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Bank director fined for role in loan fraud

The former director of lending at Anglo Irish Bank, Pat Whelan, has been fined €3,000 for failing to keep a proper record of a fraudulent €8 million loan to his colleague, Willie McAteer.

McAteer, who was director of finance, will be sentenced next week for obtaining the loan on September 29, 2008 as the bank was on the brink of collapse.

Last month McAteer, 66, of Greenrath, Tipperary Town, Tipperary, pleaded guilty to obtaining the €8 million, which he secured against his shares in Anglo Irish. He then used the money to pay off a personal loan he obtained from the Bank of Ireland.

The court was told today that the loan was formulated by Anglo Irish’s executive board of directors to prevent the shares being sold off, which would have further damaged confidence in the bank.

Whelan, 54, of Coast Road, Malahide, Co Dublin, pleaded guilty at Dublin circuit criminal court to an offence of failing to maintain a register in respect of the granting by the bank of a loan to another director.

Judge Martin Nolan noted that Whelan’s offence was a regulatory one that did not carry a custodial sentence. He said that the recording of loans to directors was “of great importance” but that he was satisfied Whelan was not aware of the precise regulations. The judge imposed a €3,000 fine. The maximum he could have imposed was €12,697.

McAteer, who is currently serving three and a half years for other offences he committed while with Anglo Irish, will be sentenced next Monday. He faces up to seven years in prison and a €63,486 fine.

Glen Mackessy of the Office of the Director of Corporate Enforcement said that prior to September 2008 McAteer, like most Anglo Irish executive directors, had built up a substantial shareholding in the bank.

He said that the directors were encouraged to buy and hold large amounts of newly issued shares. McAteer used five loans from the Bank of Ireland to purchase a total of 3.3 million shares. These were recourse loans meaning McAteer was personally liable if he defaulted.

The court heard that the Bank of Ireland had a provision where if the share price fell below a certain ratio in relation to the loan it could sell off the shares without consulting McAteer. The sale of these shares would occur under McAteer’s name and would have to be disclosed to the market and the financial regulator.

Mr Mackessy said that in 2008 Anglo Irish’s share price began to fall drastically and the Bank of Ireland could have sold McAteer’s shares if it wished. McAteer became aware of this and informed the senior management at Anglo Irish.

The bank’s board of directors were concerned that a sudden sell-off of a director’s loans could have a disastrous effect on the overall share price. A plan was formulated to refinance McAteer’s shares using a €8,246,307 loan from Anglo Irish. This loan would be secured against the shares only and McAteer would not be personally liable.

The court heard that the Bank of Ireland had made no move to sell off the shares and had given no indication that it might.

Mr Mackessy said there was no evidence that McAteer had a role in designing the scheme. The garda officer said that he signed the loan documentation when he was presented with it. Once the loan went through the Bank of Ireland released the shares as security and closed McAteer’s loan accounts.

All this took place on September 29, 2008, the same day as the government issued a blanket guarantee to the banks.

In January 2009 McAteer was asked by Anglo Irish’s chief financial officer, Matt Moran, to make himself personally liable for the loan. McAteer agreed.

Gardai interviewed McAteer in 2010 and he admitted it was his signature on the loan documents. He said he had not come up with the terms of the loan but that he accepted them. He said he did this because the sale of the shares could have a catastrophic effect on the bank.

Whelan said during an interview that he had been instructed to have his lending team prepare the loan documentation. He identified his own signature on the loan documents.

Sean Gillane, SC, the prosecuting counsel, said that McAteer had two previous convictions. He was sentenced to three and a half years last year for conspiracy to defraud involving interbank loans worth €7.2 billion. In 2014 both he and Whelan were given 240 hours of community service by Judge Nolan after engaging in an illegal share support scheme.

Patrick Gageby, SC, defending McAteer, said that his client was supposed to retire before the bank started to collapse but that he had stayed on because his help was needed. He said if he retired at the right time he would have done so “with great advantages and a good amount of money”.

Mr Gageby said that the offences resulted in no loss to the bank. He said there were no more pending charges against McAteer and that this case would mark “a poor end to his career”.

Brendan Grehan, SC, who appeared for Whelan, said that this was also the last legal matter concerning his client. He said these investigations had been “hanging over him for seven years” and that he now wanted to start rebuilding his life.