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Former Anglo Irish FD jailed for fraud

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2nd Aug 2016
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The former finance director of the defunct Anglo Irish Bank has been jailed for his part in concealing the loss of billions in deposits in the biggest accounting fraud in Irish corporate history.

William McAteer, who worked as FD for the bank, was given a three and a half year sentence for the €7.2bn (£6bn) accounting fraud in what has become the longest criminal trial in Irish legal history.

Judge Martin Nolan jailed McAteer, together with former Anglo executive John Bowe and former Irish Life and Permanent (ILP) chief executive Denis Casey for conspiracy to defraud. The trio were guilty of committing “sham transactions” intended to artificially shore up the bank’s value at the height of the financial crisis

Circular transactions

The fraud involved ‘circular transactions’ designed to disguise the true state of the bank's financial health.

Between March and September 2008, Anglo loaned 7.2bn euros (£6bn) to ILP, which placed the same amount back with Anglo. The transactions were accounted for on Anglo's end-of-year balance sheet as customer deposits rather than an inter-bank loan.

The transactions were intended to disguise Anglo’s funding crisis as it became clear to those on the inside that the bank’s backing of the Irish property boom had left it on the verge of bankruptcy following the global credit crisis.

On discovering the meltdown the Irish government stepped in to repay all depositors and bondholders, with the bailout costing the Irish taxpayer in the region of €30bn (£23bn). Anglo was then nationalised the following year and eventually dissolved, as Ireland was forced to seek an international bailout worth €60bn as its credit rating plunged.

A dishonest scheme

Defence lawyers argued that government and regulatory officials had encouraged the trio to proceed in order to maintain market confidence in Irish banking, but the prosecution stated that the accounting had been a “dishonest scheme” intended to deceive those looking at the bank's accounts.

Sentencing the men, judge Nolan said that he could appreciate the desperation of the moment and that everyone at Anglo wanted to save the bank, but saving the bank “isn't everything”. Nolan went on to call the transactions “dishonest, deceitful and corrupt”.

"The public is entitled to rely on the probity of blue chip firms”, he continued. “If we can't rely on the probity of these banks we lose all hope or trust in institutions.”

Auditors beggared belief

Judge Nolan also criticised auditors EY, stating that it “beggared belief” the Big Four firm signed off the bank’s accounts. “As a global accountancy firm it [EY] should have known the true situation at least by the end of October 2008 if it had been doing its job properly”, said Nolan.

Responding to the censure an EY spokesperson said that the firm had “fully cooperated with requests from the prosecution for witnesses and documentation in this matter. Neither the prosecution nor the defence chose to call any EY witness to give evidence at the trial in front of Judge Nolan”.

Former Anglo chairman Sean FitzPatrick and chief executive David Drumm are currently on bail awaiting trial for fraud and other offenses relating to the bank’s collapse. The trials are expected to run separately until at least 2017.

* This article was amended 3 August 2016 to correct the main image*

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