LAST NIGHT, A judge in America disallowed David Drumm’s bankruptcy bid.

Throughout his ruling, Judge Frank Bailey explained why he upheld 30 of the 52 objections to the application by IBRC and Drumm’s court-appointed trustee.

The judge said he found Drumm “not remotely credible” and other such damning statements were speckled through the 122 page document.

Drumm had filed the application in an attempt to walk away from €10.5 million debt he owes to IBRC (formerly Anglo Irish Bank and Irish Nationwide) and others. Those creditors can now pursue him.

Here are some of the most interesting things the judge had to say:

The key findings:

Finding Drumm not remotely credible and his conduct both knowing and fraudulent, I conclude that the plaintiffs [IBRC and the court-appointed trustee] have established cause to deny him a discharge many times over.

Drumm’s statements to this Court were replete with knowingly false statements, failures to disclose, efforts to misdirect, and outright lies.

A succinct description of the Irish banking collapse:

The fall of 2008 was a very difficult time in Anglo Irish Bank’s history and led in just months to the bank’s demise. During September 2008, in Drumm’s own words, the world was “falling apart”, and the second half of September was “Armageddon”. Lehman Brothers had recently gone bankrupt. AIB [Anglo] under Drumm’s stewardship, faced enormous pressures, a plummeting share price, the prospect of government intervention, and potential loss of its independence. As Drumm testified, it was an “economically bad time in Ireland”; “the markets were in turmoil”; “the share price of Anglo Irish Bank had collapsed”. On 19 December 2008, Drumm resigned his position at Anglo. On 21 January 2009, Anglo was nationalised under the Anglo Irish Bank Corporation Act 2009; the Act vested all shares of Anglo’s stock – which had in any event become all but worthless – in Ireland’s Minister for Finance and re-registered Anglo as a private limited company. Anglo Irish Bank was defunct.

And the effect it had on the Drumm family home:

Anglo’s collapse dramatically affected the Drumms in several ways. Until his resignation, Drumm was under great stress at work. Mrs Drumm said “he was working all the hours god sent him” and was never at home. She feared he might drop dead of a heart attack “because that’s what he looked like most days”. The stress and long hours put a strain on their marriage; she conceded, however that his long hours, and the strain they placed on their marriage, were not new but were constant over the two preceding years. For his role at Anglo, Drumm became the focus of considerable and inescapable media attention, not favourable.

Anglo’s collapse also affected the family financially. Drumm’s resignation terminated his substantial salary. His prospects for future employment in Ireland had considerably dimmed. The Drumms had real estate holdings but the recession had undermined real estate values. Much of the Drumms’ net worth had been in Anglo stock, which had secured Drumm’s debts to Anglo and now was worthless and, in any event, had been nationalised. He owed a ruinous sum – in excess of $11 million – to Anglo, which surely would demand payment and likely commence legal proceedings against him.

The five ways the Drumms responded:

According to the judge’s summary….

1. From September 2008, Drumm began to transfer assets to his wife, Lorraine.
2. They moved to the US in June 2009.
3. In January 2010, they purchased a home in Boston using a “substantial portion of their now-liquidated holdings”.
4. In August 2010, Drumm tried but failed to negotiate a deal with the IBRC to avoid litigation.
5. On 14 October 2010, Drumm filed for bankruptcy.

Did the judge believe Lorraine Drumm when she appeared as a witness?

The backstory from the judge: “Drumm maintains that he made these [the 2008] transfers, and others in 2009, because Mrs Drumm implored him to do so. And she insists that she did so not out of concern about his creditors but because she could envision a future without him – their marriage was severely strained, and the stress on him made her fear for his health – in which she would need to provide for herself and her children. She therefore asked him to transfer some money – “like a million euro,” she told him – into her name, so that she could control it herself.

I do not doubt that Mrs Drumm asked her husband to transfer money to her sole name, or that she was motivated by the concerns she mentioned. I do not believe she was motivated by a need for protection from possible alienation from Drumm any more than she was motivated by a fear of Drumm’s creditors. Indeed, I do believe that each of them was motivated first and foremost by desire to shelter their assets from seizure by Drumm’s creditors, especially Anglo.

“Their salutary concern to protect Mrs Drumm and their children gave rise to action because creditors would soon be seizing family assets; concerns about creditors and solvency certainly account for the timing of these transfers. Concern for family does not negate concern about creditors and desire to thwart them. Amongst the insolvent, these often go hand in hand.”

Did the judge believe the transfers were loans between Lorraine and Drumm?

I have found the plaintiffs have carried their burden of proving that the “loan” of $250,000 is a fiction, an accounting treatment after the fact. There was never an inter-spousal loan or payment on any such loan, just outright transfers between the spouses. And even if the Drumms did in fact agree to a $250,000 loan before these funds were transferred to Drumm, the nature of their agreement – with no obligation to repay at any time and no accounting for advances and payments – shows it not to have been a true loan at all, just a transfer with a false label.

On Drumm’s reasons for ‘forgetting things’ on his bankruptcy forms:

The overall sense is a man casting about for any plausible answer but the truth. The variety and inconsistency of his diverse answers, and the lack of conviction with which he delivered each, undercut whatever credibility any one might have enjoyed had it stood alone.

I conclude that Drumm was not surprised on 1 April to learn that his omissions from SOFA 10 had been in error. The expressions of surprise that he memorialised in an email and a phone call were not genuine but affected, for show, when Drumm realised that he would have to explain his omissions.

Drumm is intelligent, very sophisticated in the kinds of accounting and financial issues he was addressing…, meticulous, involved in the details of his bankruptcy filing, controlling, not one who would simply turn these matters over to counsel to handle for him. Over a period of two years, while insolvent and facing legal action on $11 million debt owed to IBRC, he had carefully transferred considerable value in case and real estate to Mrs Drumm, to keep it from IBRC.

He is not credible or truthful and has made misrepresentations at every stage of these proceedings.

And the car sales?

At a 7 December meeting with creditors, Drumm was asked whether he had vehicles in Ireland.

He said he had two and that “we” sold both. He referred to the BMW, of which he had been the sole owner, as his wife’s car. He disclosed that he had received €20,000 for it but not to whom it had been transferred or when. He’d disclosed that he’d sold the Range Rover for €35,000 in or around June 2009 but didn’t identify the transferee or mention that she was his sister.

Given Drumm’s general lack of credibility, his failure to disclose numerous other transfers to his wife, and the fact that one of the purchasers was an insider, the preponderance of the evidence does not support Drumm’s position. I find that he acted knowingly and fraudulently  in omitting the automobile sales and the disposition of their proceeds.

The omission of the BMW served, and was intended, to keep a transfer to this sister from disclosure to other creditors, the court and the public. I find that Drumm omitted the transfer of the BMW with intent to conceal and mislead.

Drumm said he cooperated with his trustee. Did the judge agree?

Drumm’s cooperation… was limited, delayed and shaped to his purposes. I find that Drumm’s record of cooperation, such as it is, only reinforces the conclusion that his omissions were knowing, deliberate, and intended to hinder, delay, and defraud the trustee and IBRC.

Has Drumm now disclosed everything about his finances?

The judge said he could make no such finding.

On what basis can the court believe that the full extent of Drumm’s assets and transfers has now been disclosed? Certainly not on his word for it, which is all I have, and therefore I can make no such finding. In short, Drumm has not earned the benefit of the doubt.

IBRC argued that Drumm used a ‘so stupid’ defense. What did the judge make of that?

I need not attribute Drumm’s conduct to stupidity; indeed it may well have been the product of cleverness. Perhaps Drumm was emboldened by a sense that he could invoke the “so stupid” defense against the consequence of his actions, the plausibility of the defense being directly proportional to the scope and brazenness of the offence.

Drumm is a quick thinker, adept in testimony intended to deflect, misdirect, avoid, fabricate. His accounting and knowledge of his financial affairs is detailed, precise, almost obsessive. He is confident in his strategising; and by the time he filed his bankruptcy petition, he had been planning and strategising for two years. No bumbler, and clearly a controlling type, he knew what he was doing. He was highly motivated to protect the Wellesley property. He withheld information and controlled its release for some perceived strategic advantage. That he misunderstood SOFA 10 as to some transfers and simply forget others – the very matters which he was most concerned in this case – this is exceedingly implausible. I have no trouble finding him capable of the kind of stupidity of which he stands accused.

Read the judge’s 122-page document, in full, on TheStory.ie>

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