AIB rejected Spollen claim on bogus accounts

A top-level committee of AIB directors was established in 1991 to examine allegations made by the former head of the bank's internal audit department, Mr Tony Spollen.

The committee concluded that Mr Spollen's complaints that management had mishandled some issues - including the treatment of non-resident bank accounts - were unfounded. Mr Spollen resigned from AIB Group soon afterwards.

The committee of six non-executive directors was established by the then AIB chairman, Mr Peter Sutherland, and had full access to Mr Spollen's detailed complaints. He alleged management inaction on bogus non-resident accounts, on which he calculated a tax liability of £100 million was outstanding, and also that the management was unduly interfering with his function as internal auditor.

It is not clear whether the committee discussed or examined the details of this alleged tax liability. It is understood that it concluded that management was handling the bogus non-resident accounts issue satisfactorily and had not unduly interfered in the internal audit function. However, the committee is understood to have been critical of AIB management's handling of a proposed change of position for Mr Spollen.

Mr Spollen became head of AIB's internal audit department in 1986, a job which involved being an in-house watchdog on the operation of the group. In 1991, after five years in the job, he was told that he was to move position as part of a management reshuffle, also involving a number of other executives.

It is understood that AIB management proposed to move Mr Spollen to a position of similar seniority elsewhere in the group, but that Mr Spollen did not favour the move. Mr Spollen drew up a memo containing information about the bogus non-resident accounts and strongly criticised management's response.

This memo was submitted to the audit committee of directors who oversee the financial management of the group which was chaired by Mr Jim Culliton. The lengthy memo was then passed to the group's chairman, Mr Peter Sutherland.

Mr Sutherland immediately established a committee of six nonexecutive directors to examine Mr Spollen's allegations. The group included Mr Culliton, the former chief executive of CRH, Dr Liam St John Devlin, Prof Seamus Sheehy of UCD, Mr Denis Murphy, Sir Douglas Morpeth and Sir Peter Froggett.

The committee met a number of times before concluding that the complaints about management inaction and pressure on the internal auditor were unfounded. Its conclusions were reported to the full AIB board. Subsequently, Mr Spollen resigned from the group in July 1991, following the negotiation of a compensation package. He could not be contacted for comment yesterday.

While the committee of non-executive directors was satisfied about management's handling of the non-resident account issue, it is not clear whether the committee, or the bank's board and senior management, accepted Mr Spollen's estimate of a tax liability of £100 million.

AIB paid £14 million to the Revenue Commissioners to settle the DIRT tax liability it was due to pay on these accounts on behalf of its depositors.

However, the Revenue Commissioners are now believed to be examining whether AIB and other financial institutions provided the tax authorities with full information at the time about the extent of bogus non-resident accounts and whether further payments are due.