3 jailed over Ireland's biggest ever accounting fraud

DUBLIN – Three former senior bankers were sent to prison Friday for their roles in concealing the loss of billions in deposits at the defunct Anglo Irish Bank, the biggest accounting fraud in Irish corporate history.

Judge Martin Nolan told the trio — former Anglo executives Willie McAteer and John Bowe and former Irish Life and Permanent chief executive Denis Casey — they were guilty of committing “sham transactions” designed to inflate Anglo’s deposit levels by 7.2 billion euros ($8 billion) in Anglo’s 2008 earnings report.

Casey received a prison sentence of 2 years, 9 months. McAteer received 3 1/2 years, Bowe two years. All were convicted last month by a Dublin Criminal Court jury of conspiracy to defraud. All three men stared at the courtroom floor during the verdict, and have 28 days to lodge an expected appeal.

Casey’s bank supplied funds that Anglo falsely claimed as new customer deposits in full-year results to shareholders. Their surreptitious move was designed to cloak the funding crisis then enveloping Anglo, a Dublin bank that had spent more than a decade aggressively betting on Ireland’s property boom — a house of cards about to come crashing down amid the global credit crisis that year.

State-empowered investigators found that the 7.2 billion euros spent barely one day on Anglo’s books before being transferred back to Irish Life and Permanent using deceptive labeling and a third banking unit. Anglo used the ruse to help reassure shareholders, set to lose their investment as Anglo shares plunged, that the bank remained on solid ground.

Instead, Ireland’s government discovered in October 2008 that Anglo was on the verge of bankruptcy and declared, in event of an Irish bank failure, that the taxpayer would step in to repay all depositors and — devastatingly — all bondholders. That miscalculated confidence-boosting measure put the state on the hook for nightmarish bills as the true scale of Anglo’s toxic debt mountain started to emerge behind a wall of twisted accounts.

Anglo was nationalized in 2009 and gradually dissolved. Most of its malfunctioning property-loan portfolio was transferred to a new state “bad bank” in 2010. Ireland absorbed paper losses at Anglo and four other bailed-out banks that drove the national deficit to a post-war European record of 32 per cent of economic output, destroying the nation’s own credit rating and forcing it to seek a three-year international bailout.