THE DIRECTOR of Corporate Enforcement has told the High Court there was “a catastrophic failure of governance” during Jim Lacey’s tenure as chief executive of National Irish Bank (NIB) and that Mr Lacey must bear ultimate responsibility for “very serious wrongdoing” by the bank.

The July 2004 report of the court-appointed inspectors into the affairs of NIB and National Irish Bank Financial Services (NIBFS) not only justified but mandated a court order disqualifying Mr Lacey from involvement in the management of any company on grounds of unfitness, Maurice Collins SC, for the director, argued yesterday.

The inspectors, who investigated the affairs of NIB and NIBFS between 1988 and 1998, concluded the bank was involved in widespread tax evasion and imposed unwarranted fees and interest charges on customers.

They found several members of senior management, including Mr Lacey, bore responsibility for various improper practices and failed to deal decisively with, among other matters, bogus non-resident accounts, the improper charging of interest and the handling of Clerical Medical Insurance (CMI) policies.

The director claims it is clear from the inspectors’ report that Mr Lacey failed to uphold or implement proper standards of corporate and banking behaviour while chief executive and demonstrated unfitness, a lack of commercial probity, negligence and/or incompetence in the discharge of his duties as an officer of the bank.

Mr Collins said the improper practices at National Irish Bank were all the more significant because they took place at a licensed bank. The chief executive of a licensed bank had a particular responsibility to ensure compliance with legal and ethical standards of corporate governance.

Mr Lacey, Grove House Gardens, Blackrock, Co Dublin, was in court yesterday for the opening of the hearing of the director’s application for a disqualification order under section 160 of the Companies Act.

Two years ago, the High Court ordered Mr Lacey to attend for cross-examination at the hearing. That is expected to take place later this week.

The hearing, before Mr Justice Roderick Murphy, is expected to last three weeks. The application is one of nine brought against NIB executives by the director arising from the inspectors’ report.

In an affidavit resisting the disqualification order, Mr Lacey, who was chief executive of NIB between 1988 and 1994 and a director until 1997, rejects the findings of the inspectors in relation to him as “fundamentally flawed” and argues that he discharged his responsibilities “diligently and competently”.

He had adhered to then “best practice” in terms of follow-up by a chief executive on internal audit reports and had taken several steps aimed at ensuring the bank complied fully with legal and regulatory requirements, he said.

It was only at branch level within NIB that there could have been first-hand knowledge any particular account was “bogus”, he said. He rejected the inspectors’ finding that senior management was aware of the existence of bogus non-resident accounts.

He said the position adopted by the bank concerning Dirt between 1988 and 1994, when he was chief executive, was consistent with that taken by other banks. If NIB erred in its approach to Dirt, the error was replicated throughout the entire financial sector, he said.

While he was chief executive, NIB was regulated by the Central Bank and it was significant that neither it nor NIB’s external auditors, KPMG, had never raised any concerns about the issues identified by the inspectors, he said.

This belied the findings of the inspectors that the improprieties identified by them were so widespread throughout the NIB network that he should have been aware of them.

Since leaving NIB, Mr Lacey said he had been heavily involved in management and advisory positions in the State and private sector, nationally and internationally, and had discharged his duties “without even a hint of criticism”.

He was appointed chairman of the Irish Aviation Authority by the Government in 1994 and was also appointed to the board of the Dublin Docklands Development Authority.