Former Anglo Irish Bank executive Tom Browne claims if information had been disclosed in late 2007 about the Quinn group's holding in the bank he would not have taken out significant loans over which Anglo's successor is suing him.
Mr Browne is being sued by the special liquidators of Irish Bank Resolution Corporation, which took over Anglo, for debts, including more than €12 million on an investment property in Bishopsgate, Victoria, London, which it is claimed he owes.
Mr Browne is counter-claiming and alleges, among other things, that the non-disclosure of the Quinn involvement was fraudulent misrepresentation through silence. He says he is entitled to rescission of the loans and that they are invalid by reason of that misrepresentation.
Counter-claim
At the Commercial Court today, Mr Justice Brian O'Moore began hearing Mr Browne's counter-claim against IBRC.
IBRC denies his counter-claim and has been seeking judgment against him since 2010 but the case has had to be deferred because of criminal trials involving a number of other former Anglo executives.
In opening the counter-claim, John Rogers SC, for Mr Browne said his client was at one point a contender for Anglo chief executive, but says he decided to leave when passed over in favour of later jailed CEO David Drumm.
He had effectively left the bank in September 2007, although it was agreed with Mr Drumm and chairman Sean Fitzpatrick, who has also since been tried and acquitted in a criminal trial over Anglo, that no announcement would be made until December, counsel said.
Contracts for Difference
Between September and December 2007, senior Anglo executives knew of the unlawful loans of some €650 million made to the Quinn Group, including for the purpose of funding what was Quinn's more than 25 per cent de facto holding in Anglo through an investment arrangement known as Contracts for Difference (CfDs), Mr Browne says.
Turmoil in the stock market, culminating in the eventual collapse of Anglo's shares (and its subsequent nationalisation) had led to Anglo seeking to get Quinn boss Sean Quinn to reduce the group's holding in the bank which under regulation could be no higher than 25 per cent.
Mr Browne says that even though Anglo had always sought security from Quinns for the groups aggressive worldwide property acquisition between 2001 and 2007, it did not seek it when it provided loans to fund the Quinn CfD arrangement, which required the group to make payments every time the Anglo share price fell.
Mr Browne says it was after September 2007 that he entered into loan arrangements for various investments using his shares in Anglo as security and which he had no reason to believe were in imminent danger of collapse, something which subsequently happened. In lending money to him, Anglo noted he had a net worth at the time of some €60 million.
Maple 10
The primary acts of wrongdoing on Anglo's side, in relation to the Quinn group and in relation to Anglo's funding of unsecured loans by another ten investors, known as the Maple 10, to help shore up the share price, pre-dated when Mr Browne exercised his options, amounting to almost one million shares, and relied on them as security on loans.
If that information had been made public at the time, they would have rendered Anglo shares worthless, he says.
Had he been aware of these matters, he would not have engaged in any further borrowings with Anglo or any other institution.
Mr Browne says the information in relation to the Quinns was known by Mr Fitzpatrick and Mr Drumm who held meetings at that time with Sean Quinn over his shareholding, but that was not known to stockholders such as he was at that time, and no longer part of Anglo.
He says he made sound decisions to borrow for investment based on his share options, and their value. In 2010, after Anglo was nationalised, he was served with a demand for repayment of the Bishopsgate loan. Even though this borrowing was being served, he says it was called in by reason of a "cross default mechanism" which entitled the bank to move in relation to his loans.
Failure to repay gave rise to the proceedings in 2010 seeking judgment against him.
The case continues.
