Irish Intercontinental Bank (IIB), which is one of three bidders for the State-owned ICC Bank, played a key role in complex loan transactions associated with the Ansbacher deposits.
IIB gave loan and guarantee facilities of up to £24 million sterling to Irish individuals and companies which were secured on cash deposits provided by Ansbacher from 1991 to 1997.
According to the affidavit presented to the High Court on Wednesday, the institution also made money out of this financing system. In one loan transaction, the net result for IIB seemed to be that it was able to lend the Irish borrower his own offshore deposit "for a 1 per cent, virtually risk free, margin", says the affidavit of Department of Enterprise, Trade and Employment official, Mr Paul Appleby.
This was because the borrower's money sometimes ended up back in IIB in Dublin, through a circuitous system of deposit manoeuvres through various bank accounts abroad.
Mr Appleby cited the findings of authorised officer, Mr Gerard Ryan, that the overall scheme of tax fraud involved distancing Ansbacher Cayman's cash deposits from the Irish borrowers. "An important by-product was that it enabled IIB to respond restrictively to standard auditing enquiries regarding the security held. " The affidavit says it enabled IIB to avoid disclosing the cash deposit in responses to audit requests from auditors to the borrowing companies. In some cases, cash which was to provide security for the loans was transferred from a deposit account in IIB in Dublin to deposit accounts with the London branch of IIB's parent company Kredietbank NV.
These cash deposits for a similar amount, were then placed back with IIB by Kredietbank in its own name as funding for IIB's loan to the Irish borrowers.
Smaller loans to other borrowers were secured on cash deposits placed with IIB in Dublin.
A spokesman for IIB said last night that the company was not commenting on the affair, but the bank was prepared to co-operate with the High Court inspectors who were appointed to Ansbacher (Cayman) Ltd. on Wednesday. The issue is unlikely to be helpful to IIB's bid for the State-owned ICC Bank which has a lucrative venture capital arm. Bank of Ireland is now seen as the front runner to buy ICC.
The affidavit cites a memo from a Mr Liam Donlon in IIB in 1991, who said he had told Mr Des Traynor - the architect of the Ansbacher accounts - that IIB "would envisage taking the deposit", for a loan, into Kredietbank London "as it is required to be in another jurisdiction".
Mr Appleby said that the success of such a scheme of tax fraud required that the Inspector of Taxes would not become aware of the existence of the offshore deposits on which the loans were secured. "This in turn required that there was no reference to this form of security in the borrower's audited accounts.
"Such reference could safely be omitted from the audited accounts only if there were departures from standard banking practice," the affidavit said.
Of the £24 million sterling which IIB provided in the form of loan and guarantee facilities, two companies - Carlisle Trust Ltd and Alstead Securities - accounted for £17.5 million. These companies were run by Mr John Byrne, the property developer who was a close friend of Mr Haughey's. Mr Traynor was a director of both.
All facility letters issued by IIB in respect of such loans excluded the primary security of the cash deposits, although secondary security was invariably included. The affidavit reveals that IIB has told the authorised officer that the bank omitted the security from the facility letters at the request of Mr Traynor.
IIB, which was incorporated in 1972, has been controlled by the Belgian Kredietbank since 1978. Kredietbank bought out Irish Life's 25 per cent stake in IIB earlier this year in a deal worth £125 million. At the end of 1998, IIB's loan portfolio stood at £1.4 billion. It manages Kredietbank's Irish operations.
