Anglo Irish Bank is primarily a lender to property developers and construction companies. They were nationalised following a staggering fall in their share price and lack of confidence in them by the financial markets. Now that their accounts are being scrutinised by auditors, it has been revealed that huge loans were granted to bank directors and other clients to prop up the bank’s share price. The collateral for these loans were the shares themselves which are now worthless.

Large investment funds which had stakes in Anglo Irish Bank are considering legal action to recoup their losses from the bank’s owners i.e. the Irish State. There maybe a valid legal basis to take action as reported by the Sunday Tribune:

Dr Deirdre Ahern, law lecturer at Trinity College Dublin, said that a possible breach had taken place of Section 60 of the Companies Act 1963 which, subject to some exceptions, prohibits the giving of financial assistance by a company for the purchase of its own shares unless this has been approved by all shareholders.

“There may also be an issue under the Market Abuse Regulations 2003 and Part 4 of the Investment Funds, Companies and Miscellaneous Provisions Act 2005 which regulate insider dealing and market manipulation and provide for both civil and criminal liability,” she added.

One memorable phrase that was sums up the situation is “economic treason”, used in comments by Senator Dan Boyle and Irish Congress of Trade Unions general secretary David Begg. The political infighting over the controversy about share price manipulation by Anglo Irish Bank comes amidst a property price collapse, a spiralling government budget deficit and a growing fear of default on Irish government sovereign debt which is now rated as riskier than Italy, Greece.