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News : Irish Last Updated: Jul 13, 2010 - 9:39:19 AM


Seán FitzPatrick: From Europe's most successful banker to bankrupt
By Michael Hennigan, Founder and Editor of Finfacts
Jul 12, 2010 - 3:35:56 PM

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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 who transformed Anglo Irish Bank into Europe's most successful bank in results terms, as it recklessly lent with the tacit support of the Irish Government during the property bubble, was today declared a bankrupt by the High Court in Dublin.

FitzPatrick’s barrister, Mark Sanfey SC, told the court that a scheme drawn up to settle with his creditors had not been supported by the management at Anglo Irish Bank. “In the circumstances, Mr Fitzpatrick considered he should bow to the inevitable and not force a vote that he could not possibly win,” Sanfey said.

FitzPatrick has debts of almost €150 million, including €110 million owing to Anglo Irish Bank, and a deficit of €80 million. His shareholdings in the bank were wiped out when it was nationalised in January 2009. All assets owned by FitzPatrick, including a stake in a Nigerian oil well, have come under the control of the official assignee, a court officer who monitors the financial affairs of bankrupt individuals. Any salary, income or pension will also go to the official assignee.

According to current Irish law, individuals can only be discharged as a bankrupt once their debts and the costs of their bankruptcy is covered, or after 12 years have elapsed.

Seán FitzPatrick resigned as chairman of Anglo Irish Bank, following an investigation of directors' loans at the bank in early 2008. FitzPatrick had concealed director loans to himself of up to 122 million each year end over an eight-year period, through an arrangement with Irish Nationwide Building Society. It is unclear if auditors Ernst & Young had ever spotted the transactions. Tens months after the discovery by his staff, the chief executive of the Financial Regulator was told about the loans, FitzPatrick and the bank's chief executive David Drumm resigned.

In June 2007, Fitzpatrick said in a speech at a business lunch, that Ireland’s then economic success was almost entirely due to the country’s entrepreneurs and had little to do with politicians. "You can’t keep good people down forever", he said. "Look around the world and you’ll find Irish emigrant stock at the very top of social, civic, commercial and political life. What happened over the past ten years or so was that this potential was unleashed at home here in Ireland rather than overseas. The Irish economy began to benefit from the innate business sense and entrepreneurship of its people.

"All the politicians did was stand aside and let it happen", Fitzpatrick added. "After years of meddling they finally stood aside and allowed the people to get on with it. Taxes were cut and the economy was allowed to open up and the effect was like putting a flower out in the sun. The economy blossomed."

From Anglo Irish Bank's Annual Report 2006

However, he warned that politicians and regulation were about to stifle growth once more. "Having developed this marvellous entrepreneurial culture which is delivering so many benefits in terms of employment and wealth to the country we must ask ourselves if there is now a danger that our regulatory environment has gone too far?", he asked. "Are we starting to shackle instead of encourage the entrepreneurs who in turn generate more wealth not just for themselves, but for the country as a whole."

Stating that we may have reached a situation where the weight of compliance with the various financial reporting standards and other corporate regulations had become so heavy that entrepreneurs were no longer willing to bear it, Fitzpatrick said: "Among the more insidious and I believe iniquitous aspects of the current regulatory environment is its apparent presumption of guilt on the part of entrepreneurs and businesspeople generally. The whole structure seems to be geared towards an annual proof of innocence statement. This is corporate McCarthyism and we shouldn’t tolerate it."

He said that we should have been proud of our successful business people and not pillory them. "It is time to shout stop. The tide of regulation has gone far enough. We should be proud of our success, not suspicious of it. Our wealth creators should be rewarded and admired not subjected to levels of scrutiny which convicted criminals would rightly find intrusive."

The biggest joke of all was the lax regulatory system, which had brought the Irish banking system to its knees.

 

"We operate to the highest ethical and governance standards as we aspire to be a model corporate citizen. For this reason we invest heavily in the development and training of our staff, as well as maintaining the highest levels of integrity in our relationships with our stakeholders." - - Anglo Irish Bank Annual Report 2007

Anglo Irish Bank was founded in 1964 as Dublin City Bank and became a publicly quoted company in 1971. It had 1,900 employees in December 2007.

In 1986 Seán FitzPatrick, a chartered accountant, became Chief Executive; Dublin City Bank merged with Anglo Irish Bank Ltd and assumed the latter's name.

December 2008/January 2009 - - Chairman Seán FitzPatrick, Chief Executive David Drumm and a number of board members resigned after it emerged that FitzPatrick had taken measures over an eight-year period, to conceal details from shareholders, of an €87 million loan he took from the bank.

In early October 2008, days after a State guarantee saved his bank from collapse, FitzPatrick called on the Government in another speech, to cut corporation tax and tackle the sacred cows of universal child benefit, state pensions and medical cards for the over-70s.

In March 2010, the former banker was arrested and detectives searched his house in Greystones, County Wicklow, as part of an investigation into possible breaches of company law by the Office of Director of Corporate Enforcement.

Anglo Irish Bank closed at 22 euro cent on the Irish Stock Exchange, on its last day of trading before becoming a State-owned bank.

On February 21, 2007, the ISEQ index rose to an-all time high of 10,041 and the Financial sub-index rose to 18,098. Bank of Ireland closed at €18.65; Anglo Irish closed at €16.64 and AIB closed unchanged at €23.95.

A year later, on February 21, 2008, AIB closed at €13.80, Anglo Irish Bank finished at €8.84, while Irish Life & Permanent closed at €10.20 and Bank of Ireland traded at €9.50.

Seven issues dominate the Irish market and in recent years, overseas residents, dominated by institutions, have owned more than 60% of Irish bank shares. Ireland's biggest company CRH, accounts for about a third of Irish market capitalisation and in December 2007, foreign holders held 84% of the issued shares.

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