The chairman of the independent audit committee which advised the AIB board that no contingent liability existed for DIRT was "prepared to take it on the chin" if the Public Accounts Committee felt its work was inadequate, he conceded yesterday.
Mr Pat Rabbitte TD, for the committee, was seeking an explanation from Mr Jim Culliton as to why the committee ultimately had taken the management line that there was no retrospective liability for DIRT, as against the contention by the bank's former head of internal audit, Mr Tony Spollen, that it could be liable for up to £100 million in unpaid taxes and so advised the board.
Mr Culliton was a director of AIB for 12 years, 1984-1986, and chairman of the special sub-committee set up by the bank's chairman, Mr Peter Sutherland, to investigate the contention of the group's internal auditor, Mr Spollen, that AIB could be facing a £100 million liability in respect of unpaid DIRT, equivalent to its entire annual profits.
Other members of the independent committee were Sir Peter Froggett, past vice-chancellor of Queen's University Belfast; Sir Douglas Morpeth, former president of the Institute of Chartered Accountants, England and Wales; Dr Liam St John Devlin, the former executive chairman of CIE; Dr Seamus Sheehy, professor of applied agricultural economics at UCD; Mr Denis J. Murphy, chairman of the Irish National Petroleum Corporation; and AIB's chief executive, Mr Gerry Scanlan.
Such was the "independent" calibre of the audit committee, which was "absolutely flabbergasted", he said, when they read Mr Spollen's memorandum on the potential £100 million liability for DIRT. He regarded Mr Spollen as a competent auditor, he confirmed, and he had seen fit to praise the work of the internal audit department in the highest terms.
Mr Rabbitte put it to him that there were no figures available that "seriously undermine" Mr Spollen's calculations. "We didn't regard the £100 million as a fiction," Mr Culliton responded. "In fact, as a committee, we began to wonder if there was some conspiracy going on that didn't include us."
The 1991 bank strike intervened between the board meeting on January 6th and the end of the month. It was a very difficult period for industrial relations. When he met Mr Spollen again on March 11th, it was clear that he was deeply upset, Mr Culliton said. "He was still the same excellent person and excellent head of the function he was in December or earlier, but that was the ingredient that had come in and we had to cope with that." Asked what precisely the committee had done to investigate the position, the former AIB director said they had been persuaded by the financial director, Mr John Keogh, on the basis of advice from Dr Donal de Buitleir and Mr James O'Mahony, of the bank's taxation department, "both former officials of the Irish Revenue", that all financial institutions, in effect, had an amnesty for the past, provided the situation was regularised by June 30th, 1991.
"To the extent that we are unable to do so in time for the DIRT payment in April 1991, we may have a limited exposure," these experts had advised, concluding that "any material exposure is not material". That was a powerful argument, Mr Culliton said.
All the senior people in AIB had so far retreated behind the answer, that it "wasn't a problem, because Donal de Buitleir told us he had an amnesty", Mr Rabbitte suggested. As far back as 1989, however, Mr O'Mahony, as head of group taxation at AIB, had drawn the bank's attention to the fact that there was "a serious threat to the bank in the event of an audit by the Revenue Commissioners into the operation of DIRT".
Mr Culliton confirmed that he had never seen the relevant document, "nor should I have". Should a document such as this not have been brought to the attention of the relevant managers and ultimately, the audit committee? he was asked.
He could only speak for the audit committee, Mr Culliton replied, and what had been received. "These are working papers. I haven't seen this before and I wouldn't even attempt to explain it for that reason." But he understood its significance, he agreed.