Anglo and Film

People in the film business will be aware of Anglo Irish Bank's involvement with film in Ireland over the years, although they may not be aware that it dates from as far back as 1990.

Anglo was a partner with the Irish Film Board in the Company Development Initiative (CDI) scheme which was intended to boost the development and business capacity of several production companies. The three-year scheme was announced in May 2001 with the IFB contributing €3.175m, Anglo contributing €1.9m, and the successful applicant companies contributing €1.27m.

The first five companies approved for CDI in November, 2001 were Magma Films, Element Pictures Octagon Films, Treasure Entertainment, and Little Bird, the latter including associated partners Comet Films, Fubar Films and Wildfire.

At the time Michael O'Sullivan, Senior Manager with Anglo Irish Bank, said, "We are pleased to be working with Bord Scannán na hÉireann/the Irish Film Board on the Company Development Initiative. This represents an important extension to our involvement in the development of Irish production companies and is an excellent opportunity to build on our film financing activities."

Interviewed by the Sunday Tribune O'Sullivan said Anglo was "involved in 16 or 17 productions, between section 481 tax-based investment, 'discounting' of presales contracts, which enables producers to release funds for production, and providing working capital. In the year to 5 April [2001], Anglo was involved in production activity with a capital value of nearly $100m."

The IFB announced a second phase of CDI in June, 2003, and the successful applicant companies were Subotica, Grand Pictures, Distinguished Features, and Cartoon Saloon.

Anglo is best known for its Section 481 financing activity, which I presume is ongoing. It claims to have raised in excess of $500m in Section 481 financing for film and television production in Ireland.

It has been involved in financing, among others, Intermission, Breakfast on Pluto, Tara Road, The Wind that Shakes the Barley, Garage, The Tudors, The Escapist, PS I Love You, How About You, Shrooms, The Clinic, and Triage.

To give some scale of the funding involved Anglo raised €21m from about 600 investors for the first series of The Tudors in 2006. It raised some €4m for the largely undistributed Triage. Section 481 investors would achieve a return on their investment of approximately €2,300, usually inside a year.

A recent report by Shane Phelan in the Irish Independent (November 26) states that former Anglo CEO David Drumm owes Anglo the sum of €8,414 in respect of a loan taken out to enable his Section 481 investment in Triage. I seem to recall that Sean Fitzpatrick, former Chairman of Anglo had a similar outstanding loan, perhaps not for the same production.

The Independent reports, Documents seen by the Irish Independent reveal Mr Drumm, who is filing for bankruptcy with liabilities of €10.26m, invested €31,750 in the company behind the movie, Darkroom Productions Ltd, in 2008. The investment was part-funded through a loan of €8,414 from Anglo, which was due to be repaid nine months later. However, despite securing a significant tax break because of the investment, Mr Drumm never paid the money back.

What's interesting about all of this is what it reveals about the mechanics of the Section 481 scheme, as it is worked by the Irish financial services sector. These are the type of people availing of the scheme and all they need in order to profit from it is a certain level of tax liability, plus a loan. Not even the cash in hand.

Where's the risk in that?