Seán Quinn and his family have done a pretty decent job of showing that the Financial Regulator’s fingerprints are all over the increasingly desperate measures taken byDavid Drumm and his colleagues to stave off the collapse of Anglo Irish Bank in 2008.
What they have had less success in showing – in their action to join the regulator in their countersuit against Anglo/IBRC’s claims they are owned €2 billion – is that theDepartment of Finance was also very much in the loop.
The Quinns have put some documents into the public domain – via affidavit – showing the department got very involved once the bank guarantee was introduced in 2008, but the situation prior to that is much less clear.
Anxious family
The Quinns are presumably anxious to suck the department in because they believe it will bolster their case, which is that Anglo should not have extended them loans – which were used to buy shares in the bank itself – because it knew everything was going wrong. Not only that , they argue, the regulator and the government then knew it too.
What is interesting about what the Quinns are trying do is that it runs counter to one of of the more popular theories for why the government included Anglo in the guarantee to begin with: its very close links to Seán Quinn and his businesses.
The theory is based in part on reports around the time of the guarantee that when the Irish government was explaining to the UK government why Ireland jumped the gun and went for such a wide-ranging and unilateral guarantee, it said that one of the country’s biggest businesses would have gone down.
The presumption was that it was Quinn and it was an easy assumption to make. There was no secret that Quinn had a great welcome in government circles. He was a very large employer in the Border regions and was credited with bringing about real competition and lower premiums in the insurance industry. If Quinn wanted to talk to a minister, he only had to pick up the phone.
The obvious question – and one that remains unanswered – is whether or not Quinn used his influence in 2008 when he and Anglo were desperately seeking a solution to the problems caused by his massive stake-building through highly geared instruments called contracts for difference. The collapse in Anglo’s share price in 2008 left him with huge cash calls to meet losses and risked exposing the near-30 per cent stake he had built up in the bank.
The follow-on question is whether his influence had any bearing on the Financial Regulator’s acquiescence to what at a minimum was an inappropriate and possibly an illegal response by the bank and Quinn – the Maple 10 transaction. The answer to these questions must lie in the records of the department and regulator .
There is one problem with this theory: the transcripts of taped conversations between David Drumm and his colleagues from the period which have been published recently by the Irish Independent.
The problem is this: if Quinn was exerting some sort of behind-the-scenes pressure on the government and thus the regulator, it would seem reasonable he would have kept Anglo and Drumm in the loop because they were all on the same side. But there is no mention of this in the frank conversations between Drumm and his lieutenants we have heard to date.
There are a couple of possible explanations that might keep the conspiracy theory alive. Drumm might have known that Quinn was exerting political pressure and not told his staff. It is possible, but he does not come across as someone who holds back. Another possibility is whoever is leaking the tapes is doing so selectively.
Fearless of any backfire
But, taken at face value, the tapes indicate that perhaps Quinn did not use his influence. This would explain why they seem to have no fear that sucking the government and the department into their case against Anglo could backfire on them
It is possible that Quinn did not have to put any pressure on the government because, at that stage, the regulator was so far out of its depth that it did not know what to do other than follow Drumm’s plan. That certainly fits with what we have heard in the tapes.
The difficulty with this is that it requires us to believe that Mr Quinn did not lift the phone in his hour of need.
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