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Tax-evasion panel to grill AIB officials

February 16, 2011

By Staff Reporter

By Andrew Bushe

DUBLIN — Beleaguered Allied Irish Bank officials are to go head-to-head with tax inspectors this week as the all-party Oireachtas committee investigating millions of pounds worth of DIRT tax evasion begins to wind up its investigation.

Publication of an internal AIB audit suggesting it might have a £100 million liability for Deposit Interest Retention Tax (DIRT) in 1991 set in train the probe into widespread tax cheating by customers of the financial institutions.

Thousands of customers, apparently with the widespread collusion of bank and building society staffs, opened bogus non-resident deposit accounts claiming they lived abroad and were not liable for DIRT.

AIB has claimed that Revenue staff gave it an amnesty on its DIRT backlog in the early 1990s, but tax inspectors have strongly refuted the claim, pointing out that legislation would be needed for such a move.

Some AIB bosses, in attempting to dismiss the £100-million-arrears estimate drawn up by their own head of internal audit, Tony Spollen, have inadvertently revealed bitter top-level animosities that existed at the top of the bank’s management team.

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Spollen had arrived at his figure by taking one six-month liability and multiplying it by 10 to give an estimate of what might be owed for five years.

The personal differences led to dramatic and damaging new claims about allegations that instructions were given to alter an audit report and an AIB-underwritten share offer that went wrong and resulted in shares being transferred into staff pension funds.

Former AIB chief executive Gerry Scanlan told the Public Accounts Committee that Spollen’s estimate was "infantile." He dismissed it as a "back-of-beyond calculation" and "fiction."

However, Jim Culliton, who as chairman of AIB’s audit committee was charged with investigating, said he did not regard the £100 million figure as a fiction. He accepted that the only way to get the true figure was to check all the accounts involved in the bank branches.

Culliton also praised Spollen, saying he was "very impressed" with him and saw him as a "deeply committed man" with a "rare independence of mind that you don’t often get in executives."

Spollen left the bank in 1991 after he was to be transferred from his audit job. But the bank denied his transfer and his audit report were connected.

Scanlan made clear the depth of hostility at the top of the country’s biggest bank. He told TD’s that Spollen’s protests about a conspiracy surrounding the proposed transfer had resulted in a situation where it was "in a sense, his job or my job."

An emotional Spollen, who said his wife is suffering from cancer and was watching the televised proceedings, responded at the next day’s hearings after staying awake all night thinking about it.

He attacked "scurrilous" remarks made by the present AIB chief executive, Tom Mulcahy, at hearings last October. "Here he was suggesting that everybody else [was] to blame," he said. "Blame all the other blanks, blame Tony, blame everybody in sight."

Spollen, who was interrupted by AIB’s barrister at the hearings, said the issue that "drew the line" between him and Scanlan was "a failed share issue in AIB, an underwriting.

"It went badly wrong. Rather than face the music and admit it, the bank had been left with an underwriting stick. What happened was that the shares were put into the widows and orphans accounts, into the staff pension fund accounts. The stock exchange was never informed."

Spollen described his relationship with Scanlan as "a little bit fraught" and said it all arose because "one time he wanted me to change an audit report, which I refused."

Chairman Jim Mitchell intervened to tell Spollen to speak to the committee’s lawyers. He may be recalled this week.

AIB, meanwhile, has played down Spollen’s suggestions of a support operation for the shares of the Dana Petroleum in 1988 and said the matter had been investigated by two law firms that said no offense had occurred. It admitted £250,000 worth of shares had been purchased and put into the staff funds.

Scanlan denied he had instructed Spollen to change an audit report. He said the request had come from the bank’s legal adviser.

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