DUBLIN (Reuters) - The former chief executive of the failed Anglo Irish Bank went on trial on Friday on charges of defrauding depositors and investors, almost a decade after a banking crisis that crippled the country’s economy.
David Drumm, 51, has pleaded not guilty to charges of dishonestly creating the impression that deposits at the since collapsed lender were 7.2 billion euros larger than they actually were in 2008 when the country’s banking sector began to get into trouble.
Drumm was extradited from the United States two years ago to face the charges and spent five months in federal custody while Irish officials sought his return home.
The charges concern a 7.2 billion euro circular transaction scheme between Anglo and bancassurer Irish Life and Permanent that took place between March and September 2008 and helped bolster Anglo’s balance sheet.
Irish Life placed the deposits via a non-banking subsidiary in the run-up to Anglo’s financial year-end, to allow its rival to categorise them as customer deposits, which are viewed as more secure, rather than a deposit from another bank.
Prosecutor Paul O’Higgins told the court it was a prime objective of Anglo to make its balance sheet look as strong as it could, describing the transactions as being carried out with “lightening speed”.
He said Drumm conspired with others to create the illusion that non-bank deposits were coming in and the fact that the money came from a non-bank entity was important because they were considered “sticky” and “sticky deposits are of greater value to a bank”.
Anglo Irish, which was nationalised in 2009 and wound down from 2011 was synonymous with the lending practices that drove the “Celtic Tiger” boom and subsequent bust, pushing the state to the brink of meltdown in 2010.
Ireland’s taxpayers stumped up 64 billion euros - almost 40 percent of annual economic output - to bail out the banks, and the country was forced into a three-year bailout in 2010.
The trial is due to last between three and five months, the court was told.
Editing by Padraic Halpin, editing by David Evans