Plot thickens as Douglas points finger at AIB

Douglas statement analysis:  The statement from Roy Douglas suggests that the Faldor scheme was an AIB operation rather than a scheme set up by executives. Colm Keena reports

The scenario concerning Faldor, indicated by the statement from Mr Roy Douglas, is an even more malign one than the already shocking picture painted by AIB itself in its statement last Thursday.

That senior managers of the bank were being invited to partake in an investment scheme that was operated by AIB Investment Managers Ltd (AIBIM), and which used a British Virgin Islands registered company as a front, raises a picture of executives being invited into improper schemes not of their own making, as they ascended the corporate ladder.

The picture is all the more worrisome given that the Faldor account was given preferential treatment over other accounts being handled by AIBIM. The account benefited from the improper use of AIBIM inhouse accounts and improper deal all-cation practices - matters that will be of particular concern to AIBIM's client base.

The AIB statement on Thursday gave the impression that the bank discovered these matters in September 2003, and immediately contacted the authorities. If it is the case, as suggested by the statement from Mr Douglas, that in fact contact with the authorities only occurred after the bank discovered that it was about to be rumbled anyway, then this undermines any attempt the bank may now be making to claim that problems with its culture belong in the past.

It may also have implications for any claim that the approach by the bank to the Revenue was in the nature of a voluntary disclosure.

The Ansbacher scandal raised the issue of corporate knowledge in relation to CRH, i.e. the issue of whether the company itself could have been said to have known about the Ansbacher scheme given its numerous links to that operation.

In this latest banking scandal, the use of inhouse accounts and preferential deal treatment, along with the fact that AIBIM was managing the account and that the Faldor beneficiaries were some of the most senior figures in the bank, all raise the issue of corporate knowledge of the scheme. Whether the legal requirements for such a finding exist is not clear.

Despite the lengthy statement by the bank on Thursday, and the questions its press office has been asked since then, the matters at the heart of this controversy are still far from clear.

What exactly was the relationship between the Faldor account and the other accounts referred to by the bank in its statement, involving five other executives including the former Aer Lingus chairman, Mr Tom Mulcahy?

Were these offshore accounts being handled by AIBIM for senior executives in a similar way to the Faldor accounts? Were the people involved invited to get involved in an AIBIM scheme, as Mr Douglas says he was? Were there other such accounts prior to 1989?

The bank has said the €800,000 liability to the Revenue that it has "underwritten" involves a corporate liability arising out of these matters but is not connected with the Faldor account.

Exactly what is involved is not at all clear. Did practices followed by AIBIM in relation to dealings with the non-Faldor accounts in some way lead to this liability?

Or is the bank accepting liability for the tax debt on funds received by a number of senior executives, because it was responsible for offering these senior executives remuneration by way of a structure that invited tax evasion?

The bank has said that three of the five executives are still with the bank and that they had an average of €16,000 in untaxed funds in their accounts. That makes for a total of €48,000. How does this fit in with a tax bill of €800,000, even taking possible interest and penalties into account and any funds the other two executives had in their accounts? It is not even clear whether the €800,000 liability is connected to the funds in the non-Faldor accounts.

The bank refuses to expand on these matters despite the obvious legitimate interest of its customers. Perhaps it is time the Irish Financial Services Regulatory Authority explained what exactly was going on in AIBIM. It might also enlighten the public as to whether these sorts of practices pre-dated the establishment of the Faldor account in 1989.