They all have some role to play in the intriguing story of Ireland’s latest banking scandal, which takes us from a beer brewing dynasty in Germany to a West Indies paradise island back to Garda headquarters at the Phoenix Park.
The story unfolded on Tuesday at the Oireachtas Committee on Economic and Regulatory Affairs.
Usually boring and sober, it became more a ‘rocked-us’ committee meeting this week when a former AIB worker broke free from a gagging clause placed on him by the bank to spill the beans on what went on during his time there.
Eugene McErlean was described by a committee member as “one of the only good bankers in the country”. He was a group internal auditor and was let go in what the bank presented as a clearing-up exercise following the Rusnak rogue trader affair in 2002.
The real reason he was let go, he claimed this week, was that he was raising concerns with the Financial Regulator’s office — then part of the Central Bank — about extraordinary share dealing involving multi- million euro sums of customers’ money.
For reasons that are still unknown and which the committee will investigate, Goodbody — the stockbroker arm of AIB — went to the bank’s auditing committee to get approval for a scheme that was subsequently investigated by the Garda as an alleged multi-million euro money-laundering exercise. Under the scheme, all shares purchased in AIB by clients of Goodbody were put in the name of a company on the tiny Caribbean island of Nevis.
When Goodbody was asked to sell AIB shares on behalf of its clients, it sold them from the company in Nevis, which it called Charterhouse. “It was a very nice name, sounds like a financial company in London or something,” said Mr McErlean.
“For a period every share which a member of the public traded in AIB which was transacted by Goodbody was acquired and sold by that company,” he said.
Some committee members pointed out that they had never before heard of Nevis, and wondered what kind of place it was.
It is not only a surfers’ paradise but a tax haven. It’s an island of sandy beaches, some of the best coral in the world — and where Scary Spice’s father hails from.
More importantly, in the context of AIB dealing there, it was one of the jurisdictions placed on a “blacklist” with which Irish financial institutions were not supposed to deal under rules set down by the the Financial Action Task Force on Money Laundering. For bookkeeping purposes, Goodbody and AIB originally placed the money in what they pretended was the financial arm of the German dynasty, Fürstenberg — the German equivalent to Guinness. Described as a “noble house” it dates back to the 17th century and Franz Egon of Fürstenberg — a bishop of Strasbourg and ally of Louis XIV of France.
The dynasty were the owners of Fürstenberg beer up until 2004 when it was sold to Heineken. Other famous relatives include the fashion designer, Diane von Furstenberg.
But according to Mr McErlean, AIB was not in fact dealing with this great empire, but through the bank account of a chap living in London, who happened to share the famous Fürstenberg name.
“Although the investment arm was called Fürstenberg, it looked like it was run by Jerry Guinness from up the road — it had no connection whatsoever with the Fürstenberg brewing family. This was a man of straw who had no worth whatsoever and who probably had very little idea about what was going on,” Mr McErlean told the committee.
This man of straw was linked with a chain of companies in various off-shore destinations around the world which all had their parent company in Nevis.
In 2001, Mr McErlean raised his concerns with the Financial Regulator’s office, including Patrick Neary. The recently retired regulator was “shocked” to hear about it. An audit of this and other matters was carried out by Mr McErlean himself and the practice was stopped in 2001.
He does not know what happened to his audit report, but said it was passed on to the Financial Regulator. The Irish Stock Exchange was also made aware of it.
The Department of Finance was unable to confirm this week if it had seen the audit or if it was ever aware of the share-dealing scheme prior to this week.
During the committee meeting, Senator Shane Ross asked Mr McErlean: “Was anybody hauled over the coals, sacked or disciplined?” The former auditor replied that a meeting was held about the audit report one morning: “If the senator is asking for the net result, it was zero,” he said.
Asked if the scheme was legal, the former auditor said: “Absolutely not.”
He added: “There is a parallel with some of the recent issues in Anglo Irish Bank, whereby the legal opinion was obtained that this was all legal. Goodbody obtained a similar legal opinion that it was legal, but I could not see it.”
Months after he lost his job in the bank the Financial Regulator called Mr McErlean in and asked if he was withdrawing his allegations in relation to the share dealing and other matters. He replied that he was not, and said he was “out on the streets after five minutes”.
In a statement on Thursday night, the regulator’s office said they had reported the matter to the Garda in October 2001.
“The procedure at the time, in accordance with the provisions of the Criminal Justice Act, 1994, was for suspicions of money laundering identified by the bank to be reported to the Garda. Having reviewed the relevant files we can confirm that all reporting obligations were met by the bank,” the statement said.
The Garda were unable to confirm if that investigation concluded, when, and what it found, saying they “are not in a position to comment on disclosures made under money-laundering legislation”.
The moral of the story is the level of unknowns in the labyrinth that is the Irish financial sector and the secrecy with which the regulator carries out its duties.
The Financial Regulator, the Irish Stock Exchange and both AIB and Goodbody will all be asked to answer questions to the committee on the affair.
But for now, the story has been left as a cliffhanger. But AIB shareholders and the public at large would not have had any hint of it happening if it were not for the work of an Oireachtas committee and the persistence of one good banker.