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Zombie bank sues former chairman for repayment of E70m loan

Anglo Irish Bank: lender dubbed a zombie by some has initiated legal proceedings against
Anglo Irish Bank: lender dubbed a zombie by some has initiated legal proceedings against former chairman Sean FitzPatrick

Sean FitzPatrick, the man seen as responsible for both making and breaking Anglo Irish Bank during the Irish Republic’s so-called Celtic Tiger boom years, is being sued by the bank for the recovery of unpaid loans of £70.4m.

FitzPatrick resigned as chairman of Anglo Irish almost 18 months ago, with the bank brought to the verge of collapse by a mountain of loans to developers.

At the time it also emerged that for eight years FitzPatrick had hidden personal loans totalling £87m by moving them off the bank’s books at the end of the financial year to avoid disclosure.

The Irish government originally included Anglo Irish in its general bank guarantee scheme but was eventually forced to nationalise it to prevent its collapse. It also had to provide £4bn in capital funding.

Today, with Anglo Irish set to transfer some £30bn in toxic loans to the recently established National Assets Management Agency it is seeking billions more in state aid.

According to a recent financial statement FitzPatrick owed the bank £106.5m a year ago but has since reduced this by some £20m.

But he has failed to provide a repayment schedule for the rest of the loans and Anglo Irish has initiated legal proceedings against him, with the case due to be heard in the Irish Commercial Court in the next few months.

Ireland’s finance minister Brian Lenihan welcomed the move, warning that the money owed must be recouped and that the bank management team “will pursue it to the ends of the earth”.

But recovering the missing millions will not be easy. The nationalisation of Anglo Irish has wiped out the value of the shares that formed a major part of FitzPatrick’s wealth, while other assets have already been liquidated.

The FitzPatrick family home in Greystones, County Wicklow, is jointly owned with his wife and is already under mortgage to First National Building Society.

One source of revenue that may be tapped is the £13.5m pension pot FitzPatrick collected when he quit in December 2008. Reports suggest that if other funds are not available the Commercial Court could order that he discharge his bank debt through regular payments from his pension fund.

Anglo Irish has said it would be inappropriate to comment on such speculation.

FitzPatrick was recently arrested at his home by the Irish fraud squad. Documents and computer files were seized.

He was detained for 36 hours and questioned about his stewardship of the bank along with allegations of false accounting.

According to police a file will be prepared for the Irish director of public prosecutions who will decide if charges are to be brought.

Meanwhile, Alan Dukes, a former Irish finance minister, is to take over as chairman of Anglo Irish, replacing Donal O’Connor who is stepping down in July.

Dukes, who was appointed to the board as a public interest director after nationalisation, insists that the troubled lender – dubbed a zombie bank by its critics – has a viable future and that it would cost the state more to close it down than to keep it going.

Dukes claims it can become part of the so-called third force in Irish banking, joining in the proposed merger of Irish Nationwide, Educational Building Society and possibly Permanent TSB.

He says: “There is a view that we could turn it into a business bank, working with other institutions.”


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