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11 July 2002 Edition

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Ansbacher exposes corrupt elite

Sinn Féin Dáil group leader Caoimhghín Ó Caoláin has described the Ansbacher Report as a "damning indictment of the wealthy elite in Irish society" and of successive governments and the Central Bank who failed to tackle massive tax evasion and avoidance organised by financial institutions.

"It finally reveals officially what has been known for a long time - that Ansbacher was a massive scam operated for years for the benefit of some of the wealthiest people in Ireland," said the Cavan/Monaghan TD.

"Its purpose was to ensure that these people made no contribution to Irish society through taxation. This was at a time in the 1980s and early '90s when our people were suffering the effects of cutbacks in health and education and other public services. While peope died on waiting lists, others queued up to be part of this exclusive banking club. Our pubic services, particuarly health, have still not fully recovered from the cuts of that time.

"Those who could most afford to contribute to the public finances at a time of economic downturn were the very people who went to great lengths to swindle the ordinary PAYE taxpayer who bore the burden.

"The real question to be answered now is whether any action will be taken against the financial institutions who facilitated white collar crime in the Ansbacher scandal and other scams. White-collar crime has enjoyed a virtual amnesty in this State up to now. If this report is not a turning point for the accountability of financial insitutions, then it will have been a wasted exercise."


Ansbacher - the untold stories


There are a handful of Gardaí seconded to the new office of corporate enforcement. The rest were obviously needed on the beat, policing the double standards that permeate our society today
So now we know the Ansbacher names. We know the architects, the builders, the property developers, the bankers, doctors, solicitors, and self-styled business entrepreneurs who participated in one small but hugely lucrative tax scam.

We can say small because we don't know how many other Ansbacher type schemes there are. In recent weeks, we have seen the Revenue Commissioners' report, which details action being taken against 1,800 holders of illegal non-resident bank accounts, accounts which were opened knowingly for them by every major financial institution in Ireland. There was also National Irish Bank's Clerical Medical Insurance tax scam.

This is what we know of and throughout the media we are told there must be more Ansbacher type operations. But no one is telling us how they will seek out these tax criminals. In fact, we are told it might be difficult to successfully prosecute any of the Ansbacher account holders who are found guilty of fraud.


Why are we stepping delicately around this issue? Why do we have to have news reports that carry the caveat that we cannot say that among the most wealthy in our society, among the decision makers and the institutions of the state, we will find fraudsters and criminals, thieves and liars.

It seems that we are not supposed to say that, even though in just one small example of one small bank, we can point to the banks, the accountants, the solicitors and private companies who broke the law. We can point to the institutions of state that are at best unable but more likely just unwilling to halt this fraud.

We can point to the governments that lacked the political will and resolve to tackle this problem of fraud and tax crime. They cannot say that they didn't know and weren't aware of the scale of the problem. It was the establishment parties who in 1988, 1989 and again in 1993, set up tax amnesties to allow the tax criminals go free. At the same time, the same parties were filling prisons with thousands of young men involved in non-violent theft, where the value of goods was often less than a £100.

For example, Garda statistics for 1993, the year of the last tax amnesty, show that there were 47,000 larcenies recorded. Almost 45% of these involve amounts of less than £100. Less than 63% of the thefts involved amounts of less than £200.

There are no Garda statistics in this or any other year for tax crimes. The Gardaí don't even attempt to record, let alone detect tax crime. There are a handful of Gardaí seconded to the new office of corporate enforcement. The rest were obviously needed on the beat, policing the double standards that permeate our society today.


So why were the politicians in Fianna Fáil and Fine Gael especially so reluctant over the years to act against tax criminals? One obvious answer is to look at the roll call of shamed TDs in recent years, with Burke, Foley, Flynn, Haughey, Lawlor and Lowry listed.

However, this is dangerous ground. It would be completely misleading to suggest that just because of a few rotten apples, the body politic is diseased too and of course, then there are the legal issues. Just because you have one or two or even three tax fraudsters in a government, and even if one of them is Taoiseach, it would be completely misleading to say that they are a corrupt government. That would be illegal.

But who wrote this legal code? Who compiled these laws that protect the wealthy, punish the poor and overlook the misdemeanours of the rich professionals? Who practices the law and fills it with terms and language that nullifies the righteous anger of those who weren't stockpiling their wealth in illegal bank accounts, who don't have vast sums of money unspent and don't have access to the professional advice that would let them defraud the Irish taxpayer.

It is the very same group of people who are defrauding us in the first place. The politicians, bankers, accountants and legal eagles who coerce, legislate, police and prosecute us are the very ones who have compiled laws and codes that apply to us but not to them. Nice one, lads. You must have been laughing into the whiskey decanters while puffing on the overly large cigars every weekend.


However, there is still one story left untold from the Ansbacher saga. It is the tale of two Dublins. You see, in one city, there was a nice man called Des Traynor who lived in a pleasant respectable and obviously wealthy community. Traynor's neighbours and friends often approached him for advice and usually help in investing their money.

Traynor did help not just with advice; he set them up accounts to illegally hide their money from the Revenue Commissioners. Traynor was not alone in the advice business. Often his clients were referred to him by accountants and tax consultants.

One Cork businessman, Cornelius Collins, told the Inspector how he was advised by Stokes Kennedy Crowley to invest his money offshore and out of sight to the Irish tax authorities. Stokes Kennedy are now known as KPMG, one of the largest accounting firms in Ireland and part of one of the largest accounting companies in the world.

However, the healthy cooperative nature of this business community does not end there. Sometimes Traynor would arrange loans for his clients - loans where it was unclear how much interest was being paid. Unclear in that it seemed considerably below commercial market rates.


Then there was the case of friends in this financial community who help friends in trouble. Independent News and Media chairperson Tony O'Reilly spent more than £1 million paying the debts of Vincent Ferguson and Jim McCarthy. The three had all been directors of Atlantic Resources, an oil exploration company.

Ferguson, McCarthy and the already mentioned Cornelius Collins, had used the Ansbacher accounts to secretly buy shares in their company. It all went wrong, and they lost their money. In stepped O'Reilly who, in 1997 and 1998, paid the debts of Ferguson and McCarthy.

So what about the other Dublin? It is one where people have the problem of not too much money but too little. They don't have the helpful bank manager or accountants to call on. They don't get the help of the private banking services that all the banks offer to their wealthy clients. They don't get preferential loan rates or their debts written off when in financial difficulties. In some cases, there aren't even banking services in their local areas, not even an ATM machine, as these banking customers are not profitable enough for AIB and Bank of Ireland and others to be bothered with.


There are over 60 moneylenders licensed by the Director for Consumer Affairs who can charge loan rates of up to 195%. Alongside this, we know there are illegal moneylenders who charge even higher and more extortionate loan rates.

Families in this other Dublin, this other Ireland in fact, get into debt to fund communion and confirmation clothes, to buy Christmas presents. Their lack of money leads to their being exploited over what are often incredibly small amounts of money.

Meanwhile, in that other Dublin, those who have large amounts of money find the exact opposite experience. Take, for example, the case of David Doyle, who with other family members ran one of Ireland's best known hotel chains.

David set up an offshore account in 1983. Unlike Ferguson and McCarthy, he made money from buying and selling Atlantic Resources shares. These and other share dealing profits were hidden from the Revenue Commissioners. He did, though, make a settlement with the Revenue Commissioners in 1993. And one of the last withdrawals of funds from his Ansbacher account was to buy himself a new car in 1990. It was a Mercedes SL and he thinks it was "about £80,000 or £90,000".

Somehow, if David had to live in that other Dublin, I think he would know exactly how much his car cost.


What the Inspectors found

Secret Banks

For 20 years, Des Traynor, John Furze and others conspired to defraud the 26-County state. They were knowingly breaking the tax code, banking and company law of the 26 Counties by running a secret bank in Ireland. For years, the bank was run from the offices of one of Ireland's leading companies, Cement Roadstone Holdings (CRH). Traynor was chairperson of CRH. Many of CRH's directors used the Ansbacher accounts to hold their money hidden from the Irish tax authorities

The Inspectors conclude that CRH assisted Ansbacher in carrying out its activities in Ireland, many of which we know to be fraudulent. Amazingly, the report also concludes that even though seven directors of CRH had Ansbacher accounts, it was unclear whether the company "knowingly" gave that assistance to Ansbacher.

Traynor was Ansbacher's chief spider at the centre of a large and complex web of accounts, trusts and shell companies. He looms large in the life and financial affairs of Charles Haughey, who claimed at the Moriarty tribunal that Traynor was in complete control of his financial affairs. It was Traynor who lobbied for Ben Dunne and others to give money to Haughey. It was he who laundered Haughey's plundered millions offshore.

Irish Business

The Ansbacher report gives a stunning insight into just a few examples of how Irish companies conducted their affairs. In many cases, it was commonly accepted practice for business entrepreneurs to hide the profits of their business in illegal offshore accounts.

In many examples, the tax consultants and auditors to these companies were active enabling board members and shareholders, siphoning money out of the Irish economy.

Traynor and others regularly set up a battery of shelf companies and trusts to hide the name of the true beneficial owners of the companies.

Neil McCann, Fyffes' chief executive, admitted to the Inspector that the company deliberately understated its profits and moved the money through a subsidiary company based in the Cayman Islands. Some of the money was used to make bonus payments to staff as well as paying suppliers.

Ignorance and forgetfulness

Many people who had secret bank accounts and shares in shelf companies told the inspector that either they didn't know the accounts were held offshore or that they had forgotten the details.

Take for example Ronald Chambers, who set up a discretionary trust with Des Traynor in 1972 but did not hear of Anbacher until the 1997 McCracken Tribunal. He could not remember a £90,000 loan he took out in 1974.

The already mentioned McCann could not remember if his company had funds in Ansbacher, but he has agreed that this must have been the case.

The Central Bank

The institution that is supposed to regulate the banking sector was found by the Inspector to have failed to "test, appraise and gather the information available to it". This resulted in the "true nature of Ansbacher's activities going undetected". Officials at the Central Bank raised their concerns about the Guinness and Mahon Cayman Trust, which was later renamed Ansbacher Cayman in 1976. The true activities of Ansbacher remained hidden for a further 21 years.

One of the Ansbacher names, Ken O'Reilly Hyland, was a former board member of the Central bank. O'Reilly Hyland had an offshore trust in the Bahamas which he moved into Ansbacher.

In his interview with the Inspectors, O'Reilly Hyland could not remember a company called Beresford Investments in which documentation names him as a major shareholder and with which the Inspectors had documentation showing six-figure loans secured by his Ansbacher deposits.

The Irish Banks

If you are wealthy enough you can forsake the banking queues and the erratic service. All the major banks have specialised services for their "high net value" clients. You get not just the cup of coffee in luxurious surroundings - when you are at your special branch you also get special cheque books, credit cards etc and expert advice.

The Ansbacher Report gives an example of just one of these banks, Bank of Ireland Private Banking (BOIPB). Des Traynor opened accounts in BOIPB in 1992. The accounts were in the names of two Cayman-registered companies.

The inspectors conclude that BOIPB failed to question Traynor about the residential status of the beneficial owners of the accounts and that BOIPB assisted Ansbacher in concealing the Irish identity of some of the beneficiaries. Finally, the inspectors conclude that Bank of Ireland "perhaps unwittingly" assisted Ansbacher in defrauding the Revenue Commissioners".

It leaves a big question as to whether there were other similar cases of fraud happening in Bank of Ireland and calls into question the activities of the other banks, who offer specialised banking services for their richer clients".

IIB Bank, formerly called Irish Intercontinental Bank, is also cited by the Inspectors for providing assistance to Ansbacher between 1991 and 1997.

Advisers and Evasion

If you trawl through the statements of Ansbacher account holders, two things become clear. The first is that among the professional classes it was deemed entirely acceptable to defraud the state and hide your money in offshore tax shelters. The rich clearly felt that they could avoid paying tax.

Also clear is that in many cases their advisers and accountants felt this too and advised their clients to open offshore accounts out of sight of the Revenue Commissioners, even though they knew this was a breach of the tax code on which they were acknowledged experts.

Two names that crop up in the report are those of Don Reid and Alex Spain, in the context of advising people to set up offshore accounts. Spain is current chairperson of DCC, a large industrial conglomerate on the Irish stock exchange, while Reid has held and still holds many directorships. He was chairperson of the Irish Times.

The Builders and Developers

While not at all a Who's Who of the wealthy in Ireland, the Ansbacher names do show common threads between one economic sector, that of housing and property developers. The Ansbacher accounts are filled with relevant names of people from this sector, including architects Arthur Gibney and Sam Stephenson.

Other builders and developers included George Crampton, as well as many other Crampton executives; John Finnegan of Finnegan Menton estate agents; Thomas Jackson a director of Monarch Properties; property developer Clayton Love Junior; builder Edward Lynam; and builder Sean McKeon, who was as a partner in Sheelin Homes.

This snapshot clearly shows how one sector of the economy, which is vitally important to the state in terms of housing and building the offices, shops, roads and other physical infrastructure needed in a modern economy, is also hugely profitable to those involved. It seems that everyone, from architects to investors, builders and vendors, was reaping the substantial rewards.

The real question is, who was paying for these profits?



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