Unlicensed Banking

Documentation examined by the Authorised Officer suggests that the Company carried on banking business in Ireland from 1978 to 1995. For all of the period during which the Company carried on its activities in Ireland, the Central Bank Act, 1971 was in force. The Company continued to operate in Ireland after the enactment of the Central Bank Act, 1989.

It is clear from the Report of the Authorised Officer that the Company was providing the following services in Ireland:

(a) Taking Deposits;

(b) Providing a service for the withdrawal of cash and drafts;

(c) Maintaining a ledger in respect of individual deposits (referred to as "memorandum accounts");

(d) Sending out account statements to Irish clients;

(e) Negotiating loans for Irish clients with GMI and IIB which were secured on cash deposits provided by the Company; and

(f) Providing Guarantees.

This activity suggests that the Company was operating a banking business in Ireland, as defined by S.2 of the Central Bank Act, 1971 and as subsequently replaced by S.29 of the Central Bank Act, 1989, without a licence, contrary to the provisions of S.9 of the Central Bank Act, 1971. I beg to refer to a true copy of a letter of 2nd July, 1999 from the Central Bank of Ireland when produced, marked with the letters "PA-31" I have endorsed my name prior to the swearing hereof, which confirms that the Company never held a Banking Licence in Ireland.

Between November 1992 and September 1994, the Company was registered as "Cayman International Bank and Trust Company Limited". Insofar as letters emanating from 42 Fitzwilliam Square were on headed paper bearing this name, Mr Desmond Traynor, the Company, or both of them, would be deemed to have been holding themselves out as bankers or otherwise having represented themselves as conducting or being willing to conduct banking business within the terms of Section 7(2) of the Central Bank Act 1971. I beg to refer to a true copy of a sample of the said notepaper when produced, upon which marked with the letters "PA-32" I have endorsed my name prior to the swearing hereof.

The "Ansbacher Limited" headed paper used by Mr Traynor throughout most of 1991 also carried the legend "A member of the Henry Ansbacher Holdings plc Merchant Banking Group".

The circumstances outlined in the Authorised Officer's Report strongly suggest that the Company, either directly or through Mr Traynor and its other agents in Ireland or via third parties, solicited deposits, by personal canvassing or otherwise, in contravention of section 27 of the Central Bank Act, 1971.

To the extent that the above offences were committed by the Company, certain officers of the Company would also appear to be culpable by virtue of section 60 of the Central Bank Act, 1971.

The Minister regards a healthy banking sector as an essential constituent of a sound economy. Irish banking and companies legislation provides assurance to companies and consumers that a proper supervisory framework is in place. The secretive nature of the Company's operations in Ireland for over twenty years exposed its clients to a high risk of mismanagement or fraud which such supervisory activity is specifically designed to avoid. Consequently, the Minister regards the flagrant abuses by the Company of Irish banking and companies legislation as a very serious matter and one which merits a thorough investigation of the Company's affairs. In the view of the Minister, the appointment of Inspectors to the Company by this Honourable Court under section 8 of the Companies Act, 1990 is necessary to clarify the scale and nature of its operations and to report on the extent to which fraud or mismanagement did take place. A comprehensive report by the Inspectors of these matters will serve to identify in the public interest the measures which may be necessary to prevent such activity being repeated in the future.

Shortly after his resignation from GMI in May 1986, Mr Desmond Traynor became chairman of Cement Roadstone Holdings plc. In this capacity Mr Traynor was based at the company's registered office, firstly at Pembroke Street, and from 1989 to 1994, at 42 Fitzwilliam Square. Correspondence emanating from there, together with the statements of Mr Padraig Collery and Ms Joan Williams, shows that Mr Traynor directed the Irish operations of the Company from 42 Fitzwilliam Square.

Of the fifteen members of the board of directors of Cement Roadstone Holdings plc, as they appear on pages 4 and 5 of the Group's 1987 annual report, the Authorised Officer has found evidence which indicates that eight were the beneficiaries of deposits placed with the Company. This strongly suggests that a substantial number of the directors knew that an unlicensed bank was operating from its registered office. It also suggests that some of the directors may have been aware that the Company was assisting Irish individuals or companies in evading tax.

To the extent that any directors of Cement Roadstone Holdings plc knowingly permitted these activities to be conducted from the company's registered office, and permitted Mr Traynor to combine his direction of these activities with his role as Chairman of Cement Roadstone Holdings plc, they may have been party to the carrying on of the business of the Company with intent to defraud the creditors of other persons, namely the Revenue Commissioners.