Revelations on recidivist bank AIB no longer a surprise

THE BOTTOM LINE:THE MAHON tribunal's findings about Bertie Ahern's lying, Albert Reynolds's abuse of power and Pádraig Flynn's corrupt payment have rightly dominated the public's attention – but the report must also make uneasy reading for what was once Ireland's largest bank, AIB.

The scandal-prone bank, now in State ownership following a €20 billion handout from the Government, features prominently in the controversial rezoning of the Quarryvale lands in votes by Dublin city councillors from 1991 to 1993.

AIB adopted a “see-no-evil, hear-no-evil” approach to the operations of lobbyist Frank Dunlop and the services it provided that coincided with elections and council votes that multiplied the value of land in west Dublin.

Had AIB and the other banks not blown up and left the State nursing a €63 billion bill for reckless lending, this behaviour would seem extraordinary. But revelations about Ireland’s recidivist bank no longer surprise.

This is, after all, the AIB that bought us the ICI debacle of 1985, the bogus non-resident accounts, loan write-offs to Charlie Haughey and Garret FitzGerald, John Rusnak’s rogue trading, the Faldor tax evasion scheme for executives, and customer overcharging.

Perversely, given AIB’s crazy lending of recent years, it was a fear of heavy losses on a property deal that prompted AIB to pressure developer Tom Gilmartin into ceding control of the project to Cork rival Owen O’Callaghan from 1991. The subsequent deal – in which AIB took a 20 per cent stake in the firm behind Quarryvale – meant it had a clear view of dubious payments relating to the project.

In evidence, Jim Donagh, an assistant manager at AIB, said he had no recollection of two payments of €10,000 listed by O’Callaghan as “expenses”. Donagh said he was told the cash was for “sandwiches and tea ladies” and buying drinks at meetings of local groups and councillors to talk up the project.

This money was in fact corruptly paid to politicians Liam Lawlor and Colm McGrath, despite an agreement with AIB that loans would only be used to buy property at the site. The tribunal said it was satisfied senior personnel within AIB knew in December 1991 that payments had been made to Lawlor and McGrath. AIB officials denied knowledge of corrupt payment to politicians.

The Mahon report shows the bank was most concerned the Quarryvale site would be rezoned for the project to proceed and that the government would apply favourable tax status. Incredibly, Gilmartin’s manager at AIB recommended to the bank’s credit committee that the original loan be conditional on the then minister for the environment (Pádraig Flynn) telephoning the bank to say the site would receive the tax designation.

In November 1992, O’Callaghan told AIB manager Michael O’Farrell and official Mary Basquille the council vote on zoning would take place the following month and that “substantial additional costs are likely to arise before then”. A month later, O’Farrell noted in a memo after meeting O’Callaghan that the upcoming vote would be “very tight . . . his lobbying continues and he indicated that he had injected £85,000 into the situation”.

The tribunal noted that, notwithstanding the clear inference that financial support had been given to politicians, there was no suggestion that AIB took issue with “Mr O’Callaghan’s modus operandi”.

The Mahon report said it appeared O’Farrell had been made aware £85,000 was spent lobbying councillors. O’Farrell is now head of intermediary services at the bank.

AIB also offered remarkable services to Dunlop, cashing big cheques and facilitating him to fill his briefcase with up to £100,000 at any one time, particularly around the time of elections (not that bank officials recalled making any connection between the two).

John Aherne, an AIB branch manager, accepted it was “irregular” for AIB to have cashed cheques for Dunlop in the name of “Barry McCarthy”, a fictitious person.

“You do irregular things if you value your client,” he said. Clearly AIB later valued many more clients highly, judging from the wild banking of more recent years.

Mahon noted nobody was prepared to do enough to stop corruption, and this was perhaps inevitable when corruption ceased to be an isolated event and became so entrenched that it was “transformed into an acknowledged way of doing business”.

This was certainly the case for AIB and its “don’t ask” policy in its management of the relationships with O’Callaghan and Dunlop.