On February 24, 2009, a team of fraud squad investigators and white collar crime officials raided the headquarters of Anglo Irish Bank on St Stephen’s Green in Dublin 2. As the television cameras whirred outside, members of the Garda Bureau of Fraud Investigation and the Office of the Director of Corporate Enforcement searched through the bank. 

Anglo was reeling after the dramatic departure of its chief executive David Drumm and chairman Sean FitzPatrick in December 2008 amid allegations of reckless lending and corporate criminality. Almost unnoticed among the mill was the bespectacled, neatly dressed figure of Robert Heron. Heron was a partner with Anglo’s solicitors, Matheson, one of the biggest and most respected law firms in Ireland. 

Heron knew to be there as the raid was a pre-arranged spectacle organised between the state’s investigators and Anglo’s new owners, also the state, following its nationalisation the previous month. Heron was there in an advisory capacity to Anglo, which was being investigated in relation to numerous matters including lending to fund the acquisition of the bank’s own shares by the industrialist Sean Quinn and a group of longstanding clients of the bank known as the Maple 10. 

What happened between Sean Quinn and Anglo has been the subject of extensive investigation and a lengthy court case. The role of Matheson is however a tale that has not been fully told. Until now. 

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Matheson, once known as Matherson Ormsby Prentice (Mops), is one of Ireland’s oldest and most established law firms tracing its origins back to 1825. Its history tracks that of Ireland – from the Easter Rising in 1916 when its offices were destroyed by fire, through to the Celtic Tiger when it moved into luxurious Liffey-side offices built by boomtime developer Sean Dunne. 

Matheson regularly tops the Irish league tables for advising on mergers and acquisitions. More than half of the world’s largest 50 banks work with it along with many of the globe’s biggest asset managers and technology firms. It is a respected firm. 

Robert Heron joined the firm in January 1988 immediately after he finished his law degree in Trinity College. This was around the time Matheson moved into its previous office on Burlington Road in the heart of leafy Dublin 4. Heron did his apprenticeship at the firm, qualifying as a solicitor in 1991.

He quickly rose through the ranks becoming a partner in Matheson in 1995, a promotion that reflected his expertise in advising corporate clients. Heron was an equity partner, meaning he was one of about 70 people who owned the firm. One of Matheson’s clients was Anglo Irish Bank.

Cementing a relationship 

In the 1990s, Anglo was a modest proposition. Heron first got to know Anglo’s finance director Willie McAteer not long after the Donegal-born banker joined Anglo in 1992 from Paul Coulson’s venture capital firm Yeoman International Leasing. McAteer and the bank’s charismatic then chief executive Sean FitzPatrick were on the acquisition trail. Matheson – and Heron – advised Anglo when buying two smaller rival banks, starting what would prove to be a long and, for many years, mutually beneficial relationship.  

In 2002, Heron advised Anglo on what to do after the bank received a request from the Revenue Commissioners in relation to the disclosure of client information. This type of work was not unusual. By the time of the Irish financial crisis, Heron had a history with Anglo management but it was all on a professional level. Anglo was by no means Matheson’s biggest client but it was significant. Anglo was growing fast; so too was Matheson’s advisory work for the bank.  

For many years Matheson did enjoyable and routine work as Anglo grew at a barnstorming rate. In 2005, FitzPatrick had moved up to being chair of the bank while a young banker called David Drumm replaced him as chief executive. The bank’s value surged to over €13 billion on the Irish Stock Exchange as it grew explosively. Things became more ominous in 2008 when confidence in global banking shattered, sending Anglo’s share price tumbling. Over-extended banks such as Anglo were in trouble.

Solicitor Robert Heron. Photo: Sam Boal/RollingNews.ie

In January 2008, Heron was asked to advise Anglo in relation to some questions that were being asked by the Financial Regulator in relation to the personal loans of the bank’s chairman Sean FitzPatrick. FitzPatrick had, over a number of years, been moving his personal borrowings from the bank off its balance sheet at its financial year-end. The type of numbers involved started in the millions but ultimately reached over €100 million. This practice meant FitzPatrick’s loans were not disclosed to the stock market in the bank’s annual report. 

In March 2008, Heron was also called into action during the period that became known as the St Patrick’s day massacre. The American investment bank Bear Stearns had collapsed, triggering a global crisis which caused Anglo’s share price to plummet. Anglo also suspected that its woes had been impacted by short-selling in the market. 

Matheson was advising the bank in general on the issue and it had also acted for the bank in relation to a stockbroking firm called Merrion Capital, who the bank believed was talking it down. 

Anglo had heard concerning news from the property developer Sean Mulryan, who was a client of Merrion. According to Anglo Republic, a book on Anglo by Irish Times  journalist Simon Carswell, a Merrion advisor called Ken Costello had told Mulryan: “They’re fucked – the Irish banks are fucked.” 

Mulryan had fed the information back to Anglo and FitzPatrick had rung Merrion’s chief executive John Conroy to demand that Costello was fired. Conroy defended Costello saying he was just expressing what was felt in the market and that this was reflected in Anglo’s falling share price. 

David Drumm had instructed Matheson to send Merrion a letter threatening legal action over Costello’s comments to Mulryan, which he copied to Patrick Neary, the then financial regulator. Neary was looking into unusual share trading in Anglo, but he later told Conroy the regulator was not targeting his firm in particular. 

Neary’s investigation never found any wrongdoing and Costello’s assessment of Anglo and Irish banking was later entirely vindicated. But this would only emerge later. Having survived St Patrick’s Day, Robert Heron took a much needed Easter holiday. 

The border billionaire

On March 27, 2008, McAteer contacted Heron with a much more serious problem. McAteer told Heron he needed to meet urgently that day to fill him in on what was going on. 

At 4pm, McAteerarrived at Heron’s office at 70 Sir John Rogerson’s Quay along with Matt Moran, chief financial officer with Anglo. The meeting lasted just half an hour. McAteer told Heron that Quinn was an important client of the bank with business borrowings of more than €1 billion.

No documents were provided or exchanged by either side at the meeting. Heron maintains he only listened and did not give any advice at this stage

In addition, McAteer told Heron that Quinn had built up a position more than 25 per cent in the bank’s shares using a financial mechanism called contracts for difference. This position was so large that it encouraged short sellers to bet against the bank and made it hard for it to hold onto funding. 

McAteer said that the Financial Regulator was aware of the issue and was pushing for a quick solution. The regulator, McAteer said, already had concerns about Quinn’s insurance business and was not prepared to allow the tycoon take over Anglo. 

Quinn was losing money on his gamble, straining relations with Anglo. However he was prepared to go long on the bank by converting 14.9 per cent of his CFD position into actual shares with the businessman placing the remaining 9.4 per cent of his position with an institutional investor, using Morgan Stanley as advisers. McAteer mentioned that he was in touch with Con Horan, a senior official in the financial regulator, in relation to Quinn.

No documents were provided or exchanged by either side at the meeting. Heron maintains he only listened and did not give any advice at this stage. Heron later said to investigators he believed that Anglo was only going to be a passive player in dealing with the issue as Quinn would take the lead role. This was the only face-to-face meeting Heron had with the bank, he said. 

Matt Moran later maintained there was an additional meeting with Heron the following day, March 28, in McAteer’s office in Anglo. Heron denies this second meeting. Nothing turns on it either way. 

Heron was familiar with the existence of section 60 of the Companies Act 1963, which banned firms using their own money to buy their own shares unless this was done in the ordinary course of business. In relation to corporate transactions, Heron had advised on this issue more than ten times over the years. Section 60’s application to banks, however, was much more unfamiliar territory. 

In any event, the issue of section 60 did not come up at the initial meeting, according to Heron. The solicitor said there was no mention at this stage that Anglo intended to lend to anyone to buy its own shares. This is not that surprising, as the bank believed in March 2008 the problem was only that speculators were betting against it, rather than something more fundamental being wrong.  Back then the bank, like many others globally, believed the market was wrong, and it was still worth billions.

Matt Moran’s recollection of this initial meeting was that section 60 was mentioned at this early stage. Either way Heron could hardly be expected to have formed a firm view on anything after such a brief meeting. The issue of section 60 would become of much greater concern later on. 

Deal or no deal 

On the day of the initial meeting, McAteer asked Heron to prepare a simple agreement on how to deal with Quinn, by placing his shares both with the border businessman and with a third party which at that stage was expected to be an institutional-type investor. At 11.36pm that night, Heron provided the terms of this agreement, reflecting what he thought was Anglo’s limited role in the placement. Heron raised or commented on a number of legal issues that could relate to the execution of an agreement between Quinn and Anglo and stressed that the agreement could only be fulfilled in accordance with applicable law and regulation.  

Former Anglo Irish Bank chief executive David Drumm. Photo: Leah Farrell/RollingNews.ie

The following day, he had a conversation with McAteer who was anxious to get moving. Heron could see that there were various legal issues arising from the proposed transaction which he advised on. Heron opened a file inside Matheson called “shareholder placing” in relation to the issue. Some of his colleagues chipped in comments in relation to aspects of competition law and financial services regulation that could be relevant to doing the deal. 

On the morning of Monday March 31, Fiachre O’Neill, Anglo’s head of tax and compliance, contacted Heron to discuss the various issues. Among the issues O’Neill discussed was contacting the Irish Takeover Panel – which Heron had advised should occur. In the afternoon, Heron spoke to Miceal Ryan, director general of the Irish Takeover Panel. Ryan agreed with Heron – that based on the information then available,  the proposed transaction did not involve a concert party acquiring control of Anglo. At the time of this contact with the Irish Takeover Panel Panel, the final actual deal, which later caused Anglo so much difficulty, was not being considered. 

On July 10, O’Neill sent Heron a two-page document in relation to the Quinn family taking on some of their father’s shares.

On April 1, Heron interacted with the Central Bank on the matter in relation to what approvals were required or not required to complete the deal. There were other contacts. Heron’s records show he might have spoken to McAteer around April 11 but he cannot recall these discussions. Things went relatively quiet in May as the bank tried to find someone, an institution or sovereign wealth fund, to take on part of Quinn’s position in the bank. 

Heron went on holidays to California in late June, leaving the matter with one of his team before returning to the issue in earnest about July 7, 2008. A company had been set up in Madeira in Portugal to take on Quinn’s position. The bank asked Matheson to advise it on how to it could get power of attorney to control this company. In effect, Anglo wanted to ensure that Quinn could not buy or sell its shares without the bank’s approval. The bank wanted control because it feared that, say, Quinn dumped his entire position at once, which would have destroyed it. 

By July 9, a deal seemed to be coming together. “It looks like a more ‘full’ solution is possible,” O’Neill told Heron in an email. At this stage it was thought Bain Capital, a Boston-based investment fund co-founded by Mitt Romney,  might take some of Quinn’s position. After lunch, O’Neill told Heron that Morgan Stanley had sourced clients who were willing to take on 9.4 per cent of Quinn’s position. At this point, Heron said he did not know that Anglo was considering lending to fund the transaction. 

On July 10, O’Neill sent Heron a two-page document in relation to the Quinn family taking on some of their father’s shares.

That afternoon O’Neill, rang Heron to tell him that Anglo planned to lend money to members of the Quinn family to finance the acquisition of the banks’ shares as part of unwinding their father’s position. He asked Heron for advice as to whether this was possible. According to Heron, the prospect of the bank also lending to ten other borrowers did not arise then. There was still, however, much to consider.

Intensive interactions

There were several other interactions between Matheson and Anglo. Around July 11, Heron advised O’Neill of the issue of section 60. He told him that a company lending to fund the purchase of its own shares was in general an offence, but there was an exemption which might allow a bank to do so. A clause in section 60 said that such lending might be legal if done in the “ordinary course of business.” 

 A fifteen minute discussion took place between Heron, Moran, O’Neill and another Anglo banker in compliance called Brian Gillespie. This took place ahead of a conference called scheduled for the following morning with Morgan Stanley. 

At 9.14pm the night before the Morgan Stanley call, O’Neill sent Heron a copy of the issues that Morgan Stanley wanted to discuss the following day. He asked Heron to call him in the morning before the Morgan Stanley conference call. 

The issues Morgan Stanley wanted to discuss in the “legal call” were set out by David Churton, a member of Morgan Stanley’s compliance team. These included  “discussions to date with the Irish regulator and takeover panel”, as well as: “Concert party issues and 10 per cent holding implications”; “financial assistance to the extent (Anglo) is connected with funding of share purchases”; “market abuse considerations” and “disclosure and press release.”

Between July 15 and July 16, 2008, Heron said he had additional contacts with Anglo in relation to the Irish Takeover Panel and the position of the bank when lending to the Quinn family. He said it was only around this time that he first became aware that substantial money was being lent to the Quinn family to buy the bank’s shares. 

On Saturday July 12, Heron went on the conference call with Morgan Stanley, along with O’Neill and Moran from Anglo. The purpose of Heron being on the call was to discuss legal issues raised by Morgan Stanley. 

The morning before his call with Morgan Stanley, Heron had reviewed the law, such as it was, in relation to section 60 by looking at a book on the Companies Acts written by Lyndon McCann and Thomas Courtney. 

Heron later said he was unsure whether section 60 was actually discussed specifically on the Morgan Stanley call. 

Notes from Morgan Stanley banker Harry Eddis of the meeting indicate the investment banker believed the issue was discussed. His notes state: “Bank satisfied lender is an ordinary course for amounts, terms, duration and manner, all entirely normal.” He also claims: “MOP (Matheson) thinks is very clearly within the exemption.” 

Notes from another Morgan Stanley banker on the call also state: “Bank is satisfied lending is in ordinary course… nothing in fact that takes outside exception.”

Matheson’s invoice – setting out its numerous interactions with Anglo – states that on Monday July 14, the law firm carried out a “review of authorities, market abuse regulations in advance of and attending on legal conference call with MS (Morgan Stanley)”. 

Heron said his advice on this matter was based only on Irish textbooks – which had no authority on the “ordinary course of business” exception. He did not look at English law textbooks or online to see if there were any overseas authorities that might be relevant. 

Between July 15 and July 16, 2008, Heron said he had additional contacts with Anglo in relation to the Irish Takeover Panel and the position of the bank when lending to the Quinn family. He said it was only around this time that he first became aware that substantial money was being lent to the Quinn family to buy the bank’s shares. 

Legal qualifications

However, he did provide a letter on July 22 to Anglo in summary form setting out the legal position. This was prepared for the bank after it asked for it on July 21. Heron’s advice said that, based on the information provided by the bank, such loans would likely be legal provided they were done in the ordinary course of the business of the bank. “We have provided Irish legal advice to the bank in relation to the following arrangements,” Heron’s letter began.

This included, he said, the unwinding of Quinn’s contracts for difference position, and the acquisition by Quinn’s children of one large chunk of the bank with the remainder being acquired by others. 

This letter was qualified multiple times. Heron later said he did not believe his advice could be seen as a matter of fact confirmation that the loans were legal and that it was a matter for the bank to satisfy itself of this. He said he later assumed that Anglo had established for itself that the lending it had done was in the ordinary course of its business. 

On July 23, Anglo asked Heron, to forward this advice to the Financial Regulator, which he agreed to. There were more interactions, and around July 28, Heron was told – he later said for the first time – that some of Quinn’s position was being placed with 10 clients of the bank rather than institutional investors as hoped in March. 

In August, there were further interactions with Anglo in relation to the Quinn unwind lending, but these issues related to security on the loans, not their legality. 

On November 13, 2008, Heron interacted directly with the Financial Regulator in relation to the Maple deal for the first time. O’Neill, McAteer and Heron went to the Central Bank’s headquarters, which was then on Dame Street, to meet with Donnacha Connolly and an associate who wanted to discuss their concerns around shareholders acting in concert within Anglo. Connolly was then deputy head of retail banking supervision. The Regulator listened and asked questions, but did not express its own opinion at that meeting, as it was in fact-finding mode.  

Heron does not believe that an agreed note of the conclusions of this meeting were ever circulated. 

On November 28 2008, Matheson issued Anglo Irish Bank with an invoice for €58,523. Over seven pages, the law firm lists 110 interactions it had with Anglo in relation to the matter that it was now charging for. 

Matheson describes itself as partaking in many different activities. These include on April 1, 2008, working on “Central Bank of Ireland approval issue” and on July 14 2008, carrying out a “review of authorities (section 60, market abuse regulations) in advance of and attending on legal conference call with Morgan Stanley”. 

 Matheson also sent Anglo an invoice on behalf of a Cypriot law firm called Chrysses Demetriades & Co Lawyers. This related to its work setting up the various companies for the Quinn family to hold their shares in the bank.

With all of the Anglo criminal trials over, the Quinn’s ceasing their case suing the state in relation to the bank, and now Matheson settling the cases taken against it by FitzPatrick, Drumm and Whelan, the episode is finally over. 

In January 2014, Heron left Matheson to take up a position as head of legal with Dunnes Stores. Heron previously worked on the Dunnes Stores account while at Matheson. Heron has, for client confidentiality reasons, never publicly commented on his time advising Anglo.