He would tolerate no restraint on his spending, Mr Haughey angrily told an AIB executive. No, he would not hand back his cheque books. He had to live. How dare they have the cheek to bother him with these matters?

He just kept on spending, writing cheques, getting through £12,000 a month on a £7,000 a year salary. As his debt rose and the bank kept asking him would he perhaps do something about his massive debt, he bought an island, built a house on it and kept on spending.

Unfortunately for most bank customers, they would not get away with similar behaviour. Mr Haughey was no ordinary customer, AIB's former chief executive Gerry Scanlan explained to the Moriarty tribunal this week. He was a KBI - a "key business influencer". He was prominent, influential and appeared to be affluent, he said. In other words Mr Haughey was rich and powerful and it was bank policy to treat the rich and powerful differently from ordinary customers.

For example, AIB's response to Mr Haughey's spurning of their entreaties to pay some money back was to back off and allow him build up bigger and bigger debts. This went on for a decade until suddenly, this man who had not paid off his debts for 10 years came up with £750,000. The bank told him to forget about the remaining £400,000. No questions were asked.

He owed £255,000 in 1971. The figure fell and rose for a few years before beginning a steady upward climb to £1.143 million in 1989. AIB demanded the return of his cheque books in October 1986 but when he said no - becoming "quite vicious" in the process, according to an internal AIB memo - they continued to issue him cheque books and honour his cheques.

During this period he also had debts of more than £200,000 with Northern Bank Finance Corporation.

Throughout the decade he had meetings with AIB executives who expressed grave concern and then continued to allow him spend massive amounts of the bank's money without hindrance.

In 1973 he sold 17.5 acres of his land at Abbeville to Roadstone for £140,000 to help him repay his debt of almost £300,000. He also obtained a loan of £150,000 from Northern Bank Finance Corporation to repay the remainder of the debt. However, this appeared to be the last indication until late 1979 that he regarded his debt as a cause for concern.

As he toured the country rebuilding the political career shattered by the Arms Trial, he kept on spending. By June 1974 an AIB regional general manager had declared that his attitude "cannot be tolerated". But it was. In July 1974 Mr Haughey made it clear that he found any restraint on his spending "unnecessary and galling". The bank backed off.

During this time Mr Haughey owned assets he estimated as being worth £1.252 million. These included his house and lands at Kinsealy, a stud farm in Meath and other properties.

An internal bank memo shows that AIB had discovered that not only did Mr Haughey intend to continue spending the bank's money, he had no intention of selling any assets and furthermore, he was going to build an elaborate house on Inishvickillane, which he had recently acquired. He was "extremely vague" about how he was going to pay for the island house.

He made promises to pay back debts from time to time but just kept on spending.

Of course Mr Haughey claimed under oath to the McCracken tribunal that he had no involvement in dealing with his personal finances at all during this period. Since about 1960, he said, Mr Des Traynor had looked after all his financial business so he "never had to concern myself about my personal finances".

This was entirely untrue. But during this time Mr Haughey was both attempting to threaten and induce AIB to stop bothering him about these massive debts. In 1976 he told his bank manager he intended to be in politics for another 10 years and could direct a lot of business their way. The bank "did not make use of his influential position", he said.

The following month he met three bank officials, one of whom bravely demanded he hand over his cheque book. Mr Haughey did no such thing and as well as becoming "quite vicious", warned that he could be a "very troublesome adversary".

He kept writing cheques and the bank kept honouring them. In December 1976 the debt exceeded £300,000. He sought and was given an overdraft facility for £350,000 for a further two years. By June 1978 he was up to £580,000, the bank said it was "unacceptable", and it rose and rose.

By June 1979 he was offering £400,000 in full and final settlement, although in August 1979 the debt was £913,000. In September it topped £1 million. AIB officials had begun writing internal memos remarking that Mr Haughey seemed to believe his political position ensured the bank would not move against him. After AIB's behaviour over the previous decade, the assumption was not surprising.

He is unlikely to have changed this assumption upon reading the letter sent to him by Mr Phelan of AIB on December 11th 1979, just after Mr Haughey became Taoiseach. "To say the task you have taken on is daunting is an understatement but I have every faith in your ability to succeed in restoring confidence in this great little nation," it said.

However, within a week Des Traynor offered AIB £600,000 in full and final settlement, but this was rejected. In January, with the involvement of the bank's chief executive, Mr Paddy O'Keefe, a figure of £750,000 was agreed. The money came from a Guinness & Mahon account in the name of Mr Traynor. The source of the money is unknown.

Throughout the time he was indebted to the bank, AIB was conscious it could conceivably destroy his political career. Had it called in the debt and Mr Haughey been declared bankrupt, he would have automatically lost his Dail seat. But bearing in mind the enormous value of Mr Haughey's assets, he might well have been able to discharge the debt with funds to spare.

In the end, however, he didn't have to sell off as much as a painting or a horse. The final resolution of his debt problem began to take shape in September 1979, when, shortly before he became Taoiseach, he rang his bank manager saying he wanted to deal with "this dangerous situation once and for all".

In October 1979 he offered £400,000 in full and final settlement of the overdraft. He also suggested that the Iraqi bank Rafidain might offer to lodge a £10 million deposit with AIB at an interest rate below the market rate. Rafidain, Iraq's state bank controlled by Saddam Hussein's regime, had significant business relationships with Goodman International and Taher Meats.

In December 1979 - the month Mr Haughey became Taoiseach - settlement terms were being negotiated with AIB. In January 1980, within just a month of his becoming Taoiseach, a decade of difficulty came to an end. Some £750,000 emerged from an account in the name of Des Traynor in Guinness & Mahon Bank to clear the debt. It is not known where the money came from. The remaining £400,000 - interest which the bank had decided would never be paid back - was written off.

The former AIB chief executive, Mr Gerard Scanlan, this week tried to explain the bank's bizarre behaviour. Mr Haughey belonged to the category of customer known as a "Key Business Influencer"(a KBI in marketing parlance), he said. Banks valued such customers as they were prominent, influential and affluent.

Mr Haughey's political position was a deterrent against the bank taking action such as demanding that he sell some of his assets to repay his debts. Mr Scanlan said the bank would have viewed Mr Haughey as a valued client because of his influential political position.

Mr Scanlan agreed with Mr Justice Moriarty that bankers believed "if you owe us £1,000 it's your problem; if you owe us £1 million it's our problem".

Mr Scanlan said: "The evidence is before us."

"The Directors . . . were constrained to advert once more to the difficulties, strain and embarrassment which had been suffered by the bank due to Mr Haughey's proclivity towards making arbitrary, unauthorised drawings on his accounts."

Mr J.J. McAuliffe, AIB regional general manager, to Mr T. Fitzgerald, manager, AIB Dame Street, 11/2/74.

"These temporary excesses have arisen from a combination of circumstances outside my control and it is my intention that they be eliminated by 30th September at the very latest."

Mr Haughey to Mr Fitzgerald, 22/7/74.

"Haughey has abused our confidence and trust and we can no longer entertain hope that his accounts will be operated in a regular fashion."

Internal AIB memo written by Mr McAuliffe for the bank's advances committee, 25/10/74

" It was decided that dishonour of cheques was out of the question".

Response of advances committee, 14/11/74

"Mr Haughey admitted that he had been casual in his dealings with the Bank but said that in future he would operate his accounts within the arrangements now being entered upon."

Memo of meeting between Mr Haughey and senior AIB officials, 6/1/75

"The Directors . . . shared your view that the fresh drawings reflected a most irresponsible attitude."

W.N. McDonnell, assistant advance controller, to Mr McAuliffe, 29/1/75

"Despite the unattractiveness of the proposition Mr Phelan recommends sanction bearing in mind the likelihood of Mr Haughey being a man of influence in the future and the fact that the additional money will be repaid March/April."

Recommendation of Mr Phelan on Mr Haughey's latest proposals to reduce his debt, 16/9/75

"He mentioned that the Bank did not make use of his influential position and he indicated that he would be more than willing to assist the Bank in directing new business etc. He intends to devote a further ten years to politics."

Internal AIB memo of meeting between Mr Haughey and Mr Phelan, 13/9/76.

"At this point Mr Haughey became quite vicious and told Mr Denvir that `he would not give up his cheque book as he had to live' and `that we are dealing with an adult and no Banker would talk to him in this manner'. Furthermore he stated that if any drastic action were taken by the Bank he could be a `very troublesome' adversary."

Account in AIB memo of Mr Haughey's response to a demand that he return his cheque books, 1/10/76

"It is my considered position that this client does not believe the bank will force a confrontation with him because of his position."

Mr Phelan to AIB advances manager, Mr G.A. McDonnell, 17/7/79

"Mr Haughey fails to see the precarious position he is in and obviously feels that his political influence will outweigh any other consideration by the Bank."

Internal AIB memo, 7/9/79.

"To say the task you have taken on is daunting is an understatement but I have every faith in your ability to succeed in restoring confidence in this great little nation."

Mr Phelan to Mr Haughey after his election as Taoiseach, 11/9/79

"Mr Traynor . . . said there were no rabbits to be pulled out of hats or blood to be got out of turnips."

AIB memo of meeting with Mr Des Traynor at which Mr Traynor offered just £600,000 to settle the £1.143 million debt

"I now have pleasure in enclosing herewith draft in the sum of £50,000 being the final amount as agreed."

Mr Traynor to AIB chief executive Mr Patrick O'Keefe sending final settlement of Mr Haughey's debt to AIB, 14/2/80