Udaras na Gaeltachta has given a total of £220,000 (€279,340) in grants to companies that were promoted by a Swedish bankrupt and convicted tax cheat.

One of the projects - to set up an aircraft painting operation at Carrickfin in Co Donegal - has come to a standstill while the other is on hold while fresh funds are sought from outside investors.

Mr Dick Hoglund, a Swedish national with convictions for tax fraud, was involved in promoting both companies to ┌darβs, the development agency for Irish speaking areas.

He was a director and a 6 per cent shareholder in Primary Holdings, the company behind the two ventures, until June last year - but continued to act as a consultant after his resignation. Sources close to both projects said that Mr Hoglund and another Swedish national, Ms Agneta Ljungquist, were the prime movers behind the two projects, which would have brought 80 jobs to the Donegal Gaeltacht.

Mr Hoglund was convicted of tax fraud in Sweden in 1996 and was subsequently convicted in 2000 for serious tax fraud. Swedish company records also show that Mr Hoglund has been involved in 165 companies - of which 73 went bankrupt.

Mr Hoglund is also understood to have been declared bankrupt in February 1999, although he has subsequently been released from bankruptcy.

┌darβs said yesterday that it only became aware of Mr Hoglund's record, including his convictions, in June of this year through an anonymous source.

The agency contacted Primary Holdings about the matter and were told, for the first time, that Mr Hoglund had resigned a year earlier. They were also informed that "he had continued for some time thereafter to provide some business services to the companies on a part-time basis, but that this has ceased by July 2001".

Primary tried unsuccessfully to recruit a number of high-profile Irish businessmen as directors at the time Mr Hoglund resigned. These included Mr Kevin Bonner, former secretary general of the Department of Enterprise and Employment and now a business consultant, who declined.

The company also approached Mr Kieran Corrigan, the Dublin-based accountant whose clients include John Boorman's Merlin Films. Mr Corrigan declined to cite his other work commitments.

The more high-profile of the two Primary Holdings projects is Avipaint Ireland (Aerpeint Teo) which was to create up to 40 jobs through repainting civil and military aircraft at Donegal airport. The project never got off the ground because of objections raised by local groups who took their campaign to the High Court. Their application for a judicial review of An Bord Pleanβla's decision to grant planning permission was rejected last month.

In the interim, Primary approached the Industrial Development Board of Northern Ireland (IDB) about moving the project to Belfast International Airport. Although discussions took place, no formal application has been received by the IDB, which was also made aware of Mr Hoglund's past by an anonymous source.

┌darβs has committed more than £734,000 to the project, but to date only £120,000 has been drawn down, according to a spokesman. The second Primary Holdings company, called Digisonic Teoranta, was based in an ┌darβs building in Bunbeg, Co Donegal, which was refurbished at a cost of £70,000.

Digisonic was to produce electronics for the automotive industry based on research carried out with an Israeli company, Tici Software. The manufacturing operation has yet to be established. ┌darβs has committed £660,000 to this project but has only paid over a £100,000 Research and Technology Innovation Grant. The company is trying to raise money in Ireland from a number of sources, and has approached Merrion Capital in Dublin among others.

┌darβs is required to match the funds raised by the company under the terms of the agency's agreement with Digisonic. "We are involved in continuing discussions with the directors of Digisonic Teo . . . The directors of Avipaint Ltd have not as yet indicated to us what decision if any they have taken regarding the future of the Carrickfin project," ┌darβs said yesterday.

Primary confirmed yesterday that Mr Hoglund was involved in the preparation of the Digisonic business plan being used in the current fund-raising effort, but said he was no longer involved with the company in any capacity. Primary did not say on what date Mr Hoglund's involvement ceased. They added that he was "not primarily responsible for applications to or negotiations with Udaras na Gaeltachta".

Referring to the business plans, Primary said: "Mr Hoglund had substantial knowledge of the business and products of Digisonic Teoranta and it would have been reckless of Digisonic Teoranta to prepare the business plan without his comments."

Mr Hoglund could not be contacted for comment.