Customers were not aware when buying shares in the bank, through its subsidiary stockbrokers, Goodbody, the shares were being put in the name of a company in the island of Nevis — marked as a “black spot” with which Irish financial institutions were not supposed to trade.
It is alleged that Goodbody stockbrokers initially passed the money through what was purported to be the financial arm of the German beer brewing family Furstenberg.
But Furstenberg had nothing to do with it. The money was initially passed through the account of a man called Furstenberg, living in Britain, not related to the beer dynasty.
He was described yesterday as a “man of straw” with no great wealth, probably unaware of the scale of money being dealt through his accounts.
The share money was then routed to a number of jurisdictions around the world, including the island Vanuatu in the South Pacific — all of which had a parent company called Charterhouse based in Nevis.
Eugene McErlean, a former auditor at AIB, said he initially reported this extraordinary scheme to the Financial Regulator.
He said he did not know the purposes of the scheme. It could be seen as share price management, but in fact had no effect on share prices.
He claimed it was proposed by Goodbody and approved by the AIB auditors committee. A small number of individuals in both institutions, who are still working there, were involved.
Mr McErlean said: “For a period of time, every share that was purchased by Goodbody for a client was put into the name of one of these companies which ultimately had its parent in Nevis. Every share that was sold by Goodbody to a client of AIB came from that company.”
Asked if it was legal he said: “Absolutely not.” But he added: “There is a parallel with some of the recent issues in Anglo Irish Bank whereby they obtained a legal opinion to say this was all legal, and Goodbody obtained a similar legal opinion that this was all legal. I couldn’t see it myself.”
The scheme lasted for an unknown period of at least nine months and was stopped in 2001. The sums involved are unknown but Mr McErlean said: “It would not have been billions but multi-millions.”
He also accused the Financial Regulator of covering up and “burying” over-charging to the tune of e60 million at AIB, which it knew about for three years without acting to protect customers.
He said the regulator was aware of what was happening as far back as 2001 and carried out its own report in 2002. But the public did not learn of it until a whistleblower told RTÉ in 2004.
Mr McErlean also alleged a practice in the bank in which branch managers would go for a round of golf and charge customers a “management time fee”.
He said this was done because they were under pressure by their seniors to reach targets for this fee, and was only done to “weak” customers who were in debt and perceived as not being in a position to object.
Mr McErlean claims he was used as a scapegoat by the bank when he lost his position in light of the Rusnak rogue-trader scandal.
He raised concerns with the Financial Regulator in May 2002 over the share trading through the Caribbean and the fact that AIB had not paid back all the money owed to customers it overcharged.
The Regulator was “very shocked” and concerned about the issues raised.
But Mr McErlean was called into a meeting in the Regulator’s office five months later and asked if he was withdrawing the allegations.
He is taking a fight to Europe for the release of some documents relating to the scandal.