GOODBODY STOCKBROKERS was forced to make “significant personnel changes” after it operated an illegal scheme to trade the shares of Allied Irish Banks (AIB) in 2001, according to the Financial Regulator.
It also emerged yesterday that AIB lost £56 million (€60 million) in 2008 in a UK property scam that is being investigated by the Serious Fraud Office in Britain.
In response to claims raised by a former AIB auditor earlier this week to the Oireachtas Joint Committee on Economic Regulatory Affairs, the regulator said a Goodbody scheme to allow the firm to trade AIB shares “had not operated in accordance” with agreed arrangements. Eugene McErlean, AIB group internal auditor from 1997 to 2002, told the committee on Tuesday that Goodbody operated the scheme using tax havens in the Pacific and the Caribbean.
The regulator said AIB followed procedures at the time to report the matter to the Garda for suspicions of money laundering under the Criminal Justice Act 2004. “Having reviewed the relevant files we can confirm that all reporting obligations were met by the bank,” said the regulator.
In response to Mr McErlean’s claims, the regulator said AIB’s capital markets division investigated the share scheme and sent a report to the Central Bank and AIB’s internal audit committee. The scheme “had not operated in accordance” with arrangements previously agreed with the Central Bank and Irish Stock Exchange, which allowed the stockbroker firm to trade in AIB’s shares.
In response to the UK fraud, AIB is considering taking legal action against “a number of parties” to recoup its money. AIB accounted for the losses in 2008.
AIB lost money from selling properties backing loans, potentially amounting to hundreds of millions of pounds, that were provided to a fraudster. The loans were made from 2003 to 2007 to buy buildings in London.
The suspect used fraudulent documents from a large property firm which guaranteed higher rents and longer leases than were being paid. This enabled the suspect to place a higher value on the properties and to borrow sums of money from AIB in excess of what the properties were worth. To date, no arrests have been made.
