Here are the direct exerts from the correspondence sent by Mr. John Flynn to a number of TDs in relation to the Banking Inquiry on December 22, 2014. Italics in bold are mine (for emphasis).
“I am attaching various information …which results from BankCheck …report into overcharging at Anglo Irish Bank. Following a three year (and ongoing) investigation, I am attaching its interim report of May 2014.
The overcharging identified continues to fall on borrowers to this day through Anglo Irish Bank legacy loans inherited by IBRC, NAMA and the various Private Equity funds that have acquired them, because both methods of overcharging that were discovered continue to rack up excess interest.”
Note: this is aserious allegation that echoes other claims submitted on the subject. The reason is simple: investment funds acquired distressed and other loans priced based on current interest yield (at least in part). If the current yield incorporated overchraging, and this was not disclosed to the buyers of the assets, then the sale of these instruments can be of questionable validity and can be potentially contested by the buyers of these assets. Likewise, any parties that continue overcharging while holding the loans can also be subject to legal action and incur costs of such practice. Beyond continued overcharging, the legacy of this sharp practice by the Anglo is also contained in those cases where a new (legitimate) interest rate applies on past interest charges incurred under the TIBOR. The can of worms gets bigger and bigger with every day the situtation remains unresolved.
“As admitted when questioned by us in the IBRC Chapter 15 Bankruptcy proceedings in the United States Bankruptcy Court for the District of Delaware, on October 8th 2013, the IBRC Special Liquidators stated that IBRC “did realise that it had an overcharging issue”. The IBRC purportedly set up a steering committee, chaired by Mr Mike Aynsley to deal with that issue. Reports were prepared and finalised by the end of 2010. The said reports were then forwarded to the board of IBRC, the Regulator and the Central Bank for their review and comment in order to, “make sure that everybody was comfortable in the work that was undertaken, and trying to get to the bottom of the cost of funds issue, which they (sic) contractual rate of interest that was being charged was different than the actual rate of interest being charged.” That report and the report of the Special Liquidator which examined the the IBRC report has never been published and their contents are unknown to the public.”
So what we have here is the allegation that:
1) IBRC knows and recognises the problem;
2) IBRC – alongside others – have notified the problem to the authorities;
3) No action has been taken by anyone; and
4) No action has been taken identify other injured parties and to inform the public.
Draw your own conclusions what these points, taken together, amount to.
There is more when it comes to the overcharging allegations: “The attached BankCheck report mainly addresses the matter of manually altered systemic LIBOR/DIBOR/EURIBOR manipulation from 1990 to 2004 and not the 360/365 systematic computer generated overcharging from 2002 to date, whereby the bank overcharged its customers with an extra 5 days interest per annum - as held by Ms. Justice Finlay Geoghegan in her Judgment of October 2014 in Anglo Irish Bank v John Morrissey (Record No. 2011/1548). The reason for the limitation of the BankCheck investigation is that while the 360/365 "scam" could possibly be explained away as "a computer error” the daily random manipulation of the LIBOR rate could not. The Report is currently being updated, as further information has been made available to us since May 2014.”
This raises the second point of overcharging – on top of the original. Not only Anglo imposed false charges on its customers, it also altered the base (the duration) over which the interest accrued. By switching from 360 days contracted arrangement to 365 days basis for calculation of interest charges, while retaining the rate, Anglo de facto, it has been found, charged an extra 5-days/per annum premium on the loans. Explaining this as a computer error is a bit generous, but even if we allow for such, there is a pesky issue of compensation for an error and culpability. After all, remember an actual computer systems error in the case of the Ulster Bank for which the bank was fined heavily and paid out compensation to its clients?
Here is an interesting bit: per Mr. John Flynn, “I have not included back up data (including fallacious daily LIBOR term sheets published from within Anglo Irish Bank) with this initial email as it is voluminous, but it is available …. if you wish to pursue the matter further.”
According to Mr. Flynn, neither the banking inquiry, nor anyone else contacted in the Dail, have requested the evidence. Worse, with exception of standardised replies from two TDs, there has been no engagement with the author of the statement and the holder of the evidence.
Please note, the allegations contained in the quotes below are those of the author of the letter, and I am simply providing these clearly separate from my comments on these.
You can follow the topic of overcharging and other sharp practices and questionable strategies deployed in the post-banking crisis resolution process in Ireland here:
1) Deputy Peter Mathews June 2015 speech on the issue of overcharging by Anglo, its legacy and issues relating to Nama was covered here: http://trueeconomics.blogspot.ie/2015/06/1062015-bombshell-goes-off-on-anglo.html
2) My summary view of the Anglo’s sharp practices toxic legacy: http://trueeconomics.blogspot.ie/2015/06/11615-anglos-toxic-legacy-it-is-still.html
3) Mr. Declan Ganley’s Affidavit from 2013 concerning overcharging: http://trueeconomics.blogspot.ie/2015/06/12615-anglo-overcharging-saga-ganley.html
4) Deputy Mick Wallace’s speech in June 2015 delivered in the Dail on the subject of Nama and Anglo legacy with my introduction of the concept of value destruction: http://trueeconomics.blogspot.ie/2015/06/14615-why-read-wallaces-speech-on-nama.html
5) John Morrissey’s legal letter on overcharging: http://trueeconomics.blogspot.ie/2015/06/11615-full-letter-concerning-ibrc.html
6) Nama value destruction contextualised in a sample of 10 deals concluded by the agency: http://trueeconomics.blogspot.ie/2015/06/17615-10-cases-worth-asking-nama-about.html