Thursday, March 18, 2010

Arrest of Sean Fitzpatrick

The media is in a tizzy today about the arrest of Sean Fitzpatrick. Via RTE:
Former Chairman and Chief Executive of Anglo Irish Bank Sean FitzPatrick has been arrested by members of the Garda Bureau of Fraud Investigation.

Mr FitzPatrick was arrested at his home in Greystones, Co Wicklow, at 6.30am.
Gardaí also searched Mr FitzPatrick's home.
He is being detained under Section 4 of the Criminal Justice Act 1984. His period of detention has since been extended on two occasions and he can now be held until 6.30am tomorrow morning.
Mr Fitzpatrick is being questioned as part of what gardaí describe as an investigation into alleged financial irregularities at a Financial Institution - understood to be Anglo Irish Bank.

Here are links to stories in the Irish Independent, Irish Times, and TV3.

Arresting the man is the easy part and I am surprised that it took this long. The real question is whether the prosecution has the nous to get a conviction. There are reports that the Theft and Fraud Offences Act is what is being used. Here's the relevant provision:
10.—(1) A person is guilty of an offence if he or she dishonestly, with the intention of making a gain for himself or herself or another, or of causing loss to another—

(a) destroys, defaces, conceals or falsifies any account or any document made or required for any accounting purpose,
(b) fails to make or complete any account or any such document, or
(c) in furnishing information for any purpose produces or makes use of any account, or any such document, which to his or her knowledge is or may be misleading, false or deceptive in a material particular.
(2) For the purposes of this section a person shall be treated as falsifying an account or other document if he or she—
(a) makes or concurs in making therein an entry which is or may be misleading, false or deceptive in a material particular, or
(b) omits or concurs in omitting a material particular therefrom.
(3) A person guilty of an offence under this section is liable on conviction on indictment to a fine or imprisonment for a term not exceeding 10 years or both.

The language is rather broad so hiding loans to mislead investors ought to be covered. But there are likely to be difficulties posed by the green light provided by Anglo's external auditors. After all, a CEO is entitled to rely on independent professional advice and is not expected to be an accounting or financial expert. If the auditors told him that transferring the loans was OK, can he be said to have acted "dishonestly"?

Fitzpatrick is also likely to have had legal advice on those transactions. What if the lawyers advised him that moving the loans off Anglo's books was legal?

Another complication is the knowledge of the financial regulator. If, as some reports claim, the regulator knew about the transactions and acquiesced in them, can it be said that Fitzpatrick acted dishonestly?

There are bigger questions about why loans to insiders were allowed in the first place. After the spectacular fall of Worldcom, this sort of thing should have been prohibited.