The board of AIB had reacted swiftly when it became aware the bank might be facing a £100 million liability for unpaid DIRT, its former chairman, Mr Peter Sutherland, told the inquiry yesterday.
He was responding to questions from Mr Pat Rabbitte, who suggested the board had taken no action on the DIRT issue before 1991 "when Tony Spollen's Exocet missiles were arriving with a frequency not experienced in the previous eight years".
Mr Spollen, the bank's head of internal audit, and a personal friend of Mr Sutherland, had expressed his concerns over the possible extent of the bank's exposure in a memorandum dated March 8th, 1991. Mr Rabbitte sought clarification from the bank's former chairman that the board's decision to investigate Mr Spollen's concerns in relation to DIRT could not have been initiated much earlier. He said he was surprised the board had not considered it was an appropriate matter for their consideration up to then.
"The response was rapid," Mr Sutherland said. "We did everything possible to examine the situation and concluded that there was no past liability, on the basis of what the bank believed had been agreed with the Revenue Commissioners. In terms of liability we were looking at the future."
He had been deeply concerned, on first reading the letter dated January 28th, 1991, in which Mr Spollen drew attention to the bank's potential liability, Mr Sutherland admitted.
But he was happy the bank had taken the best course in determining the facts, the setting up of an independent sub-committee of the audit committee, which included a number of key figures including Sir Douglas Morpeth, one of Britain's most eminent chartered accountants.
Mr Rabbitte sought clarification on the "intermingling" of events culminating in the Spollen letter and the decision to transfer the head of internal audit to another area. Mr Sutherland said he had phoned his friend a month earlier to convey the high opinion of his department expressed by Mr Jim Culliton at a meeting of the audit committee he chaired.
There was no connection between these events, Mr Sutherland insisted. He was responding to Mr Rabbitte's astonishment at the fact that a man being so highly praised for his work was apparently being demoted four weeks later.
There was no question of a demotion, said the former chairman, who admitted he was not involved in day-to-day operational matters. Such transfers were a common occurrence among senior executives. In response to Mr Bernard Durkan TD, he said he had never discussed the promotion issue with Mr Spollen.
As to the purported liability of £100 million, this was disputed by management, said the former chairman: "I was confident that it would be thrashed out by the subcommittee, but I did not know what the results would be."
The audit committee lost no time in investigating the matter, he added. "They concluded that the figure of £100 million was not remotely the case, if indeed there was a liability, which is debatable." There was agreement with the Revenue Commissioners "for the past", and there was a commitment that there would be rigorous compliance for the future. Mr Rabbitte wondered why the bank had not paid £10 million for which it agreed it was liable.
An agreement with the Revenue Commissioners was in place, replied Mr Sutherland. Otherwise it would have been brought to the attention of the board. The details of such an agreement were not a matter for the board, "but we would have expected to be fully informed". He added that even Mr Spollen was not arguing that the £100 million was correct.
"Why were you so quick to rubbish the figure when a month earlier you were phoning him and telling him he was doing a wonderful job?" Mr Rabbitte asked. Mr Spollen's figures were based on information he had received "from someone else", repeated the chairman. It was nothing like the real dimension of the problem.
Asked if he agreed with Mr James O'Mahony, former AIB Group taxation manager, that any amnesty in respect of DIRT would require new legislation, Mr Sutherland replied that he was happy to accept the prevailing view that there was an agreement with the Revenue Commissioners which could be implemented. That, too, was the view of Dr Donal de Buitleir, the AIB head of taxation, regarded as one of most reputable authorities in this area.