NIB bosses likely to avoid jail despite role in scandal

AFTER a six-year investigation, none of 19 former executives at National Irish Bank is likely to face criminal prosecution despite their involvement in tax evasion and overcharging of customers.

The bank, which was forced to repay customers €23.3 million in refunds and compensation, could only face a maximum fine of €127,000 as a result of its conduct. This is because new legislation governing the behaviour of financial institutions, which carries penalties of up to €5m, does not come into effect until tomorrow.

In a 400-page report published yesterday, High Court inspectors John Blayney SC and Tom Grace revealed a litany of improper practices across NIB’s branch network between 1988 and 1998. They include:

Enabling customers to evade tax through bogus non-resident deposits as well as fictitious and incorrectly named accounts.

The promotion of offshore policies as a secure investment for funds undisclosed to the tax authorities.

Deduction of incorrect DIRT rates from special savings accounts.

Overcharging of interest and fees.

Director of Corporate Enforcement Paul Appleby admitted that criminal prosecutions against any of the named individuals would be difficult as information they gave to the inspectors is not generally admissible in any subsequent criminal trial.

However, Mr Appleby said he was disposed to start civil proceedings later this year to disqualify some of the former NIB executives from acting as company directors. He said the extent to which illegality and bad practice was tolerated by management over a 10-year period at the State’s fourth largest bank was “deeply disturbing”.

“The surprising feature is that no one shouted ‘stop’,” Mr Appleby said.

Among those cited in the report as having knowledge and responsibility for such conduct are NIB’s former chief executive, Jim Lacey; former executive director, Barry Seymour and former chief operating officer, Philip Halpin.

Independent Mayo TD, Beverly Flynn, who worked as a financial services manager at the bank between 1989 and 1997, was criticised for selling a substantial number of offshore policies to NIB customers which she knew were being bought with money undeclared to the Revenue Commissioners.

Nevertheless, the former Fianna Fáil deputy told the inspectors she was not aware of how clients financed the money they invested in the Isle of Man-based company, Clerical Medical Insurance (CMI). “Sources of funds really wasn’t an issue for me,” she said.

However, her former NIB colleague, Patricia Roche, admitted the bank clearly tried to sell CMI policies by targeting customers with “hot money”. “I recognised from the beginning that it wasn’t kosher,” she told the inspectors.

The scandal has ultimately cost the bank €64m, including a payment of €6.7m to the Revenue and €34m in costs arising out of the inspector’s investigations.