David Drumm: ‘There is a witch hunt ... I convince myself that this will pass’


NOD: So this was the Department of Finance, the Central Bank ...

DD: My connection would have always been the Central Bank and the regulator together.

NOD: But the department of finance, the minister would have known about this?

DD: Well based on what John Hurley said, the importance of what was going on was going right to the minister for finance and most likely the Taoiseach was fully aware of it at the time as well . Put it this way, I cannot imagine, there was so much fear amongst everybody about the consequences for the country, that is the Taoiseach didn’t know about it, he should have.

NOD: Leading up to that how could Sean Quinn take these positions on the banks and buy so much stock without you knowing?

DD: The dogs on the street were talking in 2007 about the fact that Sean Quinn  potentially had a share holding in the bank and we discussed it at the board. The first couple of times we brought it up we didn’t do anything about it, but then the chatter got a little bit louder and the board instructed myself and Sean Fitzpatrick to go ask him what’s going on. We never really got into what percentages, but around the board, there would have been, certainly in my own mind, there would have been an expectation that if he held stock, it was probably like in the low to mid single digits.

NOD: At what point did it spark danger?

DD: You have to notify the stock exchange at three percent, he didn’t have to notify anybody. So lets just take another example, if you saw another investor getting up nine/ten percent, if they did get up to ten percent they would have to go to the Central Bank for approval by the way, that they were going the direct route, you would sort of say, well what’s the attention. The investment community would worry about one big shareholder, what if he sells out and so on. So we in our heads thought maybe he had five percent or six percent, so we go up to the Ardboyne hotel we meet Sean Quinn and Liam McCaffrey.

It was just staggering. Sean’s sitting here, we were in the hotel room , Sean Quinn there  and Liam McCaffrey is sitting opposite me and Sean then proudly tells us that he has 25 percent of the bank, even at that time he had 28 . I looked immediately at the chairman and I tell people the story, he physically moved backwards with the shock. We had it in our own heads, maybe it was single digits. So immediately we knew it was an issue for the bank, Quinn realized in our faces that he had missed something about it.

NOD: What do you think he thought your reaction would be?

DD: That maybe it was a compliment to us, that he was buying a big chunk of the bank. What he didn’t realize , this is the unfortunate sad bit about it, he was a great entrepreneur , built huge businesses and employed a huge amount of people in areas that would not have seen employment. What he missed was the manner in which he did it, he went to these investment banks, nine investment banks and he went on margin. So they went out and bought the stock but because they had the stock on this CFD thing, they were able to lend the stock to hedge funds. A way for an investor/broker to make additional money on  CFD is to actually use the physical stock to lend it out and they make a margin, they charge two or three percent margin on it. I am sure he wasn’t aware of it, the more of these CFD’s you do, the more there is available to short and the easier it us to short the bank and give yourself a problem. He didn’t get advice and he will tell you that himself.

NOD: So he made a three billion dollar mistaken basically?

DD: As it turns out,  but he contributed to the weakness of the bank in 2008 by doing it.

NOD: How significant was that weakness?

DD: It was very, very significant because all banks were struggling in the market internationally, life was tough, we got this additional spot light on us because of the Quinn perceived vulnerability and the hedge funds in London rightly took a view that if you push, push, push this guy maybe his stock will be sold, the bank will collapse and they get like a payday.

He fashioned a rod for his own back and ergo our back, the bank’s back. So you couldn’t blame one particular thing, but we had this additional burden right absolute worst possible time that you would want something like that, during an international financial meltdown. We were coping with that at the same time.

NOD: What do you think now when he has declared bankruptcy.

DD: He’s doing what I guess he has to do.

NOD: To go from being the richest man in Ireland to having $15,000 in your bank account?

DD: it’s sad, because he was and maybe he comes again, but he did a lot of great things. There is a lot of collateral damage.

NOD: The whole operation is in danger as well.

DD: Ya and he ran that operation very well and created a lot of jobs and now it’s in receivership.

NOD: Why didn’t the bank buy it’s own shares?

DD: Am, why couldn’t the bank ... you can’t do that. It’s against the law.