In the early 1970s a new marketing term was becoming fashionable, the former chief executive of AIB, Mr Gerard Scanlan, told the Moriarty tribunal yesterday. Prominent wealthy people were called "KBIs", meaning key business influencers. Mr Charles Haughey would have been seen at the time as very much a KBI.
"Any bank manager would be delighted to have a KBI or key business influencer on his books," Mr Scanlan explained. Mr Haughey would have been "regarded as a valuable or valued client". He was "obviously very prominent, obviously very influential and had all the appearances, as I understand it, of being affluent".
By the mid-1970s, however, Mr Haughey's accounts were causing difficulty and the bank's attitude towards him changed. Mr Scanlan said: "This dream account or dream relationship turned into what I suppose I would describe as a banker's nightmare."
The account was getting very rigorous attention, yet was proving "very, very difficult to control". The bank would "normally not expect KBIs to conduct their affairs with the bank in the way Mr Haughey conducted his".
The bank manager had been told by his superiors not to dishonour Mr Haughey's cheques. Mr Scanlan said he thought this decision was taken at Dublin board level. The branch gave Mr Haughey's cheque books to his agent, Haughey Boland and Co, and might have been loath not to hand them over as it might have been perceived as a "slur" on Mr Haughey's character.
From 1976 the bank began putting the interest on Mr Haughey's accounts into "suspense accounts", meaning it was money which the bank considered might never be paid.
When Mr Haughey's representative, the late Mr Des Traynor, began discussing settlement terms with AIB in December 1979, the "backdrop" to the bank's attitude to the amount which could be discounted was the amount in the suspense account. Mr Scanlan said he would "expect" that Mr Traynor did not know how much of the £1.143 million was suspense interest. At the time it was just below £400,000.
In the event, that was approximately the amount discounted. (AIB's domestic banking profit in 1979 was £26 million). Mr Haughey paid £750,000. However, he also agreed "as a matter of honour" to pay off a further £110,000 at some date in the future. Meanwhile, no interest was to accrue. The bank held on to deeds for Inishvickillane, Co Kerry, and lands in Co Sligo, but did not take the legal steps to have the deeds noted as securities.
The £110,000 was never paid and yet the deeds were returned in 1990. Mr Scanlan, who used to keep Mr Haughey's file in his safe in his office, said he played no part in this matter. The deeds would have been kept by the securities department.
Mr Scanlan agreed with Mr John Coughlan SC, for the tribunal, that the AIB board, despite having securities to cover the amount owed, agreed the terms of the settlement because Mr Haughey was a prominent politician and had threatened that he could be a difficult adversary. "I can't draw any other conclusion," Mr Scanlan said. However, he said Mr Coughlan was "quite wrong" when he suggested that the level of discount "far outweighed any such forebearance the bank had ever engaged in before".
He agreed with Mr Justice Moriarty that it was true that bankers believed "if you owe us £1,000 it's your problem; if you owe us £1 million it's our problem". Mr Scanlan said: "The evidence is before us."
The finance director with Guinness & Mahon bank, Ms Sandra Kells, gave evidence about the £750,000 used to settle Mr Haughey's debt. The money came from an account with Guinness & Mahon which was opened by Mr Traynor in his name on December 11th, 1979. This was seven days before Mr Traynor met AIB executives and offered £600,000 as full and final settlement of Mr Haughey's debts.
There was a lodgement to this Traynor account of £150,000 on December 11th; £355,000 on January 16th, 1980; £50,000 on January 18th; £150,000 on January 24th; and £80,000 on February 13th. The total comes to £785,000. AIB got £750,000 in three drafts. Also, £30,000 was paid to Haughey Boland & Co, No 3 account, and £5,862 withdrawn on another date. The account was closed in January 1981.
No evidence was heard as to where the money may have come from. In an interview with the Sunday Business Post last year Mr Patrick Gallagher, formerly of the Gallagher group, said at the time of Mr Haughey first being appointed Taoiseach, in 1979, he agreed to pay half of a £750,000 debt which Mr Haughey told him he wanted to clear. Other unnamed individuals were to deal with the rest of the debt.
The tribunal has adjourned until next Tuesday week. It is expected that evidence will be heard from the former deputy chief executive of AIB, Mr Paddy O'Keeffe, who played a central role in negotiating the settlement of Mr Haughey's debt. Further evidence is also expected on investments in Celtic Helicopters.