysterious group of ten businessmen is said to have received loans from Anglo Irish Bank in return for buying shares, in a move designed to keep the bank afloat.
Background
Starting in 1986, Sean "Seanie" FitzPatrick spent eighteen years as chief executive of Anglo Irish Bank, during which time the bank grew from a small operator into the third-largest bank in Ireland. When he became the bank's chairman in 2005, handing over the position of chief executive to David Drumm, the bank was recording annual profits of over €500 million. The Anglo share price peaked at €17.60 in May 2007, an increase from under €1 ten years previously. Anglo was valued at nearly €13 billion and FitzPatrick's 4.5 million Anglo shares were worth nearly €80 million at this time. Prior to FitzPatrick's resignation, the Anglo share price had already dropped to €0.32, a drop of 98% with the entire bank valued at a low €242 million and FitzPatrick's stake reduced to €1.5 million.The Financial Regulator first uncovered the €87 million loans in January 2008 when inspectors from the regulator's offices carried out an inspection into the loan book of rival lender, Irish Nationwide Building Society. The inspectors noticed that a large loan was provided to FitzPatrick at Anglo Irish Bank and later repaid. The Regulator discovered at a later date that similar loans were provided to FitzPatrick in September 2008 and repaid by him in October 2008. When the issue was raised with Anglo Irish Bank it was discovered that there were further loans between the two banks over an extended period of eight years.
It is uncertain which officials, if any, within the bank knew about the loans.
Every Anglo annual report contains a note displaying the total loans given to directors of the bank. This total is measured at a single point in time. In the case of Anglo this occurs on 30 September. FitzPatrick, instead of revealing the true figures of his loans, transferred some of them to Irish Nationwide Building Society, returning them to Anglo at a later date. He acted in a manner that thwarted transparency of Anglo's loan book. Financial authorities are investigating if there have been breaches of corporate governance. The Chief Executive of the Financial Regulator said that "a lay person would expect that issues of this nature and this magnitude would have been picked up" by the external auditors, Ernst & Young
Ernst & Young
Ernst & Young is one of the largest professional services networks in the world and one of the "Big Four" accountancy firms, along with Deloitte, KPMG and PricewaterhouseCoopers ....
. After receiving legal advice Ernst & Young declined to appear before a parliamentary committee.
This in turn led to inaccurate figures for the total directors' loans given for eight consecutive years in the end of year Anglo accounts. 2008 was the first occasion on which FitzPatrick revealed his true figure, that of €87 million or twice the total of the other twelve directors' loan figures.
The situation has been described as Ireland's version of Enron
Enron
Enron Corporation was an American energy, commodities, and services company based in Houston, Texas. Before its bankruptcy on December 2, 2001, Enron employed approximately 22,000 staff and was one of the world's leading electricity, natural gas, communications, and pulp and paper companies, with...
, the American energy company which went bankrupt in 2001, and it has been said that the principals would be immediately arrested if this had occurred in the United States.
Anglo Irish Bank
FitzPatrick issued a statement on the evening of 18 December, linking his resignation with a €87 million loan he had from the bank. Ireland's Minister for Finance, Brian Lenihan welcomed the appointment of a new chairman, Donal O'Connor, an official with a substantial commercial track record, saying he "seems a natural choice" for the role. FitzPatrick's resignation came little over two months after he had admitted that his former bank had made mistakes but insisted it had not been "reckless". Alongside FitzPatrick's resignation came that of Bradshaw who had held a loan jointly with FitzPatrick, a loan that was temporarily transferred to another bank prior to a year end audit without the knowledge of Bradshaw. On the evening of 19 December, Drumm announced he would step down with immediate effect, but said he will continue to work with the chairman through a transition phase until a replacement chief executive is agreed upon.It is appropriate for me to step down today given last evening's announcement in relation to the resignation of Sean FitzPatrick and given the strong statement of support for the Bank and its recapitalisation programme by the Minister for Finance. Good progress is being made on the recapitalisation. It is undoubtedly in the best interests of Anglo that a new Chief Executive is appointed to lead the Bank through its next phase of development. The appointment of Donal O'Connor as Chairman together with a new Chief Executive augurs well for the Bank and for all its stakeholders. It gives the Bank fresh impetus and an upward trajectory. I would like to thank all of my colleagues for their intense commitment and honest endeavour and for their friendship over the last 15 years.
On 7 January 2009, Willie McAteer resigned his position as finance director and chief risk officer.
On 15 January 2009 the Government of Ireland nationalised
Anglo Irish Bank and its shares were suspended on the Dublin and London Stock Exchanges.
On 19 January 2009, the balance of the Board, who had served while FitzPatrick was chairman, resigned. The consequence of Anglo's nationalisation caused steep falls, up to 50%, in the market value of the other two large banks on January 19, 2009
Financial Regulator
Following reports of a communication breakdown at the office of the Financial Services Regulatory Authority, the Financial Regulator Patrick Neary on 9 January 2009 announced his decision to retire as of 31 January that year. Neary's weakness in dealing with the issue has received much criticism, with Green PartyGreen Party (Ireland)
The Green Party is a green political party in Ireland. It was founded as the Ecology Party of Ireland in 1981 by Dublin teacher Christopher Fettes. The party became the Green Alliance in 1983 and in 1987 was renamed to its current title in English...
Senator Dan Boyle
Dan Boyle (politician)
Dan Boyle is an Irish Green Party politician and party chairperson. He was a Teachta Dála for Cork South Central from 2002–07 and was a member of Seanad Éireann from 2007–11.-Early life and education:...
calling for a strengthening of powers within the organisation and saying that confidence in Irish financial services had been eroded by events of the previous six months. Financial observers indicated that a replacement for Neary might have to be located in the United States or in Britain.
There were also reports that the Financial Regulator may have known of the loans for eight years prior to their revelation. The Fine Gael finance spokesman Richard Bruton called for the board and senior management of the Financial Regulator to be sacked. The Financial Regulator hired a partner from Ernst & Young, to advise on the €440 billion bank guarantee scheme in January 2009, despite the fact that serious questions have been asked about why Ernst & Young did not spot the massive loans that former chief executive Sean FitzPatrick concealed from his shareholders for eight years. Consultants Mazars
Mazars
Mazars is a global audit, accounting and consulting group employing more than 13,000 professionals in 61 countries through member firms. With head offices in France, Mazars is the 14th largest accounting firm in the world...
, which reviewed their operations said "that regulatory expertise was lacking in some areas".
Irish Nationwide
On the evening of 17 February 2009, the Chairman of the building society Irish NationwideIrish Nationwide
Irish Nationwide Building Society was a financial institution in Ireland from 1873 to 2011. One of the country's oldest financial institutions, it was originally called the Irish Industrial Building Society; it changed its name in 1975 when it had just five staff...
, Dr Michael Walsh, resigned his position.
Irish Stock Exchange
On 23 February 2009, the former Anglo Irish BankAnglo Irish Bank
Anglo Irish Bank was a bank based in Ireland with its headquarters in Dublin from 1964 to 2011. It went into wind-down mode after nationalisation in 2009....
director Anne Heraty unexpectedly resigned from the board of the Irish Stock Exchange
Irish Stock Exchange
-History:The Irish Stock Exchange is Ireland's only stock exchange and has been in existence since 1793. It is an Irish private company limited by guarantee. It was first recognised by legislation in 1799 when the Irish Parliament passed the Stock Exchange Act...
. The following morning, Dublin's ISEQ
Irish Stock Exchange
-History:The Irish Stock Exchange is Ireland's only stock exchange and has been in existence since 1793. It is an Irish private company limited by guarantee. It was first recognised by legislation in 1799 when the Irish Parliament passed the Stock Exchange Act...
index fell over 3% to stand at 1,987, a 14-year low. The last time it stood under the 2,000 level was the middle of 1995.
Dublin Airport Authority
On the evening of 24 February 2009, the chairman of the Dublin Airport AuthorityDublin Airport Authority
Dublin Airport Authority plc is the state-owned airport authority in the Republic of Ireland. With a head office on the grounds of Dublin Airport in Fingal, County Dublin, the authority also owned the Great Southern Hotels which had nine sites throughout the island of Ireland and international...
(DAA), Gary McGann, announced his decision to step down from the board, stating that his decision had been influenced by his former non-executive directorship of Anglo Irish Bank.
Outcome and nationalisation
Anglo Irish Bank has said it would review its policy on directors' loans following FitzPatrick's resignation. The Financial Regulator announced he would be examining the loans issued by Anglo Irish Bank to all its directors, claiming he became aware of the existence of the loans "following an inspection earlier this year". Ultimately he became a victim of the controversy and subsequently announced his retirement.The Chartered Accountants Regulatory Board (CARB) has initiated an investigation into the "circumstances around the issue of inappropriate directors' loans at Anglo Irish"and into the performance of Ernst and Young.
. The Irish Association of Investment Managers expressed how it was "surprised and disappointed" at the controversy and announced it would be writing to Anglo's new chairman to describe its worries.
The Irish State subsequently announced it was to become the majority shareholder in Anglo Irish Bank by injecting €3 billion into the bank. Opposition party Fine Gael
Fine Gael
Fine Gael is a centre-right to centrist political party in the Republic of Ireland. It is the single largest party in Ireland in the Oireachtas, in local government, and in terms of Members of the European Parliament. The party has a membership of over 35,000...
opposed this move and stated on 14 January 2009 that the bank should be shut down but the following evening the Irish government announced that recapitalisation was no longer a serious option and nationalised the bank instead. Lenihan stated that "clear blue water" had been inserted between the old and new versions of Anglo and defended the nationalisation by saying that if the government were to let the bank fail it would be saying to Ireland and other economies that the country was "closed for business". At an Emergency General Meeting held at the Mansion House
Mansion House, Dublin
The Mansion House on Dawson Street, Dublin, is the official residence of the Lord Mayor of Dublin since 1715.-Features:The Mansion House's most famous features include the "Round Room", where the First Dáil assembled on 21 January 1919 to proclaim the Irish Declaration of Independence...
, Dublin on 16 January 2009, the bank's shareholders angrily voiced their opinions on FitzPatrick's involvement in the bank's downfall and their lack of confidence in the banking sector. The auditors, Ernst & Young were also criticised for failing to detect the loans during their audits. At the EGM the total level of loans to directors was announced as €179 million.
Legislation
Emergency legislation to nationalise the bank, titled the Anglo Irish Bank Corporation Bill 2009Anglo Irish Bank Corporation Bill 2009
The Anglo Irish Bank Corporation Act 2009 is a piece of emergency legislation composed by the Irish government in January 2009. The Act provides for the emergency nationalisation of Anglo Irish Bank which had been subject to a controversy regarding hidden loans in December 2008...
, was voted through Dáil Éireann
Dáil Éireann
Dáil Éireann is the lower house, but principal chamber, of the Oireachtas , which also includes the President of Ireland and Seanad Éireann . It is directly elected at least once in every five years under the system of proportional representation by means of the single transferable vote...
, being approved by 79 – 67 before passing in Seanad Éireann
Seanad Éireann
Seanad Éireann is the upper house of the Oireachtas , which also comprises the President of Ireland and Dáil Éireann . It is commonly called the Seanad or Senate and its members Senators or Seanadóirí . Unlike Dáil Éireann, it is not directly elected but consists of a mixture of members chosen by...
without a vote on 20 January 2009. During the Seanad's debate on the bill, Senator Shane Ross
Shane Ross
Shane Peter Nathaniel Ross is an independent Irish politician and Business Editor of the Sunday Independent. He was the longest-serving member of Seanad Éireann , until he was elected to Dáil Éireann for the constituency of Dublin South at the 2011 general election.-Early life and career:Born in...
claimed that "no-one was being told the truth about Anglo Irish Bank" and called the EGM of the previous Friday "a disgrace show[ing] corporate Ireland at its worst, as there were no answers to any questions". Senator Joe O'Toole
Joe O'Toole
Joseph John "Joe" O'Toole is a former Irish independent politician, who was a member of Seanad Éireann from 1987 to 2011.He was born and brought up in Dingle, County Kerry, O'Toole was a teacher for ten years and then a school principal in County Dublin...
advocated the chasing of those responsible for the bank's nationalisation "even into the courts", saying that a person could be imprisoned for failure to pay a household bill, yet those who caused the loss of jobs and pensions might not. President Mary McAleese then signed the Anglo Irish Bank Bill at Áras an Uachtaráin the following day.
Discussion
The bank's internal auditors appeared before the Oireachtas Joint Committee on Economic Regulatory Affairs on 3 February 2009 to discuss the nationalisation of Anglo Irish BankAnglo Irish Bank
Anglo Irish Bank was a bank based in Ireland with its headquarters in Dublin from 1964 to 2011. It went into wind-down mode after nationalisation in 2009....
. The bank's head of internal audit, Walter Tyrrell, told the Oireachtas committee that the movement of loans by Seán FitzPatrick into the bank and back out again could only have been known by FitzPatrick himself and the executive of his account, claiming that loans were tested by means of random sampling and that FitzPatrick's loans had not once been selected - however one loan he held with a partner was chosen. Fine Gael's Kieran O'Donnell
Kieran O'Donnell
Kieran O'Donnell is an Irish Fine Gael politician. He is currently a Teachta Dála for the Limerick City constituency.Before becoming a full-time public representative, O'Donnell worked as an accountant. He is nephew of former Minister and TD for Limerick East Tom O'Donnell.O'Donnell was an...
expressed his amazement that each of the directors' loans were not tested.
On 11 February 2009, Lenihan revealed plans under which €3.5 billion ($4.5 billion, £3.1 billion) each would be provided by the government's purchase of options intended to re-capitalise Allied Irish Bank and the Bank of Ireland.
Review
The Financial Regulator, on the recommendation of the Irish Finance Minister, ordered an "urgent review" of directors' loans at Anglo Irish Bank, saying it has a "very serious view" of the issue. It claims the loans were "first brought to its attention on December 17th 2008" and that a committee had been established to investigate the matter. Irish Minister for Social and Family AffairsMinister for Social and Family Affairs (Ireland)
The Minister for Social Protection is the senior minister at the Department of Social Protection in the Government of Ireland.The current Minister for Social Protection is Joan Burton, TD.-Overview:...
Mary Hanafin
Mary Hanafin
Mary Hanafin is an Irish Fianna Fáil politician who was a Teachta Dála for Dún Laoghaire from 1997 to 2011. She served as Government Chief Whip , Minister for Education and Science , Minister for Social and Family Affairs , Minister for Tourism, Culture and Sport and Minister for Enterprise,...
said the Financial Regulator had "serious questions" to answer over its supposed lack of knowledge of the loans and the Irish Minister for the Environment, Heritage and Local Government John Gormley
John Gormley
John Gormley is an Irish politician. He was the leader of the Irish Green Party from 2007 to 2011, and was a Teachta Dála for the Dublin South East constituency from 1997 to 2011. He served as Minister for the Environment, Heritage and Local Government from 2007–11...
asked the Financial Regulator to explain what he termed "extraordinary complacency" in relation to the situation at Anglo Irish Bank. The opposition party Fine Gael
Fine Gael
Fine Gael is a centre-right to centrist political party in the Republic of Ireland. It is the single largest party in Ireland in the Oireachtas, in local government, and in terms of Members of the European Parliament. The party has a membership of over 35,000...
's deputy leader and finance representative Richard Bruton
Richard Bruton
Richard Bruton is an Irish Fine Gael politician and has been a Teachta Dála for the Dublin North Central constituency since 1982. He was appointed as Minister for Jobs, Enterprise and Innovation on 9 March 2011...
quizzed the Minister for Finance on his announcement that he would provide the necessary capital to Anglo Irish Bank.
Further Hidden Loans (Deposits) Controversy Involving Irish Life & Permanent
On 12 February 2009, details of a further controversial transaction which had the effect of misrepresenting the end-of-year accounts of Anglo-Irish Bank came into the public domain. Anglo-Irish Bank lent €4bn to Irish Life & Permanent (IL&P) for 1 day by way of inter-bank loan, and a subsidiary of Irish Life placed a deposit of a similar amount with Anglo, which was recorded as a customer deposit. Following a discussion with the Minister for Finance, a board meeting of IL&P accepted the resignation of two senior IL&P executives..The "Golden Circle"
On 17 February, Taoiseach Brian Cowen informed Dáil Éireann of his knowledge of a group of ten wealthy businessmen who had come together to buy shares in Anglo Irish Bank in 2008 in a transaction which is now at the centre of an investigation by the Office of Corporate Enforcement. Cowen has since denied suggestions put forth by the Opposition that he was attempting to protect anyone involved in this so-called "Golden Circle". The mystery has been discussed in Dáil Éireann since its revelation, with Minister for the Environment, Heritage and Local Government and Green PartyGreen Party (Ireland)
The Green Party is a green political party in Ireland. It was founded as the Ecology Party of Ireland in 1981 by Dublin teacher Christopher Fettes. The party became the Green Alliance in 1983 and in 1987 was renamed to its current title in English...
leader John Gormley
John Gormley
John Gormley is an Irish politician. He was the leader of the Irish Green Party from 2007 to 2011, and was a Teachta Dála for the Dublin South East constituency from 1997 to 2011. He served as Minister for the Environment, Heritage and Local Government from 2007–11...
calling for the names to be made public if a legal way of doing so could be found. Anglo Irish Bank's annual report alongside the PricewaterhouseCooper report on the bank were both published on 20 February but Tánaiste
Tánaiste
The Tánaiste is the deputy prime minister of Ireland. The current Tánaiste is Eamon Gilmore, TD who was appointed on 9 March 2011.- Origins and etymology :...
Mary Coughlan stated beforehand that the ten would not be named in either report. The Anglo report revealed that the bank lent €451 million to the ten "Golden Circle" clients, a 50% increase on previous estimates of €300 million. That same evening, Brian Lenihan also issued a statement containing extracts from the report carried out by PricewaterhouseCooper for the Financial Regulator. The morning before its publication, Ulick McEvaddy
Ulick McEvaddy
Ulick McEvaddy, a former Irish army officer and native of Swinford County Mayo.In 1984, along with his brother Desmond McEvaddy, he established Omega Air Inc; a Washington-based US Corporation that specialises in the sale and lease of aircraft. Omega Air has become one of the biggest supplier and...
appeared on RTÉ Radio 1
RTÉ Radio 1
RTÉ Radio 1 is the principal radio channel of Irish public-service broadcaster Raidió Teilifís Éireann and is the direct descendant of Dublin radio station 2RN, which began broadcasting on a regular basis on 1 January 1926...
alongside the Socialist Party
Socialist Party (Ireland)
The Socialist Party is a socialist political party active in Ireland. It is a member of the Committee for a Workers' International .Formerly known as Militant Tendency, then Militant Labour, it adopted the name The Socialist Party in 1996. From their foundation in 1972 until the 1980s, members of...
's Joe Higgins
Joe Higgins
Joe Higgins is an Irish Socialist Party politician. In the 2011 general election he was elected to Dáil Éireann as Teachta Dála for the Dublin West constituency, having previously served in that capacity from 1997–2007...
, where he stated that the ten were "heroes" in his opinion. The Sunday Times
The Sunday Times
The Sunday Times is a British Sunday newspaper.The Sunday Times may also refer to:*The Sunday Times *The Sunday Times *The Sunday Times *The Sunday Times...
published the names of four of the Golden Circle members on 22 February. The four members of the elite are Gerry Gannon
Gerry Gannon
Gerry Gannon, so-called 'man in the hat', is an Irish builder and property developer since the 1980s. Gannon plays a significant and leading role in the build-up and demise of the Irish property bubble...
, Joe O'Reilly, Seamus Ross and Jerry Conlan. The same article declared that Sean Mulryan, Patrick Doherty, Sean Dunne
Seán Dunne
Seán Dunne was an Irish Labour Party politician. He was a TD from 1948–1957 and from 1961–1969....
, Derek Quinlan
Derek Quinlan
Derek M Quinlan is an Irish businessman prominent in the field of real estate investment and development. A former tax inspector at the Irish Revenue Commission, he formed investment syndicates of high-net worth individuals and to buy properties across the world. His principal investment vehicle...
, Denis O'Brien
Denis O'Brien
Denis O'Brien is an Irish businessman with international connections. An Arts graduate of University College Dublin, O'Brien has received a MBA in corporate finance from Boston College in 1982, and was later given an honorary doctorate by University College Dublin.O'Brien has involvement with...
, JP McManus, John Magnier
John Magnier
John Magnier is Ireland's leading thoroughbred stud owner and has extensive business interests outside of the horse breeding industry....
, Noel Smyth, Michael Whelan
Michael Whelan
Michael Whelan is an American artist of imaginative realism. For more than 30 years he worked as an illustrator specializing in science fiction and fantasy cover art...
, Jim Mansfield
Jim Mansfield
James Mansfield is an Irish businessman, with a property portfolio that included the Citywest Hotel and Resort, several developments local to the Tallaght and Saggart areas, and Weston Airport....
, Richard Barrett
Richard Barrett
Richard Barrett was an American lawyer, white nationalist, and self-proclaimed leader in the nationalist Skinheadz movement. Barrett was a speaker and editor of the All The Way monthly newsletter...
, Johnny Ronan and Fintan Drury were not among the chosen ten. Minister Dick Roche
Dick Roche
Dick Roche is a former Irish Fianna Fáil politician. He was a Teachta Dála for the Wicklow constituency, and also served in Seanad Éireann from 1992 to 1997.-Early and private life:...
has since stated that the ten cannot be named.
{|class="collapsible collapsed" style="width:1075px;"
!style="background:#D4AF37"|Golden Circle
|-
|style="background:#ffc;"|
Sunday Times list: Gerry Gannon
Gerry Gannon
Gerry Gannon, so-called 'man in the hat', is an Irish builder and property developer since the 1980s. Gannon plays a significant and leading role in the build-up and demise of the Irish property bubble...
• Joe O'Reilly • Seamus Ross • Jerry Conlan • _____ • _____ • _____ • _____ • _____ • _____
|}
Fraud search
On 24 February, members of the Garda Bureau of Fraud Investigation executed a District CourtDistrict Court (Ireland)
The District Court is the main court of summary jurisdiction in Ireland. It has responsibility for hearing minor criminal matters, small civil claims, liquor licensing, and certain family law applications...
warrant at the headquarters of Anglo Irish Bank on St Stephen's Green, Dublin. The warrant, issued the previous day, allowed the Gardaí, acting on behalf of the Office of the Director of Corporate Enforcement
Director of Corporate Enforcement
The Office of the Director of Corporate Enforcement in Ireland was set up by the Irish Government on November 28, 2001 as a consequence of the proceedings and the conclusions of various review groups, courts, tribunals of inquiry and parliamentary committees in recent years...
, to enter the premises and seize documents that may show crimes committed under section 20 of the Companies' Acts.
See also
- List of Irish companies
- 2008 FÁS expenditure controversy2008 FÁS expenditure controversyThe FÁS expenditure controversy is an ongoing incident in Ireland in November/December 2008 in which significant public and political outcry has been roused, and at least one senior figure of a government organisation has resigned...
- Enten controversyEnten controversyThe Enten controversy involved Kazutsugi Nami, the chairman of Tokyo bedding supplier Ladies & Gentlemen , arrested by Japanese police on 5 February 2009. He and twenty-one other executives were accused of defrauding 37,000 investors of at least 126 billion yen between 2001 and 2009...
External links
- Anglo Irish Bank
- Financial Regulator
- Audio of Ulick McEvaddy and Joe Higgins's "Golden Circle" Clash on RTÉ Radio 1RTÉ Radio 1RTÉ Radio 1 is the principal radio channel of Irish public-service broadcaster Raidió Teilifís Éireann and is the direct descendant of Dublin radio station 2RN, which began broadcasting on a regular basis on 1 January 1926...
– 20 February 2009
