Six years after Ireland’s economic implosion, one of that country’s most vilified former bankers landed in US Bankruptcy Court in Boston Wednesday to finally face allegations he hid personal assets to avoid repaying millions of dollars in loans.
David K. Drumm, the former chief executive of Anglo Irish Bank and current resident of the Boston area, was accused of deliberately shielding personal assets to protect himself while his bank, and much of his country’s finances, crumbled around him.
Drumm filed for bankruptcy protection in Massachusetts in 2010. But his former bank has accused him of hiding money he has used to live lavishly in the United States. The bank, now nationalized, wants the court to make Drumm repay millions in personal loans.
Throughout his daylong testimony, Drumm readily acknowledged that he failed to properly disclose asset transfers to his wife and other relatives. He chalked up that failure to sloppy record keeping, memory lapses, and harmless accounting differences.
Drumm’s explanations led to several heated exchanges with his former bank’s attorney, John Hutchinson. At one point, Hutchinson questioned Drumm about making a $6,000 loan to his brother and then failing to disclose it under questioning just days afterward.
“So it’s your testimony that you made the $6,000 loan to your brother on Nov. 29, but then you had forgotten about it by Dec. 7?” Hutchinson asked.
Drumm replied, “Yes, I don’t know why I said that. I forgot.”
Lawyers for Irish Bank Resolution Corporation Limited, the nationalized successor to Anglo Irish Bank, have called David Drumm a ‘serially dishonest debtor’ in court papers.
The dialogue followed a similar pattern over nearly eight hours of questioning Wednesday.
The case is expected to continue through the end of the week, though it is unclear when a decision will be rendered.
Wednesday’s proceeding stood out as a rare example of a high-ranking bank executive facing serious personal consequences following the 2008 economic collapse fueled by excessive risk-taking by lenders and other financial institutions.
The economic collapse and credit crisis caused widespread foreclosures and financial pain in the United States, Ireland, and around the world.
It has taken several years to unravel the financial drama surrounding Drumm, who has lived in multimillion homes in Wellesley and on Cape Cod while the case wended its way through the court system.
After Wednesday’s session, one of Drumm’s attorneys, Francis Morrissey, declined to comment on the day’s testimony, saying only, “We’re going to let the evidence in the case speak for itself.” Drumm has argued in court papers that he has never attempted to mislead the court or his creditors about the extent of his financial assets.
Lawyers for Irish Bank Resolution Corporation Limited, the nationalized successor to Anglo Irish, have called Drumm a “serially dishonest debtor” in court papers, alleging he has transferred cash and real estate to his wife to thwart collection efforts by his creditors.
Some of Ireland’s lingering economic problems stem from the billions spent to bail out Anglo Irish and a second, larger institution, Allied Irish, both of which failed after lending too much to speculative real estate investments.
Drumm first made his mark as an Anglo Irish executive in Boston, where he was dispatched in the late 1990s to open the bank’s first US outlet. The bank started financing local commercial real estate projects and scored several early successes.
He rose to become the bank’s chief executive in 2008, a post he relinquished later that year, following disclosures that chairman Sean FitzPatrick had received $115 million in hidden loans from the bank.
On Wednesday, a different set of hidden loans and money transfers were at issue for much of the day.
Hutchinson charged that Drumm improperly transferred $1.2 million in cash to his wife, as well as equity interests in a $2 million Wellesley home and a $5 million estate in Chatham. He also charged that hundreds of thousands of dollars of that money was then given back to Drumm in the form of loans from his wife.
Under questioning, Drumm acknowledged that the loans — ostensibly granted to help him start a business — were instead used to pay for living expenses, luxury cars, and private school tuition for his children.
In one heated exchange, Hutchinson asked Drumm about his prior statement under oath that he sold one Range Rover at a $19,000 loss — and then bought another one — because his wife simply didn’t like the first vehicle.
Drumm asserted that there were other reasons behind his car-buying decisions and said he was only being “flippant” when he referenced his wife’s objections.
“You lied,” Hutchinson charged. “It wasn’t just a flippant comment.”
“I misspoke,” Drumm replied. “It was a difficult day. I was in front of a roomful of media.”
Hutchinson was expected to continue his questioning on Thursday.