Stockbrokers 'hid AIB deals behind secret tax havens'
AIB's stockbroking arm used black-listed tax havens to circumvent rules preventing it from buying and selling the bank's shares, the bank's former auditor told a Dail committee yesterday.
Goodbody Stockbrokers used a complex scheme which involved companies based in the Caribbean island of Nevis and the South Sea island of Vanuatu, and exploited an innocent Londoner who happens to share the surname Furstenberg with one of Germany's richest brewing dynasties, said former AIB auditor Eugene McErlean.
The scheme was designed to hide the beneficial ownership of the AIB shares by using obscure tax havens with strong secrecy rules. At that time, Nevis was named by the Financial Action Task Force as one of the 10 tax havens in the world actively promoting money laundering.
The scheme operated about eight years ago until it was stopped by the head of AIB Capital Markets, Colm Doherty, following complaints from Mr McErlean.
The trading happened around the same time that Allied Irish managers were charging business customers for advice without their knowledge and shortly before the Rusnak affair, which saw a rogue trader defraud the bank of more than $700m.
Details of the complex scheme that involved "massive amounts of money" came to light as Mr McErlean (50) gave evidence to the Oireachtas Committee on Economic Regulatory Affairs about his time at Allied Irish.
Mr McErlean, who was relieved of his post as head of internal audit following the Rusnak affair, alleged that the then Financial Regulator, Liam O'Reilly failed to follow up his complaints.
Mr McErlean's evidence was described as "explosive" and "an Irish-style Watergate" by committee members.
The former auditor said he ordered Goodbody to stop using the scheme, which was called Charterhouse, because it could have been used to break the law. The auditor ran checks to see whether the bank's share price showed any evidence of being manipulated during the period that Charterhouse operated but there were no signs of manipulation, he added.
Mr McErlean said he doubted that this scheme was legal but noted that Goodbody had obtained advice that it was legal. The scheme was first brought to the attention of the deputy financial regulator, Patrick Neary, who later became the regulator, and then to the attention of Liam O'Reilly. Neither took action.
The former auditor said he uncovered nothing illegal while looking into the scheme but emphasised that the scheme made it easy to break the law.
He added: "That is the problem. You cannot look behind it. It is clouded in secrecy."