The directors of a Dublin bonded warehouse were this week made liable fortheir company's debts. Colm Keena reports

Details of the way money was allegedly stashed in secret bank accounts by the former directors of Eastland Warehousing Ltd were outlined in affadavits prepared for the High Court by the liquidators to the company.

The liquidators said the bonded warehousing business had a significant turnover in the storage under bond of wine. The warehouse collected substantial amounts of excise duty and VAT from traders before releasing wines to them.

The taxes were to be lodged to a dedicated account from where they were forwarded each month to the Revenue by way of direct debit. The company used a warehouse on the East Road, East Wall, Dublin, since 1993.

Not all of the taxes collected by the company were passed on to the Revenue. Because of the straightforward way in which the company operated, no difference should exist between the amount of stock held and the stock records.

However the liquidators, Mr Kavanagh and Mr Paul Wise, found a difference of 93,089 cases of wine. This would have an associated amount of excise duty and VAT of approximately €3.55 million.

The cases represented stock which had been released from the warehouse, with excise duty and VAT being collected from the traders but not passed on to the Revenue, according to the liquidators.

They told the court that it proved very difficult at the outset of the liquidation to get access to the company's books and records as they were stored on computer files which were subject to special computer codes.

The company's principal bank was AIB, Dalkey. However the liquidators found that very large sums of money were also passing through accounts kept with the First National Building Society (now First Active). These accounts were in the company's name with the two directors, Mr John McDonnell (54), Swords, Co Dublin, and the late Mr Joseph McNamara, Dún Laoghaire, Co Dublin, being the sole signatories. The secret accounts were not disclosed to the Eastland auditors.

The court was told by the liquidators that very large sums of money were misappropriated and lodged to the First National account. Cheques made out to the company were cleared in the First National as the accounts there were in the company's name. Once the funds were cleared on the account the directors as sole signatories on the accounts were in a position to distribute the funds so lodged in any way they pleased.

All of this activity occurred outside the books of the company, according to the liquidators.

They told the court that as a result of the inquiries conducted, they believed the directors had misappropriated and appeared to have defrauded the company of very significant amounts of money. In some cases, the beneficiaries of these funds were the directors themselves or persons nominated by them to receive monies.

The liquidators believed the company failed to keep proper books of account and that this had resulted in substantial uncertainty as to its assets and liabilities.

The warehouse, which was owned by a company owned by Mr McDonnell and Mr McNamara, was sold for €2 million by the liquidators and the proceeds taken by Eastland. This left a shortfall of €1.5 million for which the directors are now personally liable.