AIB `could not have had DIRT amnesty'

AIB could not have had a Revenue agreement or amnesty on its DIRT arrears liability because of the scale of non-disclosure by the bank, according to a former senior executive.

Mr Tony Spollen, head of AIB's group internal audit until 1991, when he left the bank, said "in the real world" the Revenue would not have countenanced an agreement "in a million years" if they had understood the scale of the problem.

"My whole sense of the thing is that there was not an amnesty and my reason for that is I felt that if this was totally bona fide, genuine, we could have got some sort of letter," he told the inquiry.

Mr Spollen added, however, that even if they had got a letter from the Revenue, he was concerned that because of the extent of the problem "the Revenue always have the right to go back".

Mr Pat Rabbitte TD put it to him that there might have been "an informal agreement to leave well enough alone and to look to the future". He replied, however, that "it was too big in my opinion to take a verbal assurance".

Mr Spollen, who drew up the bank's £100 million potential liability figure, said it had been heavily criticised, but it was not so "off-the-wall", because the bank's financial director, Mr John Keogh, went to the Central Bank about it. "The group financial director of the biggest institution in the State wouldn't call the Central Bank and say we have done preliminary figures, £600 million, if he thought it was a crazy figure."

The £600 million was a preliminary figure, but £463 million was used in the end and £400 million was reclassified from non-resident (in the State) to resident accounts.

Mr Don Walsh, a senior AIB executive, said, however, that there was an "unreconciled difference of £160 million", and what Mr Spollen had outlined was "funda mentally wrong". He told the inquiry that the bank's chairman, Mr Lochlann Quinn, had already outlined what the calculation should be, a maximum liability of £35 million.

The inquiry chairman, Mr Jim Mitchell, asked Mr Walsh if at the time he had queried Mr Spollen's figure. Mr Walsh said no, but he had made it clear to Mr Spollen that nobody was in a position to come up with a figure. The chairman said somebody obviously had drawn up a percentage, but Mr Walsh said there was a file note of the unreconciled difference, so that was evidence of a disputed figure.

Mr Spollen said the chairman of the bank's audit committee, Mr Jim Culliton, had not rubbished his figures, he just did not consider them. "Mr Keogh is a very persuasive man" and he persuaded the bank's audit committee and Mr William Cunningham of PricewaterhouseCoopers, the bank's external auditors, that the bank had an amnesty, he said.

He said that between March 6th and May 6th 1991, when the accounts were signed off, almost £400 million in accounts was reclassified from non-resident to resident, which showed the £100 mil lion liability figure was not so crazy.

On March 5th, the group taxation manager, Mr Jimmy O'Mahony, had a telephone conversation with Revenue and was given an effective amnesty. Mr Spollen believed that if the Revenue was aware of between £400 million and £600 million in bogus accounts, it would not take a write-off of that magnitude. The evidence suggested the Revenue was not in possession of the facts at the time "so that was why it was vital that I should get some piece of paper" confirming the apparent agreement to "look forward".

Now an independent audit consultant, Mr Spollen said he calculated the £100 million DIRT liability based on the figure he had been given that 60 per cent of the bank's £1 billion in non-deposit accounts could potentially be bogus. Mr Spollen said that on the same day he received the 60 per cent calculation of potential bogus accounts he was told: "Don't worry about it, because the Revenue are forgetting the past."

He said he had written to another senior executive expressing his concern that the Revenue might have been misled. He said he was not commenting on whether it was intentional or not, but he later told Mr Rabbitte he did not think the bank purposely misled the Revenue.