2 former Anglo Irish executives guilty of fraud; 1st convictions of Ireland’s banking crisis

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DUBLIN – Two former executives of Anglo Irish Bank were found guilty Thursday of committing fraud in a loans-for-shares scandal — the first convictions to stem from a banking crisis that brought Ireland to the brink of national bankruptcy.

After an 11-week trial, a jury found that former Anglo finance director Willie McAteer and lending director Pat Whelan illegally loaned 450 million euros ($621 million) to 10 top clients in July 2008 on condition that the men — property developers deep in debt to the bank — would use all the money to manipulate the market by buying Anglo’s own slumping shares.

Prosecutors demonstrated that the bank told all 10 customers that, should Anglo’s shares continue to slump, they would have to repay only a quarter of the debt, an illegal condition. The trial also heard evidence that several loan contracts later were fraudulently rewritten, with bogus dates, to lower the clients’ repayment requirements to zero.

The jury acquitted Whelan and McAteer on related charges of providing 169 million euros ($233 million) in loans to the wife and five children of the bank’s biggest investor, Sean Quinn. In 2008 he was Ireland’s richest man but had bet his business empire on the continued success of Anglo. The Quinn family loans — also provided specifically to buy Anglo shares — required 100 per cent repayment.

McAteer, 63, and Whelan, 52, face minimum 5-year prison sentences. Judge Martin Nolan said he would consider what punishment to impose at an April 28 hearing.

The same jury on Wednesday acquitted Anglo’s former chairman and chief executive, Sean FitzPatrick, of fraud in relation to all 16 loans, ruling that he had not played a direct role in the scheme. FitzPatrick faces a second fraud trial in October, when he is due to face charges of hiding more than 120 million euros ($165 million) of his personal loans from shareholders.

Anglo was a key financier of Ireland’s Celtic Tiger economy and, for a decade of unprecedented growth, its most celebrated financial success story. Its shares peaked over 17 euros ($23.50) in 2007, but then the global credit crisis exposed the bank’s reckless lending practices. As Ireland’s long-runaway property market buckled in 2008, Anglo shares lost three-quarters of their value and executives sought surreptitious investment from their own clients to turn the tide.

The gambit failed as foreign banks and hedge funds, seeking safe bets, stopped buying Anglo bonds and demanded repayment.

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