Sean FitzPatrick must have expected that someone would eventually come knocking on his door. What the former banker did not know, however, was exactly when it was going to happen, or who would be doing the knocking.As it transpired, the answer came last Thursday when several members of the Garda Bureau of Fraud Investigation arrived at his home at 6.30am. Sixteen months after he resigned as chairman of Anglo Irish Bank, the bureau finally decided to haul FitzPatrick in for questioning amid allegations of financial fraud. However, the call could have come from any number of interested parties, all of whom have the smooth-talking former banker firmly on their radar. The fraud squad might have fired the first shot last week, but a host of other bodies and investigators are currently loading their guns as well.Officials and detectives from the Office of the Director Corporate Enforcement (ODCE) are still trawling through thousands of pages of financial documents, computer records and interview transcripts, as part of a wide-ranging investigation into Anglo.The investigation is complex, fragmented and diverse, but FitzPatrick has emerged as the key player in the narrative, the man at the centre of the financial maze. An investigator from the Chartered Accountants Regulatory Board, Sean Purcell, is also on the prowl, looking into breaches of duty by its members, including FitzPatrick, who is a certified chartered accountant.Meanwhile, the Financial Regulator, under new management, is also conducting its own probe into the financial and reporting machinations in Anglo prior to its nationalisation by the Irish government last year. And, of course, there is the bank itself, also under new management. Anglo is currently pursuing its former chairman and chief executive through the Irish courts over loans of some €70 million that he owes the bank.As it prepares to unveil the largest loss in Irish corporate history, understood to be in the order of €12 billion, the lender is not just going after FitzPatrick,but also his investments, his family home and even his pension. Last week’s action by the Garda Bureau of Fraud Investigation was the criminal aspect of the various probes. He was arrested under Section 10 of the Criminal Justice (Theft and Fraud Offences) Act 2001, the first high-profile figure to be arrested under the legislation.
The act deals with false accounting, and carries penalties ranging from fines to ten years’ imprisonment. Having been detained for 31 hours, FitzPatrick was released without charge just after lunchtime last Friday. Gardai said a file was bring prepared for the Director of Public Prosecutions (DPP), but the focus of the questioning has not been revealed.
However, it is understood that much of the questioning related to annual ‘warehousing’ of FitzPatrick’s loans with the Irish Nationwide Building Society. From 2001, FitzPatrick and Anglo shifted his personal loans from the bank’s books to Irish Nationwide, thereby ensuring that they never appeared on its year-end accounts. FitzPatrick maintained that the strategy was legal; the Garda Bureau of Fraud Investigation is not convinced.
Like the ODCE, the fraud squad is also looking into other issues surrounding Anglo. Officials are examining documents concerning the movement of €7.45 billion in deposits between Anglo Irish Bank and Irish Life & Permanent in 2008, a move which artificially inflated Anglo’s balance sheet. Also being examined is the €451 million in loans that Anglo advanced to ‘‘ten long-standing clients’’ to purchase a 10 per cent stake in the bank.The ODCE is investigating whether the secretive deal represented an illegal share support scheme, designed to boost
Anglo shares on the stock market. In such cases it is standard practice that institutions on both sides of the deal will be asked questions. As such, sources said it was probable that Irish Life and Permanent and Irish Nationwide will be asked to furnish answers. Securing a fraud conviction against FitzPatrick under Irish criminal law would be a tricky business, however. There are few precedents for such convictions, and the standard of proof, like in other areas of criminal law, is extremely high.
The bureau is working with the Financial Regulator on the case, and the two probes are reportedly running in parallel. It is expected that FitzPatrick will be questioned again before a file is sent to the DPP, who will then decide on the basis of the evidence accumulated whether to press charges. Separate to all this, however, is the ongoing work of the ODCE, the state body established in 2001 to police corporate crime and encourage compliance across all sectors of Irish business. While the fraud squad is dealing with criminal law, the ODCE is investigating whether any breaches of company law occurred in Anglo. The director, Paul Appleby, has already conducted a dawn raid on Anglo, and has devoted one-third of the staff of his office to the Anglo investigation.It has not yet questioned FitzPatrick. However, a number of detectives attached to the office can bring in the banker for questioning when, or if, they decide. The ODCE was not commenting last week, other than to say that the investigation was ongoing. The government has certainly been keen to back up the ODCE’s investigation. Staff numbers have been increased, while new legislation is to be introduced to give the state’s corporate enforcer access to previously confidential company records.
Appleby clearly believes he is following a trail. In a leaked letter to the joint Oireachtas finance committee last year, he said it was his opinion that ‘‘circumstances suggesting prejudice, misconduct and/ or illegality are present with respect to the company’s affairs’’. Despite sustained political pressure, Appleby has not been rushed in his investigation.However, there were suggestions last week that the move by the Fraud Squad might spur the office into quicker action. Not that FitzPatrick will mind the wait. With the authorities circling, he is attempting to restructure his finances in an effort to repay money to his lenders. In total, he has debts of €90 million and assets of more than €30 million, leaving a deficit of €60 million.FitzPatrick might have relinquished his many directorships, but the one-time blueblood of the boom has never been busier - for all the wrong reasons.
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