Auditor of firm linked to Ansbacher scheme disqualified on appeal

THE Supreme Court has ruled the auditor of a company used by the late accountant Des Traynor for a “sophisticated and extensive scheme” of tax evasion by Charles Haughey and others must be disqualified or restricted in some way on grounds of unfitness.

While the cumulative effects of the actions of Patrick McCann as auditor of Kentford Securities was “very grave”, the court noted he has had a “chastening” and costly experience over several years as a result and the impact of disqualification may be “particularly severe” on him. It said it would consider submissions at a later date as to whether a shorter period of disqualification should apply.

The court yesterday unanimously allowed an appeal by the Director of Corporate Enforcement (ODCE) against the High Court’s refusal to disqualify Mr McCann despite finding failures in his conduct as auditor and director of Kentford.

Mr Justice Donal O’Donnell described as “unduly indulgent” the High Court’s refusal to disqualify on the basis of its view Mr McCann was unlikely to repeat such conduct. The High Court approach was based on errors of principle in the trial judge’s analysis of the purpose of disqualification orders, he ruled.

If the High Court approach of focusing on future conduct became standard, it would reduce the effectiveness of Section 160 of the Companies Act (which provides for the making of disqualification orders) as a protection for the public against individual directors and auditors and as a deterrent to others, he said.

The 1990 Companies Act considers past conduct is “the key to disqualification”, the judge said. The Act intended disqualification orders to be partly penal, to deter such conduct and to improve corporate governance, he added.

The ODCE had sought the disqualification order against Mr McCann, 52, a certified public accountant, practising under the title McCann and Associates, arising from his conduct at Kentford between 1988 and 1994 when he was an accountant employed by Chartered Secretarial Company (CSC), which provided secretarial services to Kentford. He also had his own accountancy firm.

While Mr McCann was auditor to Kentford, IR£2.27 million passed through its accounts as part of the Ansbacher secret deposits managed by Traynor.

In his 2006 High Court judgment, Mr Justice Michael Peart upheld the Director’s complaints about Mr McCann’s conduct but declined to disqualify him.

Yesterday, however, Mr Justice O’Donnell found there was nothing in Mr McCann’s testimony to the High Court to suggest an “epiphany” on his part or any ready acceptance this unacceptable behaviour was improper.

If Mr McCann had frankly acknowledged his part in the provision of services to Kentford, this case might have been “very different”, the judge concluded.