O'Brien funds begin their journey

On Thursday, November 27th, 1996 Michael Lowry was chairing a committee meeting of EU ministers in Brussels, one of two such important committees he was chairman of during Ireland's then presidency of the EU.

Lowry was on top of the world. At 43 he was chairman of the Fine Gael parliamentary party and a Government minister. If he played his cards well he might become party leader some day, Taoiseach even.

He mixed with some of the most powerful figures in the Irish business world, and his ability to convince some of them to make substantial financial donations to his party was one of the key factors behind his political success.

In party politics the person who brings in the cash has clout within the party. And business people liked Michael Lowry.

On a personal front, Lowry owned a substantial house in Holy Cross, Tipperary, and had just bought a £200,000 (#254,000) house on Carysfort Avenue, Blackrock. He had £147,000 on deposit in a specially opened account with Irish Nationwide in the Isle of Man, money which had been sent to him a month earlier by a friend, the late Smurfit group executive, David Austin. Lowry was to later say the money was earmarked for the renovation of his new Dublin home.

However, even as he was sitting in Brussels being attended to by his retinue of civil servants, a helicopter was buzzing around his family home in Holy Cross so a photographer could take pictures of the house everyone in the State would soon know had been renovated with money given to Lowry by Ben Dunne.

The almost £400,000 spent on the house was treated in the books of Dunnes Stores as expenditure for work on its outlet in the ILAC Centre. Lowry's spin on the merry-go-round was about to jolt to a halt.

The 1990s was a great decade for the entrepreneur, Denis O'Brien, and 1996 was special. A year earlier his consortium, Esat Digifone, had put together a successful bid for the State's second mobile phone licence. The competition involved bids being vetted by a group of civil servants from the departments of Finance and Transport, Energy and Communications, as well as foreign consultants. The announcement that Digifone had won was made by Lowry in October 1995. From then up to May 1996, the consortium negotiated the terms of the licence with Lowry's department and in May 1996 the licence was officially awarded. O'Brien was on his way to great riches.

During the period between the announcement of the winning bid and the actual granting of the licence, O'Brien did something reckless. Austin, a long-time family friend and a sometimes Fine Gael fundraiser, asked O'Brien to contribute to a Fine Gael fundraising lunch in New York. O'Brien, according to his later evidence to the Moriarty tribunal, decided it would be impolitic to do so, given how recently Lowry had made the licence announcement. However, O'Brien promised Austin he would suggest to one of his partners in the licence bid that they make a donation. Of course as far as what is politic or not is concerned, there was no difference between one part of the consortium giving money rather than the other.

At the time, the consortium was made up of three de facto partners: O'Brien's Esat Telecom; Telenor, a Norwegian state company; and IIU Nominees Ltd. IIU Nominees was to eventually hold 20 per cent on behalf of Dermot Desmond.

O'Brien asked his Norwegian partners if they would make a contribution to Fine Gael. The Norwegians were to later say they donated the money on behalf of Esat Digifone. O'Brien said the $50,000 was donated by Telenor on its own behalf. Although the point seems to be important to both sides, the key points are that O'Brien initiated the payment and that it came from within the Digifone camp.

The money went from Oslo to an account in the Bank of Ireland, Jersey belonging to Austin. Austin sent Telenor an invoice stating the payment was for "consultancy services" as agreed with O'Brien. When Austin later went to pass the money on to Fine Gael, John Bruton told him not to. The money stayed in the Jersey account for more than a year, then Austin passed it on to the party as a personal donation.

Meanwhile, Denis O'Brien's bank accounts were flush with cash. As well as running radio stations in Dublin, Prague and Stockholm, he was competing with Telecom Eireann's landline business, setting up his rival mobile phone network, and involving himself in numerous other business ventures. Near the end of 1996 his bank accounts were particularly full because of certain share dealings and the sale of properties in the IFSC. He was on a roll and it was the way he liked it. The more money there was coming in, the more scope he had for getting involved in new ventures, and making more money again.

In July of 1996, O'Brien asked his personal financial adviser and accountant of many years, Aidan Phelan, to open an account in the Isle of Man in his, Phelan's, name. He told Phelan to transfer £407,000 from the account in GE Capital Woodchester Bank, Dublin of one of his radio companies, to the newly opened Isle of Man account. The money was transferred to a company account belonging to Phelan in AIB Isle of Man, and from there to the account newly opened and in Phelan's name, in AIB Isle of Man. It was the first and only time O'Brien asked Phelan to open an account for him in his, Phelan's, name, the accountant later said.

Soon after opening the account Phelan received instructions to forward certain amounts from the account to a number of named individuals. Soon all the money was dispersed.

One recipient of money from the account was Austin. O'Brien was to later say he transferred £150,000 to his old friend because they had agreed O'Brien would buy a house in Marbella, Spain, from Austin so his, O'Brien's, parents could make use of it.

The "handshake deal" was done in the summer of 1996 but the O'Briens were not to take possession of the house until the following year, so that Austin could make use of the house during the 1997 Ryder Cup competition in Spain. No solicitors were used for the transaction. At the time Austin was receiving chemotherapy for terminal cancer. Austin placed the £150,000 he received from O'Brien in a newly opened, dedicated account in Jersey. There the money sat until October, when he moved the bulk of it on to Lowry's newly opened, dedicated account with Irish Nationwide in the Isle of Man.

In his work with Esat Telecom, O'Brien had numerous meetings with Lowry seeking to resolve difficulties and canvas support. The issues discussed included complex matters to do with access to Telecom Eireann's land-line system.

O'Brien also had a lot of input into Esat Digifone, of which he was chairman. His old friend from pre-university days, Barry Maloney, was chief executive of Digifone and the two men would meet most Mondays to review progress with the rolling out of the new network.

One issue among many which the two men discussed was that of a number of lobbyists and consultants - including Charles Haughey's former press officer, PJ Mara - who had worked on the Digifone licence bid and who were looking for money. They had been promised success fees and after the win were expecting payment, but Maloney was insisting particular paperwork be provided before the payments were issued. It was a small matter but it was irritating O'Brien.

One day in October or November 1996, O'Brien said to Maloney: "Why don't you make the payments; I've had to pay two people £100,000 each." Both men agree the comment was made. O'Brien says it was made during a run in the mountains. Maloney says it was said during a meeting in an office. Both men agree it was understood that one of the payments was to Lowry.

Maloney said: "I don't want to know; it has nothing to do with Digifone." And so the matter was let lie, for the time being.