Money trail leads from unexpected to bizarre

In January 1997 a remarkable coincidence occurred involving Denis O'Brien and Michael Lowry.

Lowry had just fallen from the sky like Icarus. One day he'd had a State car, stewardship of a large Government department and the chairmanship of two important EU council of ministers' committees; the next day he was, in career terms, standing in the rain waiting for a bus.

In the midst of the trauma that accompanied this, a relatively unimportant matter seems to have exercised the former minister - the need for a new mobile phone.

A friend of his, accountant Denis O'Connor, had begun work during 1996 on the accounts of Lowry's refrigeration company, Garuda Ltd. In December 1996, following Lowry's sudden fall from grace, O'Connor began working on Lowry's personal finances. These would, in time, become the focus of not one but two tribunals.

In early 1997 Lowry told O'Connor he'd like to have a mobile phone that the media couldn't contact him on, and O'Connor asked an accountancy acquaintance to get one from the distribution company that he, the acquaintance, worked for. O'Connor would later say that what was being sought was "confidentiality" not "anonymity" for Lowry.

O'Connor's accountancy acquaintance was Aidan Phelan, Denis O'Brien's personal accountant. Phelan agreed to O'Connor's request. O'Connor later told the Moriarty tribunal he did not know at the time that Phelan's main client was Denis O'Brien.

Nor, he said, did he tell Lowry that he was approaching Phelan. He agreed with tribunal counsel John Coughlan SC that there was no reason why Lowry could not have bought himself a new phone in a shop. Phelan sourced a phone in his name and forwarded it to O'Connor. When the bills came in he sent them on too. Soon after getting the new phone Lowry lost the PIN number and contacted Eircell, even though he, of course, was not the registered user. The Sunday World got the story. "O'Brien's Money Man Gives Phone to Lowry" screamed the headline. Phelan had just had a sudden lesson in the nature of political indiscretion.

Or maybe he hadn't. After the story Phelan met Lowry so they could discuss the matter. Phelan said later it was the first time they'd ever met. The two men met again later that year when O'Connor asked Phelan if he might be able to help do something with Lowry's company, Garuda, which was not doing so well. Over the following two years a proposal to merge or sell the company was considered but ultimately came to nothing.

As 1997 progressed Denis O'Brien gave consideration to when would be the best time to have the initial public offering (IPO) in the US of Esat Telecom shares. Eventually he decided on November 7th. When Barry Maloney heard the news he was not a happy man. He had options in Esat Digifone but not in Esat Telecom. He wanted the mobile phone company launched first - or at least this is what some of his colleagues thought lay behind what happened next, though Maloney denies this.

The McCracken (Dunnes Stores) tribunal reported in the summer of 1997. In September 1997 the Oireachtas established the Moriarty tribunal. At some stage around August/September 1997 Denis O'Brien, during a meeting with Barry Maloney, referred to the comments he'd made a year earlier about two payments of £100,000, one to Lowry. "I didn't actually do it," he said. "Thank God."

Maloney was to say later the comment set off alarm bells. This was because the comment was made in the context of the establishment of the Moriarty tribunal and the preparations for the IPO. Maloney discussed the matter with a solicitor. On October 8th he conveyed his concerns to O'Brien and urged O'Brien to delay the IPO.

The two men discussed the issue in O'Brien's office in the Malt House, overlooking the Grand Canal Dock. The discussion continued as they were walking down the stairs to the street. O'Brien stopped and looked Maloney in the eye. "You're not buying this, are you?" he said, referring to his denial that any payment had been made to Lowry. Maloney said he was having difficulty accepting his friend's word.

The two men walked to the bottom of the stairs, around the front of the building and down a laneway. Then O'Brien said to Maloney: "What I haven't told you is that I was going to make the payment but it got stuck with an intermediary."

After these discussions Maloney formed the view that O'Brien had not given money to Lowry; however, he was now concerned that a third party - an intermediary - knew of an intention to pay, which had not borne fruit. He brought his fears to the Digifone board. The issue became a crisis within both Esat Digifone and Esat Telecom during late October and early November.

If Telecom was launched on the US exchange and it later emerged there was something "dodgy" about the Digifone licence, the value of the shares could be affected. This, in turn, could leave the directors of both Telecom and Digifone open to multi-million pound suits from disgruntled investors.

On the other hand, if the shareholders were to stall the IPO in order to investigate the matters brought to their attention by Maloney, Esat Telecom might be fatally damaged and have to withdraw as a shareholder in Digifone. O'Brien was facing the possibility of a massive loss.

The shareholders decided to investigate what had been said and, if nothing to support the making of a payment was discovered, to accept O'Brien's word. During the inquiry O'Brien said he had in fact thought of making a payment to Lowry. He agreed he'd told Maloney the payment had become "stuck" with an "intermediary" but said the intermediary was in fact his bank, GE Capital Woodchester.

It was decided to search O'Brien's significant accounts in Woodchester Bank from 1995 to 1997, to see if a payment to Lowry could be spotted. This happened. Phelan was asked if O'Brien had any other significant accounts. He did not mention the account in AIB in the Isle of Man opened a year earlier with a deposit of £407,000. It slipped his mind.

The shareholders also investigated the Telenor contribution of $50,000 to Fine Gael, which had gone to David Austin and later been reimbursed to Telenor by Digifone.

It had to be established that the party, and not Lowry, had received the payment. It was decided Austin would be asked to write a letter stating the money had been passed to the party.

Phelan, who knew Austin, went to get such a letter, which was eventually supplied. (Austin at this stage was very ill.) The letter from Austin of course did not constitute proof that Lowry had not received the money. No-one did the simple thing of asking Fine Gael for a receipt.

On November 7th the IPO went ahead and was successful. More than £100 million was raised. O'Brien's accumulation of riches from the sector was continuing. During 1998 to 2000 he and his colleagues continued to develop the Esat companies. When in January 2000 BT bought Esat Telecom, O'Brien made more than £230 million. He was feted in the media as a national hero.

By this time he was a tax exile. In July 1996 - the same month he paid the £150,000 to David Austin - he'd paid £214,844 for a site for a house in Quinta do Lago, Portugal. As he was to tell the Moriarty tribunal, he later bought the entire resort. His parents began to holiday there. They never made use of the Marbella house formerly owned by Austin. It is let.

During late 1997, Michael Lowry was introduced by a so far unnamed third party to Kevin Phelan (no relation of Aidan Phelan). Kevin Phelan was scouring the UK looking for investment opportunities that might be of interest to wealthy Irish people. Lowry, at this stage, was on his uppers but presumably anxious to make some money to settle his tax debts and stay afloat. Lowry expressed an interest in doing business with Kevin Phelan but nothing happened immediately.

During this same period O'Brien became involved in two investments in the UK that had been identified by Kevin Phelan. Kevin Phelan had approached Aidan Phelan about the deals and Kevin Phelan may not have known that his namesake was investing on behalf of O'Brien. One of the investments was in Luton, believed to be a leisure centre; the other, in Doncaster, was the ownership of the lease on the town's football stadium.

Meanwhile, Kevin Phelan got back to Michael Lowry and told him he'd found a property that the independent TD might be interested in. It was a development site in Mansfield, England, and the price was £250,000 sterling. Lowry put down a 10 per cent deposit.

Kevin Phelan introduced Lowry to an English solicitor, Christopher Vaughan. Vaughan had worked for O'Brien and Phelan in the Luton and Doncaster transactions. In December 1998 Lowry sent Vaughan the 10 per cent deposit and the Mansfield property was registered in Lowry's name.

By March 1999, according to evidence heard by the tribunal, the deal needed to be closed and Lowry didn't have the money. Lowry went to Aidan Phelan, O'Brien's accountant, for help.

While much of this story is extraordinary, what happened next, based on Aidan Phelan's own evidence, is bizarre. Phelan decided to get involved in the Mansfield deal with Lowry, and sent £300,000 sterling to Vaughan for lodgment to the solicitor's client account. Approximately £230,000 was used to close the Mansfield deal, and the rest was left lying in the account. The money Phelan used came from Denis O'Brien.

Aidan Phelan's evidence is that he had an agreement whereby he would be paid up to $1.5 million for his work on buying O'Brien's Portugese property and, more importantly, his work on a Dutch mobile phone company, Versatel. The "success fee" would be paid when O'Brien sold some of his Versatel shareholding. Phelan had signing rights over some of O'Brien's accounts and in order to settle the Mansfield transaction he took £300,000 sterling from one of the accounts as an advance on the proposed success fee. (The subsequent collapse of Versatel shares has meant no success fee ever became due.)

The £300,000 came from an account of O'Brien's in Credit Suisse First Boston in London. At the time Phelan also had signing rights on accounts in Woodchester from which he could also have taken the money. O'Brien was told the money was being withdrawn but, Phelan said, was not told why.

In December Lowry got back on to Aidan Phelan. He had identified another property in England, this time a church in Cheadle. Lowry wanted to do this deal on his own but needed Phelan's help. Phelan told him he could borrow the money still in Vaughan's client account for use as a deposit. He also said he would help him get a loan from GE Capital Woodchester. By this time the bank was in the process of being taken over by Investec Bank.

Phelan approached his contact man in Woodchester, senior executive Michael Tunney, and asked for a loan of £420,000 sterling. The money was to go to a UK company called Catclause, which would use the money to buy the property. A guarantee was to be provided by a wealthy Cork developer, John Daly. (Daly told the tribunal he originally agreed to sign the £0.5 million guarantee for Lowry, but over the Christmas changed his mind.)

Phelan told the tribunal he told Tunney the loan was for Lowry. Tunney told the tribunal he was not told Lowry was involved, and that he thought Phelan was the recipient of the loan, which was to go to a company called Catclause. Two other executives of the bank, Michael Cullen and Anthony Morland, said they were told by Tunney that Denis O'Brien was behind the deal. Cullen was told O'Brien was "aware" of the transaction; Morland was told it was a Denis O'Brien transaction.

O'Brien has said he knew nothing about the deal. In time that would change.