Scanlan says bank saw Haughey as a valued client

Mr Charles Haughey was regarded by AIB as a "key business influencer", the tribunal was told yesterday

Mr Charles Haughey was regarded by AIB as a "key business influencer", the tribunal was told yesterday. Mr Gerry Scanlan, a former AIB chief executive, said the bank would have viewed Mr Haughey as a valued client because of his influential political position.

However, he said, "this dream account or dream relationship turned into what I would describe as a banker's nightmare."

Mr Scanlan accepted that Mr Haughey's position would have been a significant consideration in the settlement of his £1.14 million debt, under which almost £400,000 was discounted from the account.

Mr Scanlan said: "In the marketing language that was becoming fashionable in the early '70s, he would have had the acronym of KBI associated with his name, which was `key business influencer'. I think any bank manager would have been delighted to have a KBI . . . on his books.

READ MORE

"I would say he was regarded as a valuable, or a valued, client, and in the early 1970s he was probably very prominent, obviously very influential and had all the appearances, as I understand them, of being affluent."

Mr Scanlan said the bank would normally not expect KBIs or valued customers to conduct their affairs in the manner Mr Haughey conducted his. The account was "very, very difficult to control and yet it was getting rigorous attention. I would believe the amount of senior executive time that is reflected in this documentation was a great diversion."

Mr Scanlan said Mr Haughey's political standing would have acted as a deterrent against disciplinary action over his debt. The ultimate sanction would have been to refuse to honour cheques or to withhold cheque books. However, "if a bank manager refused to give them to the customer's agent, as in this instance, it would be somewhat of a slur on that client's character."

In relation to the settlement, Mr Scanlan said the tribunal should not put undue emphasis on the fact that Mr Haughey was a politician. The settlement had to be viewed in the context of the difficult economic period of the late 1970s. He said settlements were not amenable to a formula.

"It was a decision made at the time, insofar as I am concerned, by people for whose technical competence as executives I had high regard, whom I knew and would acknowledge to be people of probity, competence, and as far as I am concerned, high integrity . . . The only conclusion I can come to is that those people made the correct decision in the climate of the times and with the knowledge that was available to them."

When pressed, Mr Scanlan accepted that Mr Haughey's potential political influence would have been a motivation behind the settlement.

Counsel for the tribunal, Mr John Coughlan, asked whether the decision to settle was made "because they were dealing with a politician who on the bank's own documentation had pointed out to them that he would be a dangerous adversary."

Mr Scanlan replied: "Well, that's the conclusion you are drawing."

Mr Coughlan: "No . . . I am asking you, looking at the documentation and your experience as the most senior banker at one stage in this bank, would that be your understanding of what motivated this enormous discount?"

Mr Scanlan: "I can't draw any other conclusion."

In relation to the secrecy which surrounded the settlement, Mr Scanlan said a "reserved approach" would apply to any client who was a prominent public figure - however, "more so in this instance".

He accepted that extra confidentiality surrounded the settlement rather than the account, given that the files relating to the account were requisitioned by senior management only after the deal was struck. Mr Scanlan said the accumulation of Mr Haughey's debt should be viewed in the context of the prevailing economic climate. The account was being charged at the bank's highest rate, at a time when interest rates had soared. In addition, the account had a 6 per cent surcharge, reflecting its extremely difficult history.

Mr Scanlan said one should also bear in mind that there was a bank strike in 1976, when clients wrote many cheques which the bank subsequently refused to pay. However, in the case of Mr Haughey, because the board had decided "none of this client's cheques were to be returned unpaid, I think they had to be paid."

Mr Scanlan was asked why no sanctions were taken against Mr Haughey between March 1976 and September 1979 when drawings of £485,219 were made.

He said that while the bank held sureties against Mr Haughey, who "appeared to be asset rich", it would have been reluctant to seek to claim them.

He pointed out that property values had fallen significantly at the time. In March 1975 Abbeville was valued in the bank's documentation at £800,000, rising to £1.5 million in normal times. In August 1979 the property was valued at £1.3 million.

Joe Humphreys

Joe Humphreys

Joe Humphreys is an Assistant News Editor at The Irish Times and writer of the Unthinkable philosophy column