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News : Irish Last Updated: Apr 24, 2009 - 5:31:05 PM


Seán FitzPatrick resigns as Chairman of Anglo Irish Bank over directors' loans investigation; Loans amounted to €150 million in September 2008
By Finfacts Team
Dec 19, 2008 - 2:42:15 AM

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Seán FitzPatrick, a chartered accountant, joined Anglo Irish Bank in 1980 and served as Chief Executive Officer from 1986 to January 2005. He resigned as Chairman of the bank on Dec 18, 2008. FitzPatrick has also resigned from the boards of Smurfit Kappa, Aer Lingus, food group Greencore and investor, Gartmore Irish Growth Fund.

Seán FitzPatrick has resigned as Chairman of Anglo Irish Bank, following a continuing investigation of directors' loans at the bank. Directors loans at September 30, 2008, amounted to €150 million.

FitzPatrick resigned over the temporary transfer of €87 million in loans between the bank and Irish Nationwide Building Society over an eight-year period, to avoid amounts appearing in the year-end accounts.

Ernst & Young are the Anglo Irish Bank auditors.

The Regulator said that loans to Anglo directors"remain under investigation".

FitzPatrick said that the transfers were his "own initiative" and that his decision to resign was taken "in the best interests of the bank and all of its stakeholders".

In one of two statements released by the bank, FitzPatrick said:"The transfer of the loans between banks did not in any way breach banking or legal regulations. However, it is clear to me, on reflection, that it was inappropriate and unacceptable from a transparency point of view."

Lar Bradshaw, a non-executive director, also resigned from the Anglo board last night as one loan he held jointly with FitzPatrick was transferred prior to year end. The bank said Bradshaw was "unaware" of the transfer.

The bank said all other directors have confirmed that they have not engaged in similar loan transfers or in "any other inappropriate action in relation to their loans".

"The board of directors has decided to initiate a formal review of governance including policy and practice relating to the directors loans. This review will be carried out using independent expertise," the bank said. "It is important to state that the annual reports of the bank for each of the years in question represent a true and fair view of the bank. The disclosures in each of the annual reports were in full compliance with Companies Act requirements."

FitzPatrick's loans were discovered by the Regulator during an inspection of Irish Nationwide last January.

Seán FitzPatrick has also resigned from the boards of Smurfit Kappa, Aer Lingus, food group Greencore and investor, Gartmore Irish Growth Fund.

He has been replaced as Anglo chairman by Donal O'Connor, a former managing partner of PricewaterhouseCoopers and a non-executive director of the bank since June.

Losses on Shares

Last Sunday, the Sunday Business Post reported that Anglo's CEO David Drumm’s estimated losses from investing in Anglo Irish Bank shares are close to the total take-home pay he received from the bank since becoming its Chief Executive almost four years ago, according to an analysis of Anglo directors’ dealings.

An analysis of Anglo directors’ dealings shows they have spent €10.7 million between them on Anglo shares over the past 12 months. These are now valued at €500,000.

Regulatory filings show Drumm spent more than €5 million on Anglo shares since becoming chief executive, increasing his holding from 77,000 shares at the date of his appointment to over 1 million shares.

He spent €4 million in a single transaction in November 2007 to double his holding from 500,000 shares at a price of €7.97 per share.

The collapse in the Anglo share price, which closed 98 per cent off its peak at 38 cent last Friday, has resulted in Drumm’s total holding being valued at just €380,000, a loss of €4.6 million.

The Post said other directors have experienced real losses in the last year, including Declan Quilligan who spent just over €2million on Anglo shares now worth €113,000.

An Anglo spokeswoman declined to comment to the newspaper, on whether Anglo had granted any loans to Drumm or any other director to buy shares in the bank. She also declined to comment on what security - such as personal guarantees or charges over individual directors’ assets - the bank may have been given if loans were granted to buy shares.

STATEMENTS:

Seán FitzPatrick, Chairman of Anglo Irish Bank, today (December 18th 2008): A statement from the board of directors of Anglo Irish Bank Corporation plc announces that Mr Seán FitzPatrick has tendered his resignation as chairman with immediate effect. The board has accepted his resignation with regret. The board also announces Mr Lar Bradshaw, a non-executive director, has tendered his resignation. The board has accepted Mr Bradshaw's resignation with regret.

Mr Donal O'Connor was nominated and appointed chairman, in succession to Seán FitzPatrick at a board meeting this afternoon. He joined the board as a non-executive director in June 2008. He was senior partner of PWC for 12 years until June 2007, and a member of the global board of PWC for six years to September 2008.

Mr FitzPatrick's decision to resign is based on the fact that, over a period of eight years to 2007, he temporarily transferred loans with Anglo Irish Bank to another bank prior to the group's year end. This transfer of loans did not breach banking or legal regulations. It was, however, inappropriate from a transparency point of view.

At September 30th, 2008, the loans to Seán FitzPatrick totalled €87 million. The total for directors' loans at that date was €150 million. Mr Bradshaw's decision is based on the fact that a loan, which he held jointly with Mr FitzPatrick, was temporarily transferred to another bank prior to year end.

While Mr Bradshaw was unaware that this transfer took place, he believes that it is in the bank's best interest that he should resign.

The board has advised the Financial Regulator and the Department of Finance of the issue and of Mr FitzPatrick's and Mr Bradshaw's decisions.

All of the other directors have confirmed that they have not engaged in this or in any other inappropriate action in relation to their loans. All directors' loans are agreed on normal commercial terms and conditions.

The board of directors has decided to initiate a formal review of governance including policy and practice relating to the directors loans. This review will be carried out using independent expertise.

It is important to state that the annual reports of the bank for each of the years in question represent a true and fair view of the bank. The disclosures in each of the annual reports were in full compliance with Companies Acts requirements.

Announcing his decision, FitzPatrick said: “I have made my decision in the best interests of the Bank and all its stakeholders. From the beginning, Anglo Irish Bank was based on a set of beliefs which were pro-business and we achieved great success allowing many new businesses and entrepreneurs realise their potential in Ireland and later overseas. I remain committed to those ideals of access and speed of delivery based on the strength of relationships that should underpin successful banking practice.

My decision to tender my resignation has been prompted by the fact that at the 30th September, 2008, I had fully secured loans, on normal commercial terms, with the Bank totalling €87 million which will be included in the annual report for 2008 in the note relating to Directors’ Loans. This balance is substantially higher than in the 2007 report because in prior years I had temporarily transferred my loans to another bank before each year end. I had done this on my own initiative over an eight year period.

The transfer of the loans between banks did not in any way breach banking or legal regulations. However it is clear to me, on reflection, that it was inappropriate and unacceptable from a transparency point of view.

One of the loans was a joint loan with Lar Bradshaw and I would like to emphasise that he had no knowledge of the temporary transfer of this loan.

I am fully responsible for my own decisions and actions and I regret that I had adopted this approach. I have always pursued high standards in my personal and professional life and I failed to meet those standards in this instance.

It is absolutely essential that the Chairman of the Board should be unencumbered by any issues which could prevent him from playing a leadership role at the Bank, given the current international financial environment.

I have spent the last 33 years working hard to build a successful, respected bank. I reached this decision of my own volition and without pressure from any quarter. I have done so because my remaining ambition for Anglo is that it would continue to progress with determination.

The Bank will benefit greatly from the leadership of Donal O’Connor who succeeds me and I wish him well. I have also decided to resign from my non-executive roles in Smurfit Kappa Group, Greencore Group, Aer Lingus, Experian and Gartmore Irish Growth Fund plc with immediate effect.

To say that I owe a debt of gratitude to colleagues past and present and to clients and friends of Anglo would represent the greatest understatement of my business career. They all know what their commitment and loyalty to the Bank has meant to me and I thank them for it.”

MINISTER FOR FINANCE

The Minister for Finance, Mr Brian Lenihan, today [December 18th] welcomed the appointment of Mr Donal O'Connor as the new chairman of Anglo-Irish Bank to replace Mr Seán FitzPatrick. The Minister noted that this appointment was made following consultation with him.

The Minister said that this change would not interrupt the substantial progress which has been made with Anglo Irish Bank in relation to the recapitalisation programme he announced last Sunday (December 14th, 2008) and reiterated his commitment to underwrite the capital needs of Anglo Irish Bank on appropriate terms and to ensure its long-term strength and viability as a bank of systemic importance in Ireland.

The Minister expressed his disappointment at the circumstances surrounding the resignation of Mr Seán FitzPatrick as chairman but believes that strong corporate governance must be upheld by all financial institutions in the Irish financial system.

He welcomes the board's decision to conduct a review in this regard. He understands that the financial regulator is already engaged in discussions with the institution on these issues.

The Minister said that Mr O'Connor, who has a substantial and impressive commercial track record, seems a natural choice to lead this financial institution in what is a challenging period for all financial institutions.

The Minister said that he looks forward to progressing discussions with Mr O'Connor and his board in relation to Anglo-Irish's involvement in the State's recapitalisation programme. He noted that these discussion are already far advanced and that he expects that the details of these discussion can be announced very shortly.

Anglo Irish Bank remains covered by the Irish Government guarantee, so its depositors and creditors are assured of the security of their funds.

The Minister restated that the Government will ensure financial stability within Ireland and will continue to take all necessary measures to ensure that systemically relevant institutions, such as Anglo Irish Bank, remain sound and viable.

The Minister noted that he is happy with the significant progress made this week with a number of institutions arising from the announcement by the Government of its recapitalisation programme of up to €10 billion. The Minister expects to be in a position to make a comprehensive announcement in this regard in January.

FINANCIAL REGULATOR

The Financial Regulator became aware, following an inspection earlier this year, of matters surrounding loans from Anglo Irish Bank to Seán FitzPatrick.

While it does not appear that anything illegal took place in relation to these loans, the Financial Regulator was of the view that the practices surrounding these loans were not appropriate.

As a result we continued to monitor and investigate this and as part of this process, we advised Anglo Irish Bank to ensure that these loans are reported in the annual accounts for 2008.

While these matters remain under investigation, the Financial Regulator was informed today by the board of Anglo Irish of the resignation of Seán FitzPatrick as chairman and Mr Lar Bradshaw as director. It has welcomed the appointment of Mr Donal O'Connor as the new chairman.

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