A "fraudulent" move by Anglo Irish Bank may be responsible for the possibility that former chief executive David Drumm will not have to replay any of the €8.5m he borrowed.
During a creditors meeting in Boston on Tuesday officials said the loans given to Drumm, who has filed for bankruptcy, were "fraudulent" after the bank changed the loan conditions, making the borrowings recourse as opposed to non-recourse loans.
Bankruptcy trustee Kathleen Dwyer said on Tuesday that by the bank changing it's conditions, they behaved in a fraudulent manner, claiming Drumm does should not owe any money to the bank.
Counsel for Dwyer, Larry Murphy, said the Anglo loans to Drumm amounted to "a fraudulent transfer action".
"The trustee has come to the position that the claims by Anglo Irish Bank are not allowable," he said.
Dwyer said Anglo "reneged on its agreement to limit its recourse" to loans it extended to its former chief executive to buy shares in the bank.
Dwyer accused Anglo of "wrongful conduct."
If a U.S. court concludes the same findings, the bank can only look for Drumm's shares (or his collateral), shares that are now worthless since the bank has been nationalized.
Dwyer also said Drumm "has a valid case" to sue his former employer for €2.6m for mental distress, harassment, termination of his employment and loss of bonuses.
Unhappy with the news in Ireland, Anglo have begun proceedings to have Dwyer removed as a trustee.
Drumm told reporters before the hearing, "I am not going to comment to the media at all today."