Anglo auditor ‘unaware of loan refinancing’

A former auditor of Anglo Irish Bank has said that he was not aware at the time of the audits of documents that suggested that multimillion-euro loans linked to Sean FitzPatrick were temporarily refinanced.

The trial at Dublin circuit criminal court previously was told that loans taken out by Mr FitzPatrick, 68, his wife and family members increased from about €10 million in 2002 to about €100 million in 2007.

It is the state’s case that these loans were “artificially reduced” for a period of two weeks around the bank’s financial end-of-year statement by short-term loans from other sources, including Irish Nationwide Building Society (INBS).

Dominic McGinn, SC, for the prosecution, told the jury that the prosecution related to the alleged failure by the bank’s former chairman to disclose the extent of these loans to the bank’s auditors between 2002 and 2007. Mr FitzPatrick has denied all charges.

On day 85 of the trial, Vincent Bergin, who is a partner with EY and who led the audit of Anglo for the years 2005 to 2008, was shown documentation of deposit accounts, loan facilities and loan accounts in the name of Mr FitzPatrick and his wife, Triona, for 2005, 2006 and 2007. They included letters from INBS offering loans for cash amounts in euros, sterling and US dollars that stated that the purpose of the loans was to refinance existing arrangements with Anglo.

The jury heard that by September 2007 INBS was confirming short-term loans to Mr FitzPatrick and his wife involving tranches of more than €62 million, $56 million and £14 million. In Anglo’s accounts in the same year the total amount of loans to all directors of the bank was noted as being almost €41 million.

Mr Bergin said that he was not aware of any of these documents or financial transactions while he was in charge of the audits. Asked how they would have affected the audit process, he said: “I think we would have asked follow-up questions as to what exactly was happening.” He said that from the documentation it appeared to him that Mr FitzPatrickwas seeking short-term loan facilities in order to refinance borrowings from Anglo. He said he thought this would have been relevant to the audit.

Asked what he would have done had he been aware of the documents, Mr Bergin said that he would have considered various options, such as consulting with colleagues, discussing it with the bank’s audit committee or the potential need to report to the Central Bank or the Office of the Director of Corporate Enforcement. He said it was difficult in hindsight to say how it would have been resolved and that it would have depended on the facts and circumstances at the time.

Mr Bergin also agreed that if the directors’ certificates or letters of representations provided by the directors to the audit team had disclosed refinancing this “would not have passed without consideration”.

He said that he would have had to consider many complex legal, accounting and governance issues and that he would have raised it in his audit report. He agreed that “various steps would have been considered up to and including resigning as auditors”.

Mr FitzPatrick, of Whitshed Road, Greystones, Co Wicklow, has pleaded not guilty to 27 offences under the 1990 Companies Act. These include 22 charges of making a misleading, false or deceptive statement to auditors and five charges of furnishing false information between 2002 and 2007. The trial, before Judge John Aylmer, continues.

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