Former bank director tells of `gigantic' tax avoidance era

Tax avoidance was "like some gigantic game" during the 1970s and 1980s, a former managing director of Guinness & Mahon bank told the tribunal yesterday.

"Tax avoidance was rife in the 1970s and 1980s," Mr Maurice O'Kelly said. The line between avoidance and evasion was "very fine" and banks which were very much larger than G&M were involved in schemes that involved taxation.

Mr O'Kelly, an executive director of the bank from 1972 to 1985, at times refused to answer questions as to whether he believed the late Mr Des Traynor was an appropriate person to act as chief executive of a licensed bank. He said Mr Traynor had been a very close friend of his.

Mr O'Kelly was a joint managing director of the bank, sharing an office with Mr Traynor and another former joint managing director. However, he said he had not been aware of the existence of the secret "bureau system" which monitored the balances in the Ansbacher deposits.

Mr John Coughlan SC, for the tribunal, said a number of former employees of the bank, of which there were only approximately 40 during Mr O'Kelly's time in the bank, had given evidence that they knew of the existence of the bureau system.

Mr O'Kelly said it was not until 1978 that he learned that loans described in bank documentation as "suitably secured" were in fact backed by offshore deposits.

He said he believed up to 1978 that suitably secured meant the client was "good" for what was an unsecured loan.

However, counsel for G & M, Mr Paul Gallagher SC, pointed out that documents signed by Mr O'Kelly and dating from 1976 indicated the loans were secured by Guinness Mahon Cayman Trust (GMCT) and that documents from 1972 listed coded GMCT deposits in the Dublin bank which corresponded in their amounts with loans which were "suitably secured".

Mr O'Kelly agreed he would have seen this documentation at the time but said he did not remember it.

When asked by Mr Coughlan about the fact that the Central Bank officials had said to him during a 1978 meeting that the activities of G & M were contrary to the national interest, Mr O'Kelly said developments had shown that the high tax rates of the 1970s were contrary to the national interest.

The tribunal was adjourned until further notice.