A year after Ireland's biggest bank found that he was one of its unnamed former executives with 'tax issues', Tom Mulcahy is keen to set the record straight, writes John McManus

On the 27th of May last year, Tom Mulcahy got a phone call. It was from the press office of AIB, the country's largest bank and his employer of some 29 years.

The caller told the former chief executive that the bank was about to issue a statement outlining the results of an internal inquiry into the tax affairs of former and current senior executives. The inquiry had been demanded by the Irish Financial Services Regulatory Authority (Ifsra) after the bank made it aware of the involvement of some executives in an offshore investment company called Faldor.

Mulcahy was told that he was one of two former executives who, although not involved with Faldor, had been found to have "tax issues". Mulcahy was not named in the statement, but within a matter of hours his name and the names of the high-profile former executives involved in Faldor were circulating in the Dublin media.

Mulcahy issued a brief statement the next day saying he had no knowledge of Faldor and was tax compliant. The following day, he resigned as chairman of Aer Lingus and shortly afterwards, departed the board of Kingspan.

One year on, Mulcahy is keen to set the record straight. The Revenue Commissioners have confirmed his claim that he was tax compliant in May of last year as well as giving his stewardship of AIB's tax governance - in respect of the remuneration of senior executives - the all-clear. They also accepted his claim to have been unaware of the existence of the Faldor scheme.

Time may have passed, but his treatment by AIB still rankles. What annoys him most is that nobody in the bank bothered to ask him about his tax affairs before releasing the statement, which referred to him. If they had, Mulcahy claims, he would have told them that he had made a voluntary disclosure to the Revenue Commissioners the previous year in respect of an account in the UK containing "several hundred thousand", that dated back to when he worked there. "It had no transaction on it for 10 years, but nonetheless, it was in my name," he says.

This settlement was revisited by the Revenue Commissioners in the wake of the AIB disclosures and he subsequently received a five-figure refund on the original settlement.

Mulcahy is too savvy to paint himself as being cynically thrown to the wolves to distract attention from the bank. He chooses his words carefully.

"It's very odd in the sense that I was there 29 years and a press releases emerges at two minutes notice.

"Then, the next day, my name emerges as one of the people with tax issues. One has to assume that was not a happy accident."

Mulcahy also poses the question: "Why did nobody ask me about my tax affairs before releasing that statement? It's a reasonable question."

Even if AIB had asked this question and adjusted its statement to reflect the facts, his name would still probably have come out in the wash, acknowledges Mulcahy. "But it would have been a significantly different story," he argues.

He says that he chose to resign from Aer Lingus, even though doing so implied that he did have a case to answer, because he believed it was inevitable that the Revenue would look afresh into his affairs.

"I knew that I could not prove that I was absolutely tax compliant in a timeframe that was relevant. It [ Aer Lingus] was a State company and it had a lot of problems without me adding to them," he says.

None of this gets around the fact that Mulcahy held an undisclosed non-resident account. "I am not saying that I was always compliant. I made a voluntary disclosure and paid what I thought was due, which is the right open to all citizens" he says. He does point out that he is not the first high-profile figure to do so and many others did not make voluntary disclosures and were pursued by the Revenue Commissioners.

His objective at this stage, he says, is not to justify his actions. It is to show that what he said at the time was true and that he acted correctly.

"There were serious question marks over me at that time. One year on, everything I said at the time has proved to be true. I was tax compliant and had no knowledge of Faldor," he explains.

Leaving his personal tax affairs aside, Mulcahy is also prepared to address the issue of his responsibility for the series of scandals that engulfed the bank prior to May, 2004.

As chief executive between 1994 and 2001, he was in situ when the seeds of both the Faldor and the more damaging overcharging problems were sown.

Dealing first with Faldor, he reiterates his position that he did not know of its existence, a position upheld by the Revenue Commissioners.

It is a similar position to that adopted by his successor, Michael Buckley, who had line responsibility for AIB Capital Markets for some of that time.

As far as the foreign exchange and other overcharging issues go, Mulcahy's position is also consistent with the banks, which is that the problems were not brought to the attention of senior management and thus not addressed.

That this state of affairs could exist for years is not as unlikely as it seems, he says.

"AIB has a divisional structure. The chief executive's job is to put together a management team, his primary role is to agree business plans and expansion plans and review ongoing performance while ensuring the board is fully briefed," he says. A chief executive's role is to be positive and focus on driving the bank forward, rather than look for hidden problems, he adds.

As regards the suggestion that the overcharging - and more significantly, the failure of individuals to bring it to the attention of senior managers - was the result of a culture of fear and intimidation, he is unconvinced.

"I am not saying there is nothing in it. It would be very hard to smell something like that on a daily basis," he says.

But he points out that great efforts were made to build an inclusive culture, to the extent of conducting a consultation programme involving 14,000 staff as part of the preparation of the 1995-2000 business plan.

While clearly unhappy with the pall cast over his reputation by the events of a year ago, Mulcahy is perhaps not as unhappy about one of the consequences of the affair as one might have thought.

His departure from Aer Lingus was embarrassing, but with hindsight he left on a high point.

His role in the turnaround of the airline has been somewhat overshadowed by the ascent into international business stardom of Willie Walsh, the chief executive he appointed after an exhaustive search.

Mulcahy was in effect the executive chairman of the company for the period between the departure of Michael Foley in mid-2001 and Willie Walsh's appointment in October. It included the critical period just after September 11th, when the company drew up and put in place its radical restructuring plan. It was a tough time and the company's financial situation was so precarious that its lawyers attended board meetings to make sure that the directors did not engage in reckless trading.

"I was in there seven days a week at that stage," says Mulcahy, who is clearly proud of the subsequent success achieved by the team he put in place, and equally not surprised at their decision to quit the airline last November, some six months after his own exit.

In his view, Willie Walsh and his colleagues knew that despite the great changes at Aer Lingus, much more had to be done in order to allow it compete on a cost per seat basis with Ryanair and other low-cost operators.

There was a very significant question mark over whether the Government would support another assault on the cost base and associated job losses.

"The management had fully internalised what had to be done. They felt they would not effect the changes at a speed for them to be successful. That is not to say they could never get it done."

As far as returning to the airline - where the chairman job comes up next March - the door is clearly still open as far as he is concerned.

"The shareholder decides those things and I have not given the matter much thought," he says.

Factfile

Name: Tom Mulcahy

Age: 64

Background: Born in Carrick on Suir, Co Tipperary. Retired as chief executive of AIB in 2001 after 29-year career. Has a number of business interests including the Queens pub in Dalkey.

Why is he in the news: He resigned as Aer Lingus chairman over a year ago, when he was identified as one of a number of unnamed former executives the bank claimed had tax issues. The Revenue Commissioners have now confirmed he was tax complaint.