On December 15th, 1983, a seminar held at the Stormont Hotel in Belfast was attended by a large number of investors and brokers interested in a company which was boasting higher than usual rates of interest.
Some of those present already had investments with the Gibraltar-based company, International Investments Ltd (IIL). They knew the main figure involved, Mr Finbarr Ross, and they wanted to hear how the investments the company had made with their funds were performing. Marvellously, they were told. Marvellously.
Moreover, there were excellent opportunities on the horizon, which required additional fundings. Mr Ross mingled with those in attendance, full of optimism and excitement about the opportunities he had identified. Later, when everything had gone awfully wrong, those in attendance would give the RUC details of what was said to them then. And in 1993, 10 years later, an RUC officer making enquiries in Gibraltar would come across a draft of the address that was made to the seminar that day, outlining the excellent prospects for the future. The draft and the recollections tallied perfectly.
Following the Stormont Hotel seminar, one investor deposited £44,060 sterling with IIL. Another man invested £15,000 by way of cheque, and £1,000 cash. Another investor, having been briefed by his broker who had attended the seminar, re-invested an existing deposit with IIL of £400,000 sterling. These investors would never see their money again. At the time of the seminar IIL was hopelessly insolvent, and had been for roughly the previous 18 months.
The evidence of the investors mentioned above forms the basis for some of the charges the RUC now wishes to bring against Mr Ross.
On December 31st, 1983, statements of account were sent to depositors purporting to show the value of their invested funds. These statements form the basis of other charges being brought against Mr Ross.
Some 1,200 investors are understood to have been affected when IIL collapsed in 1984, with debts in excess of £5 million sterling. Mr Ross by that time had gone to the United States. He has not returned to Ireland since.
The details outlined in this report are based on a lengthy deposition lodged with the court in Muskogee, Oklahoma, by Insp Noel Leckey of the RUC, who has been investigating the collapse of IIL since September 1986. The RUC investigation commenced in January 1985.
According to Insp Leckey, whose investigations have led to evidence being gathered in Northern Ireland, the Republic, the United States and Gibraltar, IIL was incorporated by Mr Ross in Gibraltar on November 12th, 1976. Two years later it was granted a banking licence to raise deposits outside Gibraltar.
At the time, Mr Ross was a director of the Irish Investment Society, a friendly society registered in Dublin and with depositors in the Republic and Northern Ireland. In 1978, the Dublin authorities introduced new legislation on friendly societies. Mr Ross, acting for the Irish Investment Society, wrote to depositors and, as a result, most transferred their accounts to the Gibraltar-based company, IIL. This enabled Mr Ross to "thus avoid the rigours of Irish banking supervision", according to Insp Leckey.
The Irish Investment Society had an account with Ulster Bank in Newry, Co Down, as had IIL. The IIL investments were transferred back into the Irish Investment Society account in the same bank. This account continued to be operated by Mr Ross. Mr Ross continued to raise deposits from the public.
However, potential targets south of the Border were protected by currency exchange control regulations which were then in force in the Republic. Mr Ross concentrated on Northern Ireland.
"The offering of higher than normal rates of interest coupled with the registration of the company in a jurisdiction inaccessible to the revenue authorities and payment of interest gross of tax, proved an attractive proposition to the public," according to Insp Leckey.
IIL operated in Northern Ireland through a network of about 60 agents, mostly insurance brokers and investment consultants. It had an office in Dublin, where Mr Ross had day-to-day control. A firm of chartered accountants in Gibraltar looked after IIL's affairs there.
According to Insp Leckey's deposition: "IIL's investment of depositors' funds took the form mainly of unsecured loans to individuals or related companies set up by Ross . . . in the Republic of Ireland for the purpose primarily of property developments. IIL had no registered shareholding in the related companies."
Money from IIL was also advanced to a company incorporated in Texas, called Pan European Resources Inc. This company was controlled by Mr Ross and purchased interests in oil and gas wells in the US. Again, IIL had no registered shareholding in Pan European.
Money from IIL was also advanced to Mr Ross himself. Unsecured loans were also made to individuals. These individuals are not named in Insp Leckey's deposition. Difficulties first began to emerge in 1980/81. An auditor expressed concern. As the difficulties persisted, directors resigned. Mr Ross was not himself a director or shareholder of IIL, but was represented by nominees and was the beneficial owner. Unease in Gibraltar rumbled on but the depositors knew nothing of it and brokers were still taking deposits in Northern Ireland.
According to a former employee, by December 1982, IIL was paying interest on existing investments from monies received by IIL from new deposits. By early 1984, brokers had misgivings about the finances of IIL. Around this time, however, Mr Ross took up residence in Texas. Mr Ross told brokers who flew out to Texas to see him that there was a "cash-flow problem" caused by administrative difficulties, but these would be sorted out. In April, a Gibraltar accountant, Mr Timothy Revill, following a preliminary inspection of the IIL books, concluded that the company was "hopelessly insolvent". In June, IIL was put into liquidation.
Following the collapse, an attempt was made to freeze IIL assets in the Republic and the US. A creditors' meeting in August 1984 heard the company was in debt to the tune of £5,470,000 sterling. Mr Revill said he had found "misfeasance and misappropriation on a large scale". IIL funds had been given as unsecured loans to third parties, to companies in which Mr Ross had a beneficial interest, and had been used for personal reasons by Mr Ross, Mr Revill reported.
"Mr Revill could not locate the ultimate destination of much of IIL's funds. However, he did find that none of the unsecured borrowers had repaid capital or made interest payments on outstanding loans in the previous two years," according to Insp Leckey. "Outgoings were being funded by new deposits".
A liquidator was appointed, Mr James Galliano. A committee was set up, chaired by the Irish barrister, Mr Colm Allen. Further investigations were carried out. The loans which IIL had made "proved, in the main, to be irrecoverable".
In 1985, Mr Galliano met Mr Ross in the US and was told that he, Mr Ross, had used IIL funds to purchase assets in his own name but which he "held in trust" for IIL. Discussions took place about a possible "compromise and settlement agreement", but it was never ratified.
Some £1 million sterling from IIL had been used by Mr Ross to buy an interest in the Rosie O'Grady restaurant in Houston, Texas and in Pan European. However, all of Mr Ross's assets were heavily mortgaged and the US banks were to foreclose on them. Some of the assets had been bought with funds other than IIL funds.
Mr Galliano was to conclude that, for most of its trading period, IIL received no income other than deposited monies. An Irish solicitor, Mr Declan Collins, found that investments made by IIL in the Republic were "highly speculative" and mostly in third-rate properties "valued at highly inflated prices".
Loan schedules showed that, as of June 30th, 1982, £3,967,401 sterling was owed to IIL, some £2,819,716 sterling of which was due from Irish companies which were either directly or indirectly under the control of Mr Ross. These Irish companies had also borrowed heavily from banking institutions, and when the banks foreclosed, there was little left for IIL. The RUC first issued a warrant for the arrest of Mr Ross in November 1990. As a result of the ongoing RUC investigation, further warrants were issued in Belfast in June 1996. Subsequent to this, an extradition request was made to the US.
