Seán Fitzpatrick steps down as Chairman of Anglo

There seems to be a view that Seán Fitzpatrick did nothing illegal.

As far as I know, it is quite legal for a bank to make a loan to any of its directors. There is, however, a legal requirement that any loan by a company to a director be explicitly disclosed in the Balance Sheet. It seems obvious that shifting the arrangement off to Irish Nationwide was done to avoid the disclosure requirement.

I think the terms of the deal with Irish Nationwide might be worth investigating. If the loan was guaranteed by Anglo Irish in some way, it might be that Anglo Irish was effectively the lender. What would have happened if Fitzpatrick defaulted on Irish Nationwide?

Inquiring minds (well, at least one) want to know.
 
There is, however, a legal requirement that any loan by a company to a director be explicitly disclosed in the Balance Sheet. It seems obvious that shifting the arrangement off to Irish Nationwide was done to avoid the disclosure requirement.

Inquiring minds (well, at least one) want to know.


Section 31 of the Companies Act 1990 forbids loans by companies to directors (including their family and corporate interests) where the loan is 10% or more of net assets.

Whats Anglo worth today? €110M on the exchange. Does any one know the net asset value on the balance sheet.
 
Its interesting that the regulator and Anglo Irish have been so adamant that while the issue was a resigning offence nothing illegal had been done.

I wonder will this stand up to further scrutiny. If what was done was legal then the legislation in this area is pretty toothless. My understanding was that all directors transactions had to be dislosed not just a year end balance.

It certainly is in breach of accounting standards
The accounting standard of most relevance to the subject matter of this guidance is Financial Reporting Standard 8 (FRS 8) ‘Related Party Disclosures’. FRS 8 requires the disclosure of information on related party transactions. For the purposes of FRS 8, parties related to a company include, inter alia its directors and the directors of any of its parent undertakings i.e. holding company, its holding company and its subsidiaries, and members of the close family of the directors and directors of any parent undertakings.
The information required to be disclosed in company financial statements by FRS 8 is as follows: The names of the transacting related parties, a description of the relationship between the parties, a description of the transactions, the amounts involved, any other elements of the transaction necessary for an understanding of the financial statements, the amounts due to or from related parties at the balance sheet date and provisions for doubtful debts due from such parties at that date, and amounts written off in the period in respect of debts due to or from related parties.
The foregoing is only a summary of the provisions of FRS 8 and company directors should seek professional accountancy advice in order to ensure that company financial statements are fully in compliance with the requirements of the FRS and that its disclosure requirements are fully satisfied.

Not that hard to understand I think. Anglo Irish was not a huge bank ,over 8 years the auditors never looked at the directors transactions ?

What Fitzpatrick did was fraudent ,in AMercia he would do jail for that.
Is the bank going to call in that 87 million now,what security has he given for this
Is the whole Board in there rotten,and we are putting taxpayers money into this bank to finance this guys reckless lending including the lending to himself
 
Section 31 of the Companies Act 1990 forbids loans by companies to directors (including their family and corporate interests) where the loan is 10% or more of net assets.

Whats Anglo worth today? €110M on the exchange. Does any one know the net asset value on the balance sheet.

According to Morning Ireland today, this law does not apply to banks. I don't know if this is true.
 
According to Morning Ireland today, this law does not apply to banks. I don't know if this is true.

I'd have thought not, but found this .... there appears to be an 'out' but I'd still contend that it is not designed to cover the type of incidence we are discussing here. I remain to be convinced it's anything but fraud.

BM

ODCE Briefing: Directors’ Loans

Is Your Company Your Personal Bank?

Introduction
Company directors occasionally use company assets for personal purposes unrelated to the company’s business, e.g., the purchase of family holidays or contributing to the purchase of a home. However, some of these transactions are legally prohibited.

Why?
The purpose is to prevent unscrupulous directors from divesting the company of its assets for their personal benefit. The rules in the Companies Acts are a ‘creditor protection’ mechanism and are designed to ensure that company assets remain within the business to meet its ongoing commitments or are otherwise available for distribution to creditors in the event of its liquidation. By encouraging compliance with these obligations, the Office of the Director of Corporate Enforcement (ODCE) wishes to reduce creditor losses and overall business risks and thereby improve the commercial environment for sound business development.

What is permitted?

While the general rule is that directors are prohibited from using company assets for personal purposes, there are a number of exemptions:

-arrangements not exceeding 10% of ‘relevant assets’ (see the Illustration below);
-arrangements approved by special resolution and accompanied by a statutory declaration describing the circumstances;
-arrangements between group companies;
-directors’ expenses properly incurred in developing the business;
-transactions made in the ordinary course of business, e.g., by banks.

Any transaction (whether prohibited or not) must be disclosed in the company’s financial statements by way of a note disclosure.

What are the Consequences of Non-Compliance?

The company auditor is required by law to report non-compliance to the ODCE. No matter how the transaction comes to attention, the Office considers if the circumstances of the offence warrant legal action against the directors and other relevant persons. In some (but not all) cases, the ODCE will be satisfied by evidence that the directors have voluntarily corrected the default.



The principal legal options open to the ODCE include prosecution of the directors and other relevant persons or High Court proceedings to remedy the default. A decision to pursue legal action is likely to be made where the available evidence suggests, among other things, that the directors knowingly breached the law in undertaking any transaction, the aggregate amount of the transactions was large, there was persistent default and/or satisfactory evidence of rectification has not been forthcoming. The ODCE has already prosecuted one director who obtained several €100k from his company, and other similar cases are planned.


If an insolvent company ceases to trade and a transaction remains outstanding, the directors may also face High Court restriction or disqualification proceedings by the company’s creditors, its liquidator or the ODCE.


The ODCE also reserves the right to inform the Revenue Commissioners of selected cases, particularly where the transactions are of a high value, in order to enable Revenue to assess if a tax liability arises.

Illustration: The 10% of ‘Relevant Assets’ Rule and its Effect


Arrangements at or below 10% of ‘relevant assets’ are permitted. This term is defined as:

-the company’s net assets (i.e., its total assets less total liabilities) according to the most recent preceding balance sheet to have been laid before the company’s annual general meeting (AGM), or
-where no preceding balance sheet has been laid before the company’s AGM, the called up share capital.

If a company’s net assets, as defined, are €250,000, this allows arrangements to be made to directors and connected persons (e.g., family members) up to a limit of €25,000 (i.e., €250,000 x 10%). If, however, no relevant balance sheet has been laid before an AGM and the company has only a nominal called up share capital (e.g., €2), the maximum permitted arrangement would only be 20 cent (i.e., €2 x 10%).

The 10% rule applies to the aggregate amount of all loans, ‘quasi-loans’ and credit transactions benefiting directors or connected persons.

Where can I get more Information?

In order to improve compliance by directors with this obligation, the ODCE has produced a booklet on ‘Transactions Involving Directors’ which is available from the ODCE website at www.odce.ie or on request from the Office at [email protected], (01) 8585800 or Lo-call 1890 315 015.

Readers wanting advice about their personal situation should consult their professional adviser.
 
It doesn't apPly to banks because it was a business transaction ie the banks business is lending
 
ODCE Briefing: Directors’ Loans

Is Your Company Your Personal Bank?

It is better to post selective quotes & links to the actual document rather than lengthy extracts from documents - especially when there is doubt over their relevance to the topic being discussed. Similarly, highlighting entire paragraphs in bold is counterproductive, as they are difficult to read.
 
Fair enough - btw I didn't bold anything, that's the way it pasted in - my only amendment was to highlight one line in red (as I felt it directly related to the previous posters point).

Regards,

BM
 
What would have happened if Anglo Irish Bank had succeeded in the Irish Nationwide?

Seán Fitzpatrick would have had to find some other bank to warehouse the loan.

Brendan
 
I could go to jail for not paying my TV licence. Does that not seem slightly unbalanced considering the worst that appears to be able to happen to people at the top of their industries is forced early retirement (or simply resigning before any inquest can uncover the truth).

If this is legal, then it only further highlights whats morally wrong in the financial services industry. It seems this guy was allowed to drawdown 87mil among banks at differant stages outside of disclosure guidelines. Cloak and Dagger come to mind.

What happens if the 87 mil is gone, no doubt the taxpayer will end up footing the bill and these guys will get to resign rich. Oh, but they were entitled to it, all is above board then, just like our friends at Fas . .

Most important thing for me is that there are obviously no proper regulation on people higher up in the food chain and even more importantly there are no real consequences to their blind disreguard for basic prudential business practises.

Saying that these guys are entitled to take these loans out may or may not true but this being mentioned simply makes a mockery of the supposed regulation of these bigwigs. I wouldnt want to get a complex that in our country , people in powerful positions in banks and people with alot of money are above the laws that us Normal working class guys are ruthlessly forced to adhere to! ! ! ;).
 
Perhaps that played a part. In this climate, it is not as easy to refinance a mortgage for €87K never mind a loan for €87M.

It just goes to show that the accounting saying is true "If you can't DO IT, AUDIT"
 
just heard one of the business-editor contributors on george hook say that the Financial Regulator may be imminently stepping down, according to their news wire
 
Was in the head office today making a withdrawal. Quiet enough in there, not much going on. Some people were opening new accounts, believe it or not.
 
Were these loans used to buy shares in the bank, I wonder?

Hmmm....

By coincidence the Indo reported this yesterday

By far the biggest loser amongst Ireland's bank bosses has been Anglo Irish chairman and former chief executive Sean FitzPatrick. At the top of the market in early 2007 his 4.5 million Anglo shares were worth almost €80m. By yesterday these shares were worth just €1.6m.
 
By far the biggest loser amongst Ireland's bank bosses has been Anglo Irish chairman and former chief executive Sean FitzPatrick. At the top of the market in early 2007 his 4.5 million Anglo shares were worth almost €80m. By yesterday these shares were worth just €1.6m.

So that bad debt will be about a third of the banks whole market value!

(Not to worry, I'm sure as usual Anglo have his property as security...)
 
What would have happened if Anglo Irish Bank had succeeded in the Irish Nationwide?

Seán Fitzpatrick would have had to find some other bank to warehouse the loan.

Brendan
Boss, the two institutions involved are noted for the huge egos at the helm. Maybe naive, but I think the other banks would not have touched this scam with a forty foot pole. In fact it might even be that the banks involved scarcely knew what was happening as it was probably arranged between a small coterie who think they are above all this good governance stuff.
 
Would it be better for all of us if we let the Irish banks go to the wall and let the European banks into the country in their place ?

After all, the regulation couldn't be any worse and they might even bring a bit more common sense into the country ?
 
Could somebody here clarify this whole senario in simple terms for one who does not fully understand accounting or banking terms. I have a number of questions and I'll list them in 'my' order of importance.

1. Am I right in thinking the Fitzpatrick took €87 mil out of Anglo coffers
each year for 8 years?
2. Did he lodge this money on deposit with F.Nationwide for 11 odd
months each year 'till just before the annual audit?
3. Did he personally gain the interest on this huge deposit?
4. If the above is not the case, how did he or Anglo gain anything from
transactions that were at best 'shady'?
 
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