“Sean Quinn didn’t invest in Anglo Irish Bank, he bet on it”

As the cost of the adminstration of Quinn Insurance mounts, and to the sound of u-turns from ill-advised supporters of the bankrupt Sean Quinn, BBC NI business editor, Jim Fitzpatrick, sets out the facts in the case of the former billionaire.  Here are a few key points

  • Sean Quinn didn’t invest in Anglo Irish Bank, he bet on it

If all he’d done was buy shares, his losses would have been limited.

But Sean Quinn chose a dangerous financial instrument called Contracts for Difference (CFDs) to build up a 25% stake in Anglo Irish Bank.

It was a leveraged bet on the share price – if it his bet had come good, he would have made billions, but because it went bad he lost more than five times his initial huge stake.

He literally bet the bank and both bank and Quinn went down. His losses totalled more than 3.2bn euros at the end, with Anglo on the hook for 2.8bn euros.

  • Anglo didn’t encourage Sean Quinn money to build this stake

Anglo Irish Bank was horrified when it discovered the scale of Sean Quinn’s stake because they knew they could both go down if the full story was public.

It was a fatal embrace. The reason some directors of Anglo now face criminal charges is because of money lent to unwind and offload Sean Quinn’s bet.

Even Sean Quinn has never publicly suggested that Anglo wanted him to build a 25% stake through CFDs in the bank.

  • Sean Quinn broke the law before the bank moved in

Sean Quinn was removed from his insurance business by the regulator because he had broken the law.

He had used funds from his insurance business to prop up other parts of the group. It was a serious offence.

The regulator eventually put the entire business into administration because he found the Quinn management were still breaking the rules and there was a massive black hole in the finances. This happened a year before Anglo moved to take control of the rest of the empire.

Sean Quinn now accepts that the actions of the regulator were “right and proper”.

Meanwhile all insurance policies in the Republic are now subject to a 2% levy indefinitely to fill the financial hole found in Quinn Insurance.

As ever, read the whole thing.

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  • dwatch

    Thanks Pete for this post. I wonder if the MP for Fermanagh and South Tyrone Michelle Gildernew, the Editor of the Impartial Reporter & Mr Quinn’s supporters at that GAA night http://www.impartialreporter.com/news/roundup/articles/2012/07/26/397497-sean-quinn-we-are-devastated-over-sons-jailing/
    understand all these facts set out by Jim Fitzpartrick? It seems that Mary Lou Mc Donald in Dublin has more knowledge about this financial chicanery with the AIB than the average person who lives in and around the Fermanagh/Cavan border area.

  • Peter,
    I’m curious, why are you posting so much on the Quinn case?
    Do you have a personal or local interest?

  • Tochais Síoraí

    If 1% of the people at the Ballyconnelld emo were able to explain what a CFD is I’d ve surprised.

  • Tochais
    You may be right but what they appreciated was that Quinn did more for the local economy and employment than Central Government ever did, in their eyes

  • Carsons Cat

    And the Krays were good to their mum, so that’s all right then.

  • Tochais Síoraí

    I’ve given up trying to explain the mechanics of a CFD to members of the Quinn Fan Club – their eyes just glaze over with a ‘I don’t really understand all that financial stuff’ or ‘he was duped by Anglo’ or ‘sure everyone makes mistakes’ or whatever shite they want to believe. He has his vocal supporters but their numbers are getting smaller (it did start from a huge base) & as I said beofre, 3000 at a demo was nmuch less than he would’ve got say ayear ago.

  • son of sam

    Sadly objective facts from a respected journalist such as Jim Fitzpatrick cut no ice with those “Concerned Citizens for Quinn”.They seem to live in a parallel universe.

  • tacapall

    Ffs he’s a con artist, a greedy group of people, who although looked on their workforce as a family nevertheless didn’t give a fk about anyone else. I would understand those people if they hid a few million after all who wouldn’t, but the amount involved is mind boggling, just ripping the fk out of it and to be honest its scary that any politician would stand by anyone who wouldn’t honour their obligations to the country they profess to love and serve..

  • Mister_Joe

    I don’t think he is a con artist; simply a thief who got way out of his depth. His present attitude that he did the right thing is an affront to those of us who work hard to make ends meet and will surely lead to him going to jail where he now belongs.

  • Alias

    The cost of Quinn’s gombeenism at Anglo is just part of the damage that Quinn did to the ordinary people whom he is dumping his debts onto, with ordinary peoples’ pockets taking another massive hit at Quinn Direct:

    “The President of the High Court has described as “truly shocking” the revelation today that €1.65 billion may be required from the Insurance Compensation Fund to meet claims and costs arising from the administration of Quinn Insurance.”

    Quinn knew that his insurance company was underwritten by the Insurance Compensation Fund which is in turn underwritten by ordinary insured people in the state, so it was always going to be ordinary people, not him, who would suffer the consequences of his recklessness.

    As Fitzpatrick points out, they will have to pay for his gambles with their hard-earned money via a levy. And money they pay for his debts is not money that they will be circulating in the domestic economy, with thousands of jobs lost to the wider economy as a result.

    The Irish state isn’t innocent here either since it allowed Quinn to abuse the Insurance Compensation Fund when it too knew that ordinary people would be left with the bill if the state failed in its duty of care toward them.

  • Alias

    One other point about the compensation fund and the State’s failure in its duty of care: in promotion of EU policy of containment of debt in the borrowing state, the State extended the scope of the fund to cover all debts of an insurer rather than just the liabilities on outstanding claims. This is a blatant example of the State violating the national interest in order to promote the EU interest. It’s the same type of blanket guarantee that it issued to other financial institutions at the bhest of the EU and which has brought so must hardship to the nation. Gombeen capitalism and gombeen government…

  • andnowwhat

    Och…the whole country was fek’n drunk on it’s faux success and I just think the Quinn are the whipping boys. Yep, they were fek’n out of their depths and deserve to be held to account but it is the faceless ones who need to be spanked hard but it won’t happen.

    They’re being punished out of all proportion when one see the likes of this http://www.tv3.ie/article.php?article_id=78157&locID=1.2.&pagename=home

  • Old Mortality

    I wouldn’t get too exercised by the projected deficit of €1.65bn in Quinn Insurance. It’s almost certain that the administrators are establishing very conservative reserves which, if they prove to be excessive, will make them appear to have done a good job and help to justify their not inconsiderable fees.
    I’d be surprised if the figure comes anywhere near that when the last claim is paid but we won’t know for a few years.

  • Alias

    “Yep, they were fek’n out of their depths and deserve to be held to account but…”

    That is part the presentation of Quinn as innocent and acting at all times with honesty and best intentions, simply undone by (a) a corrupt system and (b) his poor understanding of financial matters.

    Far from being an innocent abroad, Quinn knew exactly what he was doing. Unless you think that “a scheme of mesmeric complexity” can be devised by an idiot, I’d say you’ve been sold a pup.

    As for being an honest man, Judge Dunne said that Quinn’s behaviour was “as far as removed from the concept of honour and respectability as it is possible to be.”

  • what was he doing with such a large holding , after creating his own insurance company was he trying to buy himself a bank

  • Skinner

    Can anyone tell me who were the counterparties to the CfDs? In other words, who found themselves on the upside of the bet?

  • Tochais Síoraí

    The counterparty was CMC Markets – however their losses would be enormous had Quinn’s bet came good so they held enough shares in Anglo as a hedge – obviously the market was lobsided in there weren’t enough short sellers. When the bet started to go south ultra big time, they was the fear Quinn would bankrupt and thus CMC would dump causing the share price drop to accelerate and, well you know the rest.

  • Skinner

    Thanks Tochais

    Did Quinn put up security for his CfDs? Did CMC get their pay-out before he went bankrupt? How does it work?

  • Tochais Síoraí

    I’m not sure what kind of security comes into it with an account held by the richest man in Ireland. Anyway, Quinn was buying (through a Madeira based front company) on margin (maybe around 5% of the worst case scenario) so once the shares went outside a strictly defined limit there would’ve been a margin call i.e he then had to stump up extra cash to cover the newly calculated risk. This margin is designed to cover the vast bulk of such bets and margin calls would come into play in a minorty of trades. However, as these shares were going down like a stone there were a number of such calls and the 2008 Anglo loans to Quinn were to meet these.

    As I understand it, the cfd brokers (there actually seems to have been a few involved including Credit Suisse and IG) came out ok (which has a lot to do with why everyone else is in the shit!!).

  • Mister_Joe

    Quinn needs to dry his eyes. He decided he was good enough to play with the big boys when he clearly was out of his depth. Not surprisingly, he got creamed. Now, where is that f???ing ball he ran away with?

  • Alias

    Joe, why was he ‘out of his depth’? All the evidence supports the view that he is a highly intelligent and sophisticated businessman with a half century of experience behind him.

    At the time he was dealing with CfDs, almost half of all Irish shares trades were CfDs – and it was kids out of college doing the deals. The odds were stacked in favour of a sophisticated and experienced businessman, not against him.

    He stood to make billions by leveraging his initial investment but he made two simple mistakes that even Ballyfermot housewives would know to avoid: (a) don’t bet more than you can afford to lose, and (b) don’t bet all on the one horse.

    Sorry, but he didn’t have to be Gordon Gekko to figure that much out, so why did he do something so utterly reckless? You’d be better asking a psychiatrist why he did it. Whatever the reason, it isn’t because he was stupid and naïve – or because the ‘big boys’ hoodwinked him.

  • Alias

    Incidentally, a third mistake was to bet on a share price with parties who could influence that share price.