A beneficiary of an offshore investment scheme managed by AIB Investment Managers for some of the bank's most senior executives has said he was "invited" to join the scheme once he joined AIB's senior ranks.
Mr Roy Douglas, the former AIB executive who will formally retire this week as chairman of Irish Life & Permanent, said he believed he had invested in a fund that was professionally managed by AIBIM on behalf of the bank's senior management.
"I regarded this opportunity as a benefit attaching to my position as group general manager and it was my understanding that it had been in existence for some time."
Mr Douglas's decision to retire from Irish Life & Permanent followed contact from the Irish Financial Services Regulatory Authority (IFSRA) in the wake of an investigation into a British Virgin Islands company, Faldor Limited, in which he was one of five investors. The use of this offshore investment was found to involve a breach of tax law.
The other investors were former AIB chief executive Mr Gerry Scanlan; his deputy chief executive, the late Mr Patrick Dowling; the bank's former director of strategy, Mr Diarmuid Moore; and Mr David Cronin, the former AIB executive who was in charge of its US treasury operations which was at the centre of a foreign exchange fraud in 2002. Faldor was managed by AIBIM on their behalf.
In a statement issued to The Irish Times yesterday, Mr Douglas said he was "shocked and dismayed" to learn that AIBIM was suggesting it had engaged in unacceptable practices in regard to the investment they were managing on his behalf. "I always assumed that the fund was managed in a proper and professional manner as would be expected from a leading fund management company," he said.
An AIB spokeswoman refused to comment when asked if this type of offshore investment scheme was routinely offered to the bank's senior executives.
Mr Douglas said he invested £33,000 sterling in Faldor in 1989 at a time when he was not resident in Ireland. He returned to Ireland from Britain in 1991 and incurred a tax liability on those funds arising out of a change in tax legislation in 1998, which he did not discharge. "Regretfully I overlooked this tax liability," he said.
In August 2003, he said, he notified the Revenue Commissioners of his intention to make an unprompted voluntary disclosure, and contacted AIBIM when preparing the information for the tax authorities. Mr Douglas said he asked AIBIM for full details of an amount of £81,769 it had credited to his investment in 1995 which represented the total funds it was managing on his behalf.
Mr Douglas believes it was as a result of his contact with AIBIM that the AIB group became aware of Faldor and informed IFSRA and the Revenue Commissioners of its existence. "I subsequently assisted AIB in relation to an investigation which it undertook in relation to this matter." He said he made a payment to the Revenue that included tax, interest and penalties on October 16th, 2003.
Faldor's five beneficiaries had invested €750,000 in Faldor between 1989 and 1996. Faldor benefited from what AIB has described as "inappropriate deal allocation practices" amounting to €48,000, at the expense of the bank's own in-house funds.
AIB has said its own investigation into Faldor revealed that five other executives "had tax issues" in relation to accounts entirely unconnected to Faldor. Mr Tom Mulcahy, who succeeded Mr Scanlan as AIB group chief executive in 1994, was one of these five individuals. Of the five, three still work at the bank.
Mr Mulcahy retired from AIB in 2000 and was appointed chairman of Aer Lingus a year later. He tendered his resignation from that position to the Minister for Transport on Saturday. In his resignation letter, Mr Mulcahy said that while he was tax compliant, he believed the issue had drawn adverse publicity on Aer Lingus.
The AIB spokeswoman said the bank had stated there were no other vehicles such as Faldor before or after 1989 but added it could not guarantee that all transactions since the bank's establishment had been examined. The Revenue Commissioners said it was investigating Faldor and the other investment structures uncovered at AIB.