However, he conceded the arrangement had not been implemented properly and the practice consequently “shouldn’t have happened”.
Appearing – along with AIB’s regulatory and operational risk manager, Philip Brennan – before the Joint Oireachtas Committee on Economic Regulatory Affairs, Mr Sheehy was chiefly defending the practice whereby Goodbody Stockbrokers traded AIB shares to two international funds based in the Isle of Man and the Caribbean island of Nevis in the early part of this decade. This was done so the firm would not lose out on business ahead of legislation, which previously barred it from trading in AIB shares, being changed.
The details of this practice had been detailed by AIB’s former internal auditor, “whistle- blower” Eugene McErlean, when he appeared before the same committee at the end of March. It was his 2001 reports that found the actual operation of the funds varied “significantly” from the original proposals presented to AIB’s Group Audit Committee, which sanctioned the practice.
Mr Sheehy told the committee that nobody within either AIB or Goodbody Stockbrokers profited from the various transactions by either fund, although this has been questioned. At least one “third party” profited from one of the funds to the tune of IR£800,000.
Mr Sheehy did concede that “the funds weren’t operated the way they were meant to be, and admitted that the matter had been an embarrassment for the bank and not its proudest moment. But he strongly disagreed with the committee’s questioning whether AIB had been in breach of the Companies Act, constantly repeating the legal advice received by Goodbody Stockbrokers that the matters were “unlikely” to be found to be in breach.