Report will throw light on Faldor mystery

TODAY’S report on AIB from the Irish Financial Services Regulatory Authority (IFSRA) will cast a spotlight on the mystery of Faldor, a British Virgin Islands-registered investment company whose activities benefited five former top executives at the bank.

AIB said Faldor, whose existence was made public in May, broke tax laws and had “inappropriate dealings” with its investment management subsidiary, AIB Investment Managers (AIBIM), between 1989 and 1996.

The bank said it would pay out €1.1 million in compensation to customers who lost out as a result of Faldor’s dealings and to settle outstanding tax liabilities. It gave little detail on the exact nature of what Faldor was up to, but said it took advantage of favourable dealing practices that allowed the executives to profit at the expense of other AIBIM clients.

But who was behind Faldor? Who allowed it to be set up, who managed the €750,000 it contained and who knew about the nature of its activities? And how did the five executives linked with the company get involved? Two of the five muddied the waters in the days after AIB broke the news of its existence.

Former treasury chief Roy Douglas, who went on to become chairman of AIB rival Irish Life & Permanent, was the first to point the finger at AIB and suggest the executives were unwitting participants in a tax-dodging scheme. He said he had been invited by the bank to join an investment fund that he had assumed at the time was above board and “managed in a proper and professional manner.” He said he later approached AIB with questions about Faldor, after making a voluntary disclosure to the Revenue when he figured he had a potential tax liability. Mr Douglas believed access to special investments was one of the perks available to senior management at the bank.

Former AIB chief executive Gerry Scanlon then turned up the heat on the bank when he denied any active involvement in the goings-on at Faldor. He said he knew nothing of the company until AIB informed him of his link to it in October 2003.

AIB had transferred almost €150,000 belonging to Mr Scanlon and his wife to Faldor between 1989 and 1990 without their knowledge, he said. He also raised the possibility of suing AIB for malpractice, saying he only decided against this because of his long-standing relationship with his former employer.