£135,510 debt was repaid and replaced with `fictitious loan'

A £135,510 debt owed by a Tralee-based tourism company of which the Kerry North TD Mr Denis Foley was a director was repaid with Ansbacher deposits and replaced with a "fictitious loan", the tribunal heard yesterday.

The debt stemmed from a £70,000 loan taken out by Central Tourist Holdings Ltd with Guinness & Mahon in June 1972. In the early years interest was paid on the loan but this ceased in 1982 and the debt grew to £135,510.68 by September 1985.

Documents from Guinness & Mahon showed the debt was eventually repaid on September 6th with a transfer of £133,579.52 from the Ansbacher deposits, and a balancing payment of £1,931.16 from an Amiens Securities Ltd account, through which the Ansbacher banker Mr Des Traynor used to channel offshore funds.

The following month, however, a fictitious loan account was created in the name of Central Tourist Holdings Ltd for the same amount as was repaid. Counsel for the tribunal, Mr John Coughlan SC, said this seemed to be aimed at giving the impression that the loan continued to be outstanding.

Guinness & Mahon subsequently issued statements showing the state of this "loan" on foot of requests from the auditing firm, Haughey Boland and Co, which was acting on behalf of Central Tourist Holdings. The certificates indicated the balance on the fictitious loan account had risen to £149,665 by October 31st, 1986.

Mr Coughlan said neither Guinness & Mahon nor Central Tourist Holdings had any record of such a loan.

He pointed out, however, that the impression of a loan was created by the opening of two accounts on October 29th, 1985, in the name of the tourism company, one with a credit of £135,510.58, the other with a debit of the same amount.

This was not a loan, said Mr Coughlan, but "it had the effect that on October 31st, 1985, anyone looking at the screen in Guinness & Mahon would have been able to certify that there was an indebtedness of the part of Central Tourist Holdings of £135,510.58."

The former Guinness & Mahon banker, Mr Padraig Collery, said these two accounts could not have been opened without instruction from a senior level. Normally, such instructions came from Mr Traynor, who was then with the bank.

In relation to the genuine loan, repaid in 1985, the tribunal heard it had been guaranteed by Central Tourist Holdings' four directors: Mr Foley, Mr William Clifford, Mr Thomas Clifford, and Mr John Byrne.

The loan was secured by backing deposits from Guinness & Mahon Cayman Trust.

Earlier, Mr Collery told the tribunal he was "deeply concerned" that Mr Barry Benjamin, the Cayman banker who now controlled the Ansbacher deposits, was refusing to reply to requests for information from depositors. This concern, he said, had contributed to his seeking to protect himself from litigation and led him to withhold crucial information and documents from the tribunal.