NIB slapped with €64m bill

NATIONAL Irish bank has been hit with a total bill of €64 million after a devastating report revealed widespread tax evasion and overcharging at the bank.

Regulatory authorities have also vowed to take civil action to prevent some of the implicated former management team from becoming company directors in the future.

Former Fianna Fáil TD Beverly Flynn and former NIB chief executive Jim Lacey were among the high profile figures criticised in the six-year investigation into the bank’s activities in the 1980s and 1990s.

Ireland’s leading accountancy firm KPMG was also censured by the High Court inspectors, whose investigation was triggered six years ago after an unidentified employee blew the whistle on illegal practices within the bank.

Sources close to the bank’s management claimed last night that the bank could be sold off in the wake of the scandal by owners National Australia Bank.

The report found that between 1986 and 1998:

Bogus non-resident accounts and fictitiously named accounts were opened and maintained, allowing customers to evade tax.

Clerical Medical International policies were promoted to customers as a secure investment for funds not disclosed to the Revenue authorities.

Special Savings Accounts had taxes deducted at a reduced rate.

There was improper charging of both interest and fees to customers.

The bank was ordered to pay back €30m to the State and customers and foot the €34m cost of the High Court investigation.

Director of Corporate Enforcement Paul Appleby said he would confer with the Director of Public Prosecutions to see if criminal charges could be brought but he vowed to bar some of the former executives from future company directorships.

Tánaiste Mary Harney described the report as “deeply disturbing”.

“The report is an astonishing catalogue of systematic overcharging and tax evasion,” she said.

“What went on in NIB was not some minor oversight. What I find most shocking is the culture which prevailed at the highest level in the organisation which allowed and even encouraged wrongdoing.”

The Irish Financial Services Regulatory Authority warned it would take any action deemed necessary following the outcome of the report.

“The type of activity described in the High Court inspectors’ report is utterly unacceptable,” said IFSRA chief executive Liam O’Reilly.

“We are absolutely determined to ensure that there is no place for this type of activity in the financial services industry of today,” he said.

Larry Broderick, general secretary of the Irish Bank Officials Association, said the inspectors’ report highlighted the most deplorable activities in the country’s banking system.

He called the report “a damning indictment of totally unacceptable and unethical practices that occurred in National Irish Bank”.

“Those responsible should be held to full account for their actions and it is important that current employees are not scapegoated for the sins of the past,” he said.

Current NIB chief executive Don Price said the bank had been working for more than six years to deal with the issues in the report, co-operate with the investigation, develop reimbursement schemes and implement a wide-ranging compliance programme.

“The events under investigation go back a long time. We have literally rebuilt National Irish Bank from the ground up. It is now a very different organisation,” he said.

Bogus non-resident accounts were opened and maintained to enable customers evade tax.

Fictitiously-named accounts opened for the same reason.

Main findings

Special savings accounts had DIRT deducted at a reduced rate.

CMI policies promoted as a secure investment for funds undisclosed to the tax authorities.

Overcharging of interest to customers.

Overcharging of fees.