Dr Garret FitzGerald will appear at the Moriarty tribunal today to give evidence about an AIB loan which was partly written off by the bank in 1993.
Yesterday the tribunal heard that the former Taoiseach had borrowed some of the £170,000 to buy shares in GPA. Following the collapse of the company, he repaid 22.5 per cent, while GPA employees and directors repaid 17.5 per cent.
The tribunal heard that Dr FitzGerald had worsened his position with AIB when he amalgamated two loans in 1992. Mr Peter Nugent, former senior lending manager with AIB, said Dr FitzGerald received a loan of $322,000 from AIB Retail Bank in April 1988. Some $125,000 of this was for the purchase of GPA shares.
This loan was on a full recourse basis, which meant that the bank could claim against all the client's assets in the event of a default.
Then in August 1989 Dr FitzGerald took out a loan of $188,250 with AIB Capital Markets to buy shares in GPA and to repay some of the earlier loan. Under AIB's GPA scheme, the GPA shares were used as security and borrowers were liable only for the interest on the loan.
However, when Dr FitzGerald asked that both loans be converted into one of $248,800, all his assets became vulnerable to a bank claim. As security, Dr FitzGerald and his late wife, Joan, had offered life assurance policies on Dr FitzGerald's life of £100,000 and £275,000, as well as over 15,000 GPA shares.
The tribunal chairman, Mr Justice Moriarty, noted that Dr FitzGerald had worsened his position by agreeing to the new arrangement in 1992.
"Was there any benefit that Dr FitzGerald obtained for agreeing to that?" he asked. `It seems, on the face of your summary, that he worsened his position by leaving all his assets open entirely but didn't get anything in addition on the last of the three events."
Mr Nugent said he had not dealt with Dr FitzGerald on that particular occasion. "But he signed the documentation so he would have been fully aware of what was happening."
When GPA collapsed Mr Paddy Dowling, who was advising Dr FitzGerald, tried to reach "a mutually acceptable settlement" with AIB. Mr Nugent agreed that the bank was aware that Dr FitzGerald had "very limited income and limited assets", with the main income coming from his writing.
He had already sold his house to his son for £30,000, and was living upstairs with his wife.
Mr Dowling offered the bank £30,000 on Dr FitzGerald's behalf, and AIB eventually settled the £170,000 debt for £40,000.
