Officer to open the books of two companies as time for appeal runs out, writes Colm Keena.

An authorised officer is to begin work next week on an investigation into Dunnes Stores, the largest privately owned business in the State.

The officer, an accountant with the Office of the Director of Corporate Enforcement (ODCE), is to investigate the books of two of the companies in the Dunnes group, Dunnes Stores Ireland Company and Dunnes Stores (Ilac Centre) Ltd. Dunnes Stores Ireland Company is one of the main companies in the group, which is made up of a large number of companies which are in turn owned by a trust.

The decision to appoint an authorised officer to the two companies was first taken by the Tánaiste, Ms Harney, in July 1998 but has been held up ever since by a series of High Court and Supreme Court hearings.

The original appointment arose out of the McCracken report and subsequent company investigation work carried out on Ms Harney's behalf.

There followed a High Court objection by the two companies and Ms Margaret Heffernan, a director of both companies. This was the first of a number of hearings, both in the High Court and Supreme Court, concerning appeals against the appointment.

The officer who is to investigate the companies' books is Mr Cyril Houlihan, who will file his report to the Director of Corporate Enforcement, Mr Paul Appleby.

Mr Appleby's office was set up two years ago by Ms Harney and has responsibility for company law investigations since 2001.

The reports of authorised officers are confidential but may be passed to other interested authorities. They have in the past led to the appointment of inspectors, whose reports may be published.

Following a decision in favour of the ODCE in the High Court on May 9th last, the Dunnes companies were given 28 days to consider whether they wanted to appeal. That period expired yesterday and the work of the authorised officer is to start immediately.

One of the first documents Mr Houlihan will be seeking is a report drafted by Price Waterhouse (now PriceWaterhouseCoopers) in the wake of Mr Ben Dunne's removal from his executive role at the head of the group in 1993.

The report is understood to list a series of items, mostly irregular payments, relating to Mr Dunne's years at the helm, many of which are likely to be of interest to an authorised officer. However, Mr Houlihan's inquiry will not be restricted to the period when Mr Dunne was in charge of the group.

Another issue which may be examined is the relationship between the Dunnes companies and its suppliers.

It is known from the Moriarty and McCracken tribunals that Mr Dunne had a practice of in effect controlling companies which were supplying goods and services to the group, dictating the prices they could charge and rewarding them according to his estimate of their performance. The details of how this operated were explained to the tribunals in relation to Mr Michael Lowry's refrigeration company, Garuda Ltd, which has itself been the subject of an authorised officer's inquiry.

As part of the arrangement with Garuda, Mr Dunne made offshore payments to Mr Lowry which Mr Lowry failed to declare to the Revenue.

The auditors to Garuda were Oliver Freaney & Co, the auditors to the Dunnes group.

It also emerged from the McCracken tribunal that Mr Dunne established companies in the Far East which he controlled and which supplied goods to the Dunnes group. The price paid for these goods was set by Mr Dunne and was in general set at a higher price than might otherwise have applied. The surpluses which then accumulated in the Far Eastern countries were on occasion sent to a trust in Switzerland or a company in the Isle of Man, or were collected by Mr Dunne during his visits to the region.

One of the effects of this was that Mr Dunne was managing to get funds out of the Dunnes group, which is owned by a trust.

The Dunnes group told the Moriarty tribunal that it had settled with the Revenue in relation to items which arose out of the period during which Mr Dunne was at the helm of the family group.

As part of the fallout from Mr Dunne's removal from his executive role in the Dunnes group, he initiated legal proceedings wherein he was to claim that the Dunnes trust was in fact a "sham". The case was settled before it came to court.

Any evidence that the Dunnes trust was a "sham" could have enormous Revenue consequences for the group and the beneficiaries of the trust, consequences which could in turn threaten the group. The trust was set up in the 1960s and is due to come to an end in 2006, unless it is granted a further extension by the Revenue.

Mr Noel Fox, the accountant who was an adviser to Mr Dunne, was the man who received the initial approach from the late Mr Des Traynor, who was seeking funds for Mr Charles Haughey. Mr Fox in turn conveyed the request to Mr Dunne. This occurred in 1987 and a number of large payments occurred over the following few years. Mr Fox was a member of the Dunnes trust and a partner in Oliver Freaney & Co, the firm which acted as auditors to the Dunnes group.