It is understood that four senior KPMG partners arrested in Northern Ireland on Wednesday over allegations of tax evasion were questioned about matters including their involvement with a company set up to finance property development on both sides of the border.
The finances and tax arrangements of Jeap, a company owned by the four men that backed proposed property developments in areas such as Meath, Monaghan and Donegal, is thought to form a central part of the investigation.
The four partners are Jon D'Arcy, head of audit and transactions for KPMG in the north, Eamonn Donaghy, who heads the Belfast tax practice, Paul Hollway, head of corporate finance and Arthur O'Brien, an audit and advisory partner.
Mr Donaghy also chairs Grow NI, which has been pressuring the British government to lower the corporation tax in Northern Ireland.
The partners remain on administrative leave from KPMG while the investigation is ongoing. KPMG said yesterday it has no indication that the matters being investigated by HM Revenue and Customs tax officials relates to the business of the firm or its clients.
KMPG has also said it will cooperate fully with the investigation. Several of its of senior partners also travelled from Dublin to Belfast yesterday take over the running of the office there and reassure staff.
It is also likely that KPMG will consider setting up an independent process to examine the allegations against the men and try to clear up the situation.
Jeap was set up by the four partners in 2005 while the property boom was in full swing, with each owning 25 per cent. Its most recent set of accounts, abridged statements for the year to the end of March 2014, show it had racked up losses of £4.3 million. It had just £391 cash in the bank.
Sources believe that among the areas of likely questioning to the four KPMG partners will have been how losses accrued by Jeap were offset against tax. Jeap is registered to the home address of Mr O'Brien, one of those arrested. A man who answered the phone at his address declined to talk to the Irish Times.
The most recent detailed accounts for Jeap are for 2010, when it had already racked up losses of £2.8 million. The 2010 accounts also show that most of its long-term bank loans, then almost £2.9 million, switched to shorter-term, and presumably higher interest, funding arrangements.
It appears that Jeap has had no income since 2010, while its debts have grown considerably, possibly through rolling up interest owed. Ulster Bank has two outstanding mortgages against Jeap.
The 2010 accounts outline Jeap’s investments, which were mainly loan notes issued to development companies. It loaned almost £2.9 million to developers - presumably mostly comprising cash it itself borrowed from Ulster - but by 2010 the value of these investments had been written down to just £729,000.
The accounts show Jeap loaned €250,000 to Stateford, which was owned by Dublin developers Vincent Maguire and Liam Moran but is now in liquidation. The developers were also behind Walsh Maguire & Co, which also collapsed.
JEAP also had loaned money and held a 10 per cent stake in WJ Law (Castleblaney). Jeap’s 2010 accounts also stated it had guaranteed interest shortfalls of up to €9.6 million in relation to this company. WJ’s most recent accounts say it is insolvent and unable to repay its banks.
Jeap also backed proposed developments in Donegal via Killea Developments, and also held stakes in limited partnerships that proposed to develop houses in north Dublin and Duleek in Meath.
The Duleek partnership last year got extended planning permission until 2018 from Meath County Council for a proposed residential development.
