Potential DIRT liability not raised with bank's board

A potential DIRT arrears liability of £100 million was not raised with AIB's board by its former chairman, Mr Peter Sutherland, because there was "no belief" that it was a realistic figure.

Mr Sutherland, chairman from 1989 until 1993, told the inquiry into deposit interest retention tax that he certainly did not raise the £100 million liability because "there was never the slightest agreement on figures".

The figure was based on an estimate given to the group internal auditor, Mr Tony Spollen, that 60 per cent of AIB's non-resident accounts between 1986 and 1991 were bogus.

Mr Sutherland also told the committee that the DIRT legislation required bank officials to act as "policemen and inquiry agents on behalf of the State with their own customers". This was not easy in the context of a very competitive environment.

The former non-executive chairman, who described himself as primus inter pares (first among equals) with other non-executive board members, said at the time DIRT was not a particular focus point with AIB.

There were serious issues and there was serious disagreement about them, "and that's all", he said.

Mr Sutherland could not remember when a precise figure first came to his attention. All he could say was "there was no belief at all in the bank that that figure was - at any stage that I was aware of - a realistic figure or anything like realistic in terms of liability".

If the figure was ever stated to him he did not take it as an accurate reflection. Mr Jim Mitchell, the inquiry chairman, said it was "quite a huge sum. It equalled fully the profits of the bank in its most recent year at that stage".

Mr Sutherland replied that the audit committee disclosed in the following few months that it was "absolutely contradicted and disagreed with by many executives so there was a complete disagreement on that".

Asked if he had taken steps to get a realistic estimate of the bank's exposure since nobody in the bank accepted the £100 million, Mr Sutherland said they did what was "absolutely appropriate".

They had the fullest possible analysis that was available at the time, and the audit committee's conclusions were in the light of an agreement with the Revenue authorities "to look forward and not back".

When Mr Mitchell put it that there was no attempt by him or anybody else to quantify what the exposure might be, Mr Sutherland replied that there was a great deal of discussion, but quantifying it would have been an extremely difficult task.

Mr Mitchell said he wanted to establish how it was "so easy to rubbish" the £100 million estimate without anyone checking if there was any validity in the estimate. He added that half that amount, or even a quarter would have represented "a very serious dent" for the bank at the time.

Mr Sutherland insisted that the basis of the analysis was seriously contested. He said the issue was fully brought to the board's attention when the internal auditor gave the fullest possible information to the audit committee which carried out a review of the whole situation.