Bank threat to bounce cheques `not a big worry'
CHARLIE Haughey has no recollection of AIB threatening to bounce his cheques in 1977. He told the Moriarty Tribunal that he had no specific recollection of any such meeting but he felt the atmosphere generally between himself and the bank was ``more relaxed'' than a year previously.
The tribunal was also told that by the time Mr Haughey became Minister for Health and Social Welfare in 1978, he owed AIB almost £450,000 despite a firm commitment not to exceed £350,000.
Mr Haughey told the tribunal that he had no recollection of a meeting where he was told the bank would be forced to dishonour his cheques but said it did seem to follow the general routine.
John Coughlan SC for the tribunal pointed out that Mr Haughey had been able to remember a ``heated discussion'' in 1976, when the bank formally asked him to hand over his cheque books. ``Yes, one is inclined to remember heated discussions,'' replied Mr Haughey.
Pressed on whether the suggestion that cheques would be dishonoured did not jog his memory, Mr Haughey said not particularly. ``These sort of threats were being made from time to time.''
He agreed that the proposal to dishonour cheques had not overly concerned him. The atmosphere was more relaxed at that stage.
Counsel asked whether he agreed that internal AIB documents suggested that Michael Phelan, the manager he dealt with in Dame Street, was looking for somebody higher up to make a decision to dishonour cheques. Mr Haughey replied that they were discussing internal bank documents ``and I am not too clear what you want from me in regard to it.''
Pressed on why he thought the atmosphere between himself and the bank was relaxed at a time when they were threatening not to honour his cheques, Mr Haughey agreed that to the extent that the threat was there, it was not relaxed. But the general situation was not as ``ominous'' as it had been a year earlier.
The tribunal heard that in December 1976, Mr Haughey owed the bank £330,000. He asked for a further £20,000 on the basis that he would sell Rath Stud and 150 acres at Abbeville within two years and also that he would pay interest on a six monthly basis starting in March 1977.
On December 20, 1976, Mr Haughey wrote to the bank that the contract for the sale of Rath Stud had been signed and a deposit paid. He now intended to pay off his indebtedness to the Northern Bank Finance Corporation and let AIB have a first charge on Abbeville and his other properties.
But he was requesting accommodation of up to £350,000 for a further two years. During that period, he would sell sufficient land at Abbeville to clear his debt.
The bank noted in an internal memo that the proposals from Mr Haughey had come following a ``very hard line'' taken by the bank over the previous 12 months including a meeting with the chairman.
As well as first charge on Abbeville, the bank were getting other securities including a letter of guarantee from Mrs Maureen Haughey which was being increased from £190,000 to £350,000 while Larchfield Securities, the company holding the deeds to Innisvickillaune, were providing a guarantee of £40,000.
The bank noted that Mr Haughey could well be seeking concessions on penal'' interest rates.
In February 1977, the bank wrote to Mr Haughey telling him that facilities of £350,000 had been sanctioned. The interest rates applying to the various accounts ranged from 16pc to 18.75pc.
Mr Haughey agreed that he had raised the issue of interest rates because at the time the rates were ``quite crucifying.''
``For everybody,'' commented Mr Coughlan. Laughing, Mr Haughey replied: ``But not any more.''
Asked whether he had accepted the bank's conditions Mr Haughey said: ``I would nearly say gladly, except perhaps for the interest rates, but I had no control over them.''
In April 1977, concern was being expressed in the bank at the fact that Mr Haughey had exceeded the limit of £350,000 and had not honoured his promise to pay the interest charges due in March. Outstanding cheques at that stage would bring his debt to over £403,000 and Mr Phelan had told him that the bank could be forced to dishonour his cheques.
Mr Phelan told senior executives at the bank that he felt there was little option but to let matters run on, but on the clear understanding that drawings beyond £403,000 would be dishonoured.
In a memo to Mr Phelan the bank's advances manager said there could be no question of exceeding the £350,000 limit and asked if Mr Haughey had been requested to return his cheque books.
The tribunal heard that in June 1978 when Mr Haughey was Minister for Health and Social Welfare, his combined indebtedness to the bank had reached over £445,000. The advances manager wrote to Mr Phelan saying it was ``totally unacceptable'' but added: ``We accept that due to the change in the political climate in the past year it has not been possible for you to tackle the situation as you or the bank would wish.''