National Irish Bank believes disgruntled staff still working with the bank are behind the leaking of confidential customer documents to the media. Special investigators are likely to be called in to identify the staff, in an attempt to prevent any further leaks.
The bank is also working to establish exactly what documentation was taken from the bank and has instructed its solicitors to seek its return. An injunction against the publication of customer details was granted against RTE yesterday by the High Court.
The bank may yet call in the Gardai. Details relating to its sale of Clerical Medical Investment (CMI) offshore investment bonds were leaked about two weeks ago to RTE. Sackings and prosecutions could result. The bank believes the leaks are being used by parties competent in orchestrating media campaigns.
The sale of the bonds is currently being investigated by the bank itself, the Revenue Commissioners and the Central Bank. The Department of Enterprise, Trade and Employment is seeking to establish whether the product was authorised for sale here and received an answer yesterday to queries it had submitted to the bank on Wednesday.
NIB has discontinued its sale of the bonds and decided not to provide offshore products from two other companies pending clarification of the status of these companies products. The identity of the two companies is not known.
The bank began to promote the CMI bonds in 1992 and sales of the product peaked sharply in 1993 to 1994. In 1994 certain "shortcomings" in the sale and administration of the bonds was noted and deposits to the bank's headquarters.
It is understood the shortcomings included the fact that some NIB customers were able to withdraw money from their bank branch on the basis of the accounts CMI had with the branch as a result of the customer investing in its bonds. The customer would be given the money on request by the bank, which would then have to await receipt of an equivalent amount of the money from CMI. This was contrary to bank procedures.
The bonds were sold by staff in the NIB financial services division. CMI paid commission to NIB equal to 4 per cent of business secured. Branch managers identified high net worth customers, who were then visited by the financial services staff. The Fianna Fail TD, Ms Beverly Cooper-Flynn, who was elected last year, was a member of the staff at the time.
The CMI product involves customers selecting what mix of investments - cash deposits, equities or gilts - are made by CMI. A customer can select a financial adviser and NIB customers generally selected NIB.
Many of the customers ended up instructing CMI that they wanted the funds underlying their investments to be deposited in their local branch of NIB. The money invested in this way was CMI money invested by the Isle of Man company to underpin the customer's policy.
NIB later decided that some of its branch staff might not properly understand how the CMI product worked and had not explained it properly to their customers. Customers may have acted as if the money in the CMI accounts was actually their money.
Internal audits of NIB branches noted problems which were sufficiently widespread for the accounts to be withdrawn to the company's headquarters on Wilton Tce in Dublin. Thereafter, customers wishing to cash some or all of their policy, had to wait for a cheque from the Isle of Man.
Because so many of the customers who bought the bonds opted to have their investments lodged as cash deposits, the bank is not satisfied that the advice given to the customers was wholly appropriate. Cash deposits may not have been the most profitable way of investing.
One explanation is that local branches were anxious to retain their deposit base. Another might be that customers wanted to keep their money on deposit, but believed it would be hidden from the revenue if invested in CMI accounts. The bank has said its investigation has revealed no evidence in support of allegations that a concerted effort was made to target customers wishing to evade tax.
Such was the success of the sales team in selling the product in 1993/1994 that five of its members were invited by CMI to Australia to attend a CMI international convention.
Mr David Shelton, marketing manager with the Clerical Medical group, said NIB seemed to have difficulty with their advice process and with tax issues, and had therefore understandably ceased selling the bonds. In relation to the CMI product being authorised for sale here, Mr Shelton said there "may have been technical breaches of the Irish law".
