An accountancy expert told a market deception trial that he thought a circular €7.2 billion deal between two banks could have gone on for ever.
Mark Hunt told the trial of four former senior bankers that he had examined all the evidence around the deal and the accounting treatment of it in Anglo Irish Bank’s balance sheet and concluded that it had no commercial or economic substance.
Mr Hunt, a chartered accountant who has worked for the Bank of England and the UK Financial Conduct Authority, said: “This is a very, very unusual series of transactions. It is not a series of transactions that is routinely entered into as part of [the bank’s] normal routine balance sheet management activity.”
He said that the transactions were paired — a transaction between Anglo and Irish Life and Permanent, and a corresponding transaction between Anglo and ILP, acting as agent for the non-banking entity Irish Life Assurance.
“ILP on behalf of ILA paid the money back,” he said. He said that the transactions were circular and at no stage did ILA transfer money to Anglo before Anglo had transferred funds to ILP.
“These paired transactions could have gone for ever. This could have gone on to €14 billion or €140 billion. There were no constraints on doing it,” he said.
He told the jury that, based on the view that the deal had no commercial substance, the transactions should have been netted off in the accounts — meaning that they would cancel each other out and not be included in the final figures for the bank’s balance sheet.
“They should not have been there in the balance sheet assets or liabilities. Both would be €7.2 billion smaller,” Mr Hunt said.
The bankers from Anglo and ILP on trial for allegedly conspiring to mislead investors by setting up the transaction to bolster Anglo’s 2008 balance sheet are: Peter Fitzpatrick, 63, of Convent Lane, Portmarnock, Dublin; John Bowe, 52, from Glasnevin, Dublin; Willie McAteer, 65, of Greenrath, Tipperary Town, Co Tipperary; and Denis Casey, 56, from Raheny, Dublin.
They have all pleaded not guilty at Dublin circuit criminal court to conspiring together and with others to mislead investors through financial transactions between March 1 and September 30, 2008.
The trial before Judge Martin Nolan continues.