Allied Irish Banks has admitted that £250,000 worth of shares bought by one of its subsidiaries in 1988 as part of an alleged scheme to support their price were sold on to two of the bank's staff pension funds.
The admission follows a claim on Tuesday by AIB's former group internal auditor, Mr Tony Spollen, that the bank, rather than publicly admit that a share issue had failed, put the stock into the pension funds - and did not inform the Stock Exchange.
But the bank has insisted the transactions - involving £250,000 worth of shares in exploration company Dana Petroleum - did not involve any "notifiable offence".
Mr Spollen told the Dail Public Accounts DIRT hearing that the Dana share issue had gone badly wrong and that AIB had transferred the shares into the pension funds to support the Dana share price.
The share issue was handled by Allied Irish Securities, the then recently formed stockbroking subsidiary of AIB, and was underwritten by Allied Irish Investment Bank, which also advised Dana on the share issue. AIIB received a £30,000 commission on the Dana share placing.
However, when Dana came to the market at the end of May 1988, the shares were not well received. Offered at 45p, they initially rose to 47p, then fell to 20p before closing at 33p. Rather than admit its stockbroking firm had failed to find investors willing to buy the Dana shares, it is alleged the underwriters then acted to make the placing look successful.
Asked yesterday if Dana shares were put into any AIB pension fund by AIB or any of its subsidiaries in 1988, a spokeswoman for AIB said that one of its subsidiaries, Allied Irish Investment Managers, had subscribed for 25 per cent of a £1 million share issue by Dana at a total cost of £250,000.
These shares were then placed in two AIB pension funds - £173,000 in the AIB pension fund and £74,000 in the widows' and orphans' fund.
The spokeswoman confirmed the pension funds paid for the shares involved. AIB also reiterated comments by its chairman, Mr Lochlann Quinn, to its 1998 annual general meeting that the bank had hired two independent law firms to investigate the Dana dealings. They reported that no offences had been committed.
At the time the share support operations were alleged by Mr Spollen to have taken place, there appears to have been no regulations which would have prevented the placing of the shares in the pension funds.
A company law expert told The Irish Times that "there was no inside dealing legislation, no market manipulation legislation and stockbrokers were regulated from London by the Securities and Futures Authority of the London Stock Exchange. In effect there was no Irish regulation".
Stock Exchange chief executive Mr Tom Healy declined yesterday to comment on any specific company but he pointed out that Exchange rules covered share issuers and the shares involved rather than the investors.
The Pensions Board also said it had no role in the supervision of investments by pension fund trustees, who were required to invest pension funds prudently.
The public disclosure that Mr Spollen had estimated that AIB had a potential £100 million liability to DIRT in 1991 was central to the establishment of the Public Accounts Committee's inquiry. The bank has been seeking at the hearings to undermine Mr Spollen's version of events.