Supreme Court disqualifies Traynor auditor

 

THE AUDITOR of a company used by the late accountant Des Traynor for a “sophisticated and extensive scheme” of tax evasion by Charles Haughey and others must be disqualified or restricted in some way on grounds of unfitness, the Supreme Court has ruled.

While the cumulative effects of the actions of Patrick McCann as auditor of Kentford Securities Ltd were “very grave”, the court noted he had a “chastening” and costly experience over several years as a result, and the impact of disqualification may be “particularly severe” on him as an auditor.

It said it would consider submissions at a later date as to whether a shorter period of disqualification should apply in his case and what conditions should attach to that.

The three-judge court yesterday unanimously allowed an appeal by the Director of Corporate Enforcement (ODCE) against the High Court’s refusal to disqualify Mr McCann, despite finding serious failures in his conduct as auditor and director of Kentford.

Mr Justice Donal O’Donnell described as “unduly indulgent” the High Court’s refusal to disqualify on the basis of its view Mr McCann was unlikely to repeat such conduct in the future.

If the High Court approach of focusing on future conduct became standard, it would significantly reduce the effectiveness of section 160 of the Companies Act [which provides for the making of disqualification orders] as a protection for the public against individual directors and auditors, and as a deterrent to others, he said.

The 1990 Companies Act considers past conduct was “the key to disqualification”, he said. The Act intended disqualification orders to be partly penal, to deter such conduct and to improve corporate governance.

The ODCE had sought the disqualification order against Mr McCann (52), a certified public accountant, practising under the title McCann and Associates, arising from his conduct as auditor of Kentford. The matters complained of occurred between 1988 and 1994 when Mr McCann was an accountant employed by Chartered Secretarial Company, which provided secretarial services to Kentford, and he also had his own accountancy firm.

While Mr McCann was auditor to Kentford, some £2.27 million passed through Kentford’s accounts as part of the Ansbacher secret deposits managed by Mr Traynor.

In his 2006 High Court judgment, Mr Justice Michael Peart upheld the director’s complaints about Mr McCann’s conduct but declined to disqualify him. Whatever “irregular and improper conduct” Mr McCann “was mixed up in all those years ago at the behest of his employer and Mr Traynor is a thing of the past”, he ruled, and Mr McCann did not now represent a danger from which the public ought to be protected.

Mr Justice O’Donnell yesterday said the 1990 Act provided for a two-stage inquiry in making disqualification orders – (1) an objective forensic inquiry as to whether breaches of section 160 were established to the degree required, followed by (2) consideration of the court’s discretion.

If that procedure was followed, it was apparent the “most serious” matter against Mr McCann justifying disqualification occurred over a number of years when Mr McCann’s business was well-established, Mr Traynor was long since dead and it was publicly known Kentford was used by Mr Traynor for tax evasion, the judge said.

That matter was Mr McCann’s insistence to an authorised officer for the ODCE between 1999 and 2002 that a letter, dated January 1990, from Mr Traynor, claiming Kentford was a trust company, was genuine when it was not. That letter was clearly created in 1993 or later and backdated with Mr McCann’s knowledge, the judge said. Such conduct in dealing with an official investigation by the ODCE was conduct “aggravating particular wrongdoing”.

The purpose of Mr McCann’s becoming a director of Kentford was to provide “the appearance of compliance” with the requirements of corporate governance, Mr Justice O’Donnell added. Mr McCann maintained to the “very end” he was not a director between 1989 and 1992 when it was self-evident he acted as such. He was a director at the same time he was auditor in breach of the Companies Act.

There was no objective evidence that any audits were carried out since he seemed to have handed all his audit working papers to Mr Traynor and any audit carried out was “at best perfunctory”.

COMPANY DIRECTOR: HAUGHEY, TRAYNOR, ANSBACHER LINKS

PATRICK McCANN of McCann & Associates, Drumcondra Road, Dublin, is a former director of the company that holds the Haughey family assets.

He is a member of the Institute of Certified Public Accountants in Ireland. A spokeswoman for the institute said it would be looking at the Supreme Court ruling.

Mr McCann is a director of Management and Investment Services Ltd, which was associated with the operation of the Ansbacher Deposits when it was run by Sam Field Corbett. He was a director of Larchfield Securities for about a year in the 1980s. The company owns Inishvickillane, an island off the coast of Co Kerry, and other assets on behalf of the four children of the former Taoiseach, the late Charles Haughey.

He is also a former director of Carlisle Trust Ltd and other companies associated with the property developer John Byrne and which are owned by a Cayman Islands trust established for Mr Byrne by the late Des Traynor, the principal architect of the Ansbacher Deposits.