Larchfield had substantial assets but no income, auditor explains

Shares in Celtic Helicopters and other assets owned by the Haughey children through their company, Larchfield Securities, are treated in the company accounts as funded by their father, the tribunal heard yesterday.

Mr Kieran Ryan, who was appointed auditor to Larchfield in 1997, said the company had no income of its own until 1996. Yet it succeeded in accumulating substantial assets prior to that, including real estate, the yacht Celtic Mist, and shares in Celtic Helicopters.

Mr Ryan said that none of the Larchfield directors - Ciaran, Conor and Sean Haughey and Eimear Mulhern (nee Haughey) - had any knowledge of how the assets were paid for.

However their father, Mr Charles Haughey, said that some of the assets were "by way of gift" to his children. He told Mr Ryan to put other assets "down to me".

Mr Ryan's evidence formed part of the investigation into the payment in 1992 of £100,000 to Celtic Helicopters from an account into which three Dunnes Stores cheques totalling £180,000 had been lodged.

A chartered accountant, Mr Ryan was asked two years ago to prepare the Larchfield accounts in order to bring the company's tax affairs up to date.

He established that income was first earned by the company in 1996 by the letting of property at Kilmuckridge, Co Wexford. As a result, he prepared the accounts for the two tax years before December 31st but no others.

The company register showed that Larchfield was incorporated on November 12th, 1973, and was converted into an unlimited company on December 1st, 1994.

Mr Ryan said the assets of Larchfield comprised lands and a house at Ballyduboy, Kilmuck ridge, Co Wexford; Inishvickillane and the house there; a cottage and lands at Lislarry, Co Sligo; the Celtic Mist and shares in Celtic Helicopters.

The acquisition of Ballyduboy and Inishvickillane were regarded in the accounts as "by way of gift to the children" from Mr Charles Haughey.

Estimates of their value were obtained from Mr Haughey.

In addition, Mr Ryan said, "assets acquired by Larchfield Securities after 1982, being additional lands at Ballyduboy, Celtic Mist including refurbishment costs, and the Celtic Helicopters shares are regarded as assets to the company with a matching liability to Charles J. Haughey."

In relation to a group of 1985 Celtic Helicopters shares owned by Larchfield, Mr Ryan said the company directors had no knowledge of how they were obtained. Larchfield had no current bank account cheque book and had no income at that stage.

Mr Ryan said that in the course of discussions with Mr Charles Haughey he was told: "You better put that down to me." Mr Haughey had said this without saying that he paid for the shares.

Counsel for the tribunal Mr John Coughlan SC asked whether Mr Haughey had meant that the shares had been financed by a loan to Larchfield.

Mr Ryan replied: "That's certainly how it's been treated. But to be honest I'm not sure that he knew exactly where it came from at the time that we spoke."

In relation to almost £8,000 of Celtic Helicopters shares acquired by Larchfield in 1990, Mr Ryan found no record of payment from the company. The shares had been purchased from Mr Cruse W. Moss in two stages on May 24th and August 17th, 1990.

Mr Ryan spoke to Mr Charles Haughey about the shares and again he was told to put them down to him. He did not believe it was in his remit to delve further.

A similar situation applied to 55 A ordinary and 54,842 B shares in Celtic Helicopters. Mr Ryan found they had been purchased for Larchfield on the date of issue, March 28th, 1995, and, he said, "I understand that the payment was made on its behalf directly or indirectly by Charles J. Haughey."

The exception among Larch field's Celtic Helicopters shares was a group of 290,329 7 per cent non-cumulative preference shares of £1 each. A Deloitte & Touche document, dated January 23rd, 1998, said: "It is our understanding that MS Nominees holds these shares in trust for Larchfield Securities, which is in turn holding them in trust."

Mr Ryan said that none of the Haugheys had documents to show it was holding the shares in trust, as one would have expected.

Mr Ryan said he discussed the shares with Mr Charles Haughey over the last few months and Mr Haughey had indicated there was no difficulty in confirming that most of the shares belonged to other people. However, Mr Ryan said, "there was uncertainty over one of the holdings", namely the 100,000 shares allegedly for the benefit of Mr Michael Murphy.