By 1984 Citicorp in the US was expressing an interest in buying 29.9 per cent of Davy. The partners in the firm set out to look at the most tax-efficient way they could structure the sale. A number of options were investigated, included one involving Liechtenstein trusts.

The Liechtenstein document was drafted by an unknown individual following meetings held in Zurich on August 30th, 1984. The best "exposition" on Liechtenstein trusts came from Mr Edmund Burke, according to the document. Mr Burke is a Zurich-based accountant who is a member of the Institute of Chartered Accountants in Ireland as well as England and Wales. Contacted at the offices of Moores Rowland, Zurich, yesterday, Mr Burke said that as the author of the document was unknown, he couldn't say if he was contacted by that person. He said the document was something which could be "prepared by any first-year law student" and that he did not want to discuss it. "I understand the document was never acted upon", he said, so he did not know what "all the fuss" was about.

Contact with Zurich was made originally by way of the Blackrock accountancy firm, John Woods and Company, which is part of the international accountancy affiliation, Moores Rowland International.

The document is similar to the Furze note in that it outlines how discretionary trusts could be hidden from the Revenue. The memo suggests that all instructions would be made in person or over the telephone, and without any paperwork being generated in this jurisdiction. It also states that the funds should never be brought back into this jurisdiction, save if they were to be "trickled" back.

The memo also refers to the difficulty of getting the "US party" - Citicorp - to go along with a scheme whereby a portion of the proceeds from the sale would have to be be directed towards Liechtenstein.

In the event, the scheme was never used. The deal went ahead in 1985 and it is thought the amount involved was £5 million. According to Davy, the full consideration was received in Irish pounds and all appropriate taxation was paid to the Revenue. Mr McLaughlin, however, kept the document outlining how the scheme would work and made use of it in 1986.

By the 1980s Mr McLaughlin was a married man living in a large family home in Foxrock. He and his wife, Susan, had three children. In 1986, he decided to establish a discretionary trust for his children. He placed £250,000 in a Liechtenstein-based trust, using the memo that had been drafted for Davy two years earlier. Mr McLaughlin said on Wednesday that the money invested was after-tax income. He also said he was in contact with the Revenue commissioners "to resolve outstanding tax issues, if any, which may have arisen from this arrangement or any other matters".

Exchange control regulations governing the taking of money out of the jurisdiction were in place up to 1992 and it is likely the placing of the funds in Liechtenstein by Mr McLaughlin raised questions in that regard. However, it is highly unlikely the matter will now be investigated, given the time that has elapsed. There has never been a prosecution in relation to exchange control.

It is understood the McLaughlin trust has not yet been disbursed. According to tax experts, trusts established abroad by Irish residents generate a claim for income tax to the Revenue, if they generate profits. The trustees or the person who established the trust would be liable for such tax. However, trust law is complicated and what issues, if any, are being inquired into in relation to the McLaughlin trust are not known.

IN 1988 Bank of Ireland bought into Davy. The purchase proceeded in a number of stages but the bank eventually bought 90 per cent of the firm for £30 million. Mr McLaughlin and the other Davy partners, along with a few other individuals at the firm, retained 10 per cent of the business. The firm was not merged into the bank but was rather left to operate independently.

Davy advised the Government in relation to some of its privatisation programme in the early 1990s. This included the sale of three tranches of Greencore shares to the markets. The third placing happened on April 30th, a Friday. Mr McLaughlin was in charge. At around lunchtime the then minister for finance, Mr Bertie Ahern, was informed it had been a success. The market was also so informed. However, far from being a success, Davy was still holding millions of the shares as Friday evening advanced. The firm panicked.

The firm placed 4.45 million Greencore shares, at 275p each - worth £12.24 million - with a number of companies connected with Davy partners Mr McLaughlin, Mr Brian Davy, Mr Garry and Mr Shubotham. The firm had been acting as government adviser. The advice included the price at which the shares should be placed. As Mr Ahern said in the Dail: "A sizeable number of shares were not placed at arm's length." He was not suggesting this had been done for financial gain but "you cannot sell to yourself". The deal had come too close to selling to yourself, he said.

After a very lengthy investigation, the London Stock Exchange reprimanded the company and imposed a fine of £150,000. Bank of Ireland bought the shares from the Davy-associated companies, as well as from some institutional investors who opted to pull out of commitments to buy. The shares were later sold at a profit.

Davy waived its fee and commission in relation to the flotation. A total of £750,000 was to have been paid to Davy by the State. It had received £4.2 million for its work on the sale of the earlier two tranches.

Davy is very highly thought of at top political levels. Mr McLaughlin would be considered an excellent adviser and operator by the Taoiseach, the Tanaiste and the Minister for Finance, Mr McCreevy. Davy is currently advising Mr McCreevy on the sale/merger of ACCBank and TSB. The commission involved is likely to be in the region of £10 million, and will be divided between Davy and two other bodies.

Mr McLaughlin's career has received a setback with the past fortnight's events but both he and Davy are viewing it as very much a temporary one. Though no longer joint chief executive or on the Davy board, he remains an employee of the company and will continue to work on the Davy projects he is currently engaged in.

Once his situation with the Revenue is resolved, it is envisaged that he will return to his former position. He also continues to have extensive property and investment interests in conjunction with his Davy partners.