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3 June 2004 Edition

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Absolute bankers!


Gerry Scanlan, Roy Douglas and Tom Mulcahy

Gerry Scanlan, Roy Douglas and Tom Mulcahy

Three weeks ago, AIB were caught overcharging thousands of foreign exchange customers. Two weeks ago, it was the mismanagement of trust funds in their care and this week it emerged that some of the top executives of the company were involved in a special elite company whose operations involved tax fraud and possible insider dealing.

The disclosures involved Gerry Scanlan, a former AIB chief executive and currently on the board of fruit company Fyffes; Roy Douglas, the outgoing chair of Irish Life and Permanent; and Tom Mulcahy, also a former chief executive of AIB and until this week the chairperson of Aer Lingus.

The executives were investors in a Virgin Islands-based company called Faldor, managed by AIB Investment Managers. Roy Douglas made clear that it seemed to him the investments were a perk of office.

And it was in this view of Douglas that the reality of corporate life in Ireland was exposed in all its inequality and exploitation. The directors of AIB and other financial institutions earn salaries and perks including substantial pension contributions and share options, yet they still sought ways to earn more money.

The money involved in Faldor was insignificant compared to their total salary, yet it was still worth being involved in for executives who could have lost millions in earnings had their impropriety been found out. Obviously, the AIB executives never feared discovery and it was only because of a whistle blower that we have discovered any of the AIB scandals.

Speaking on the weekend about the latest AIB scandal, Sinn Féin President Gerry Adams said: "Naming the alleged culprits is not enough. If there is evidence of wrongdoing, arrests should be made".

Adams believes that the government's response to this breach of tax law has been totally inadequate. "This option has rarely been exercised against those in banking or other financial institutions, or for that matter, politics, the judiciary, developers or other people in certain sectors who bring their own professions into disrepute by their involvement in white collar crime. Apparently this little golden circle is above the law."

Little wonder that there is increasing disillusionment with politicians and institutions. There are two laws. One for the rich and another for the rest of us.

Is this what Minister McDowell meant when he said inequality is an incentive for the economy?"

The 2002 Garda crime statistics showed over 7,000 juveniles cautioned by the Gardaí. There are no figures for corporate crimes or tax fraud, however the Office of Corporate enforcement annual report this week showed 43 convictions secured last year against 26 individuals. It seems that there is some imbalance in how the resources of the law are applied in Ireland today.

I wonder can the specially acquired water cannons for May demonstrators be used down at AIB headquarters?

"AIB was allowed to operate with impunity" - Ó Caoláin

Ongoing revelations show that there is a "culture of rampant corporate greed in the banking sector, and especially in AIB", said Sinn Féin Dáil Finance spokesperson Caoimhghín Ó Caoláin. He was addressing the meeting of the Oireachtas Finance and Public Service Committee, which on Tuesday discussed the current banking scandals with the Governor of the Central Bank, John Hurley.

"It should be noted that all the abuses on the part of AIB recently revealed took place on the watch of the Central Bank and before the Irish Financial Services Regulatory Authority got up and running," said Ó Caoláin. "It should also be noted that these revelations have come not as a result of investigations by the Central Bank or by IFSRA but through whistle-blowing within AIB itself.

"The overcharging of foreign exchange customers went on from 1994. We are told that it was known within the bank since 2002. The estimate currently for the amount involved is €25 million but that may well be conservative.

"Since 2000, between 500 and 600 mortgage holders have been paying up to €50 extra per month for mortgage insurance without their approval in another rip-off of customers by AIB.

"And to top it all we have the admission that senior AIB executives were evading tax through special offshore accounts, including Faldor, registered in the British Virgin Islands.

"There are still many unanswered questions about these accounts. It appears that senior AIB executives ran them as part of the normal internal business of the bank. Beneficiaries — who claim they were unaware of the tax evasion involved — have been identified but those responsible for administering this tax evasion scam have not been identified.

"Will we see prosecutions? That will be the real test of the new regulatory framework for the financial sector. All of this adds up to a culture of rampant corporate greed in the banking sector, and especially in AIB. The question people are asking is has anything really changed?

"This State bailed out AIB after the Insurance Corporation of Ireland fiasco in 1984 to the tune of many millions and got nothing in return. On the contrary, from 1986 AIB was centrally involved in the DIRT scandal which deprived the public purse of massive amounts of revenue at a time when health and education cuts were being imposed on our people. The Public Accounts Committee found that most of the senior management at AIB were well aware of the bogus non-resident accounts."

Ó Caoláin said it needed to be explained "how AIB could operate with such impunity for so many years and without interference from the Central Bank? Why was there never a single prosecution?" He concluded that we must avoid a situation "where it is only the institution that is held responsible, with fines and penalties inevitably being passed on to customers. We are talking about some of the most highly paid individuals in the economy here, in a company that has made record profits. They must be held accountable."


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