Controversy Allied Irish Banks

1 controversy

1.1 2002: john rusnak losses
1.2 tax evasion
1.3 excess fx charging issues
1.4 deal allocation , associated issues
1.5 charles haughey , moriarty tribunal

controversy

2002: john rusnak losses

john rusnak, lone wolf currency trader @ allfirst, racked losses of us$700 million during michael buckley s tenure group chief executive. ireland s biggest banking scandal , fourth-biggest banking scandal in world when came light on 4 february 2002.

tax evasion

the €90 million settlement aib reached revenue commissioners in respect of deposit interest retention tax evasion in 2000 highest tax settlement in history of ireland. bank s internal auditor, tony spollen, highlighted potential deposit interest retention tax (dirt) liability of £100 million period 1986 - 1991, gerry scanlon, group chief executive @ time rubbished estimate, describing infantile . oireachtas sub-committee inquiry dirt hearing on 27 september 1999 concluded extraordinary when scanlon told inquiry unaware of scale of dirt issue.

the revenue commissioners on 28 march 2006 imposed tax settlement plus penalties on 4 former senior executives interest, while employed aib, arising investments maintained in faldor limited. faldor investment company set in british virgin islands between 1989 , 1996 hold funds on behalf of these senior aib executives people connected them. allied irish banks investment managers managed funds in company on behalf; @ time mr gerry scanlan ceo of bank. faldor subsequently benefited inappropriate deal allocations, , artificial deals amounted €48,000 out of aib investment managers own funds.

those cited include:

gerry scanlon, chief executive aib group when arrangement in place, of glenageary, county dublin; tax , penalties amounted €206,010.
diarmuid moore, former director of corporate strategy @ aib, malahide, county dublin; tax , penalties amounted €51,044.
roy douglas, chairman, irish life & permanent plc , formerly of aib, howth, county dublin; tax , penalties amounting €53,245.43 secured.
patrick dowling, former deputy chief executive, late of delgany, county wicklow; estate paid tax , penalties of €13,000.

excess fx charging issues

in 2004 revealed bank had been overcharging on foreign exchange transactions ten years. overcharging affected 3 million purchase transactions of foreign drafts. projected amount of overcharging €14m. bank has set aside €50m cover cost of refunds.

the central bank of ireland published report investigation of aib group concerning overcharging own customers fx transactions , deal allocation , other associated issues. revealed excess charges of €34.2 million, including interest. aib failed comply law period of 8 years , staff , management aware of @ time.

the central bank of ireland knew allied irish banks overcharging consumers in fx fees failed act number of years. gave parliamentary inquiry false impression unaware of it. whistleblower gave cboi information requested come meeting them invited withdraw allegations of wrongdoing , @ same time found himself removed position @ allied irish banks without reason given. after case highlighted in media, cboi officially apologised on how authorities treated him, 8 years after alerting them of overcharging.

aib announced on 27 september 2006 final outlay in respect of restitution , interest arising overcharging amounted €65 million , included donation of €20.6 million on behalf of customers unspecified charity unable identify. no employee or officer of banks disciplined.

apart fx, central bank of ireland discovered in 2004, following anonymous tip-off, aib overcharged customers €8.6 million. no regulatory action taken.

deal allocation , associated issues

between 1989 , 1996, funds of senior executives of aib @ time and/or related parties managed allied irish investment managers limited (now aibim) through british virgin islands investment company, faldor ltd.

faldor benefited inappropriate favorable deal allocations, way of artificial deals, amounting approximately €48,000 out of aibim s own funds. further inappropriate deal allocation practices relating 8 transactions in period 1991 1993 identified adversely affected performance of 2 specialist unit trusts, amounting total of €174,000, advantage of other clients. these unrelated faldor. while internal audit function of aib did identify inappropriate dealing practices in 1991 , 1993, there no evidence faldor account identified in these audits. no disciplinary action taken against individuals involved in these practices @ time , compensation not paid unit trusts affected. when episode of law breaking exposed disciplinary process put in place within aib , compensation has been paid disadvantaged. tom mulcahy, group chief executive of aib 1994 june 2001, resigned chairmanship of board of aer lingus on 28 may 2004 following disclosure of matter.

charles haughey , moriarty tribunal

in 2006, moriarty tribunal published report financial affairs of former taoiseach charles haughey. mr. justice moriarty found aib had settled million-pound overdraft haughey on favourable terms politician shortly after became taoiseach in 1979; tribunal found leniency shown bank in case amounted benefit bank haughey. according report, bank showed extraordinary degree of deference mr. haughey despite financial excesses.