The jury in the trial of Michael Lowry has heard he told a previous hearing "alarms bells went off" when he realised in 2006 that there was "no clear record" in his company's accounts of a 2002 payment.
It is the State's case that the Independent TD's company, Garuda Ltd, received Stg £248,624 (€372,000) in commission from Norpe OY, a refrigeration company based in Finland, in August 2002.
It is alleged that Mr Lowry arranged for this payment to be made to a third party, Kevin Phelan, residing in the Isle of Man, and therefore it didn't appear in the company accounts for that year, nor did he declare it as income.
It is further alleged that the accounts were then falsified in 2007 to reflect that the payment was received in 2006.
The Dublin Circuit Criminal Court jury has been hearing transcripts from an appeals commission at which Mr Lowry successfully challenged a €1.1 million tax bill raised against him personally and his company Garuda Ltd.
Mr Lowry (64) of Glenreigh, Holycross, Co. Tipperary, has pleaded not guilty to four charges of filing incorrect tax returns on dates between August 2002 and August 2007 in relation to a sum of Stg £248,624 received by Garuda Ltd and one charge in relation to failing to keep a proper set of accounts on dates between August 28th, 2002 and August 3rd, 2007. He has further pleaded not guilty on behalf of Garuda Ltd to three similar charges in relation to the company's tax affairs and one charge of failing to keep a proper set of accounts on the same dates.
Transcripts from Mr Lowry’s testimony before the appeals commission hearing in April 2015 were read out by Remy Farrell SC, prosecuting.
Many distractions
Mr Lowry said that in 2002, he wasn’t as focused on his business as he should have been. “There were many distractions,” he said, adding that there was also a general election in May of that year.
The jury had previously heard from tax inspector Henry Oliver in the investigation unit of Revenue that he looked into the €372,000 payment in August 2013 and assessed it as an emolument, a wage or salary, earned by Mr Lowry.
He said on that basis, he determined that Mr Lowry owed income tax on the figure and Garuda owed PAYE and PRSI on the sum.
He assessed the total owed to Revenue, including penalties and fine, as being €1.1 million. Mr Lowry told the hearing that commission from Norpe OY due to Garuda in 2002 was diverted for his own personal benefit.
He said it should have been treated in the accounts as a repayment to him from Garuda. He had ealier told the hearing that he had lent the company money in anticipation of a tax bill but he wasn’t sure if the liability would fall on him personally or Garuda.
He said by August 2002, he believed the money owed to him - as reflected in the director’s loan account - was €450,000.
Mr Lowry accepted that the director’s loan account from year end 2001 didn’t reflect that he had been due that much money but he said he knew he was in credit. “I recalled putting the money into the account,” he said.
Mr Lowry said in the summer of 2002, the assessment was raised by Revenue and it became obvious that the tax liability fell on Garuda and not on him personally. Referring to the commission paid by Norpe, he told the hearing; “I lent the money to the company and I was clawing it back when it became available to me.”
He said he knew that he “personally instructed Norpe” to make the payment to Kevin Phelan but said he was not able to recall how this was accounted for in Garuda’s books. He said he put Mr Phelan in contact with Norpe to facilitate the payment.
Mistake
Mr Lowry told the hearing that “alarms bells went off” in September 2006, four years later, when he realised there was “not a clear record of receipt of the money”. He said he rang his accountant, BBT, and informed them that the payment was missed.
Mr Lowry said he was told nothing could be done until the year end, when the accounts were due to be finalised.
“I simply made a request and they (BBT) rectified the situation. As to the mechanics of it, I didn’t have a say in that,” he told the hearing. He said on January 15th , 2007, a letter was drafted by BBT and he was asked to sign it.
The jury had previously heard that this letter stated while the payment from Norpe OY was paid directly to Mr Lowry, it was properly due to the company and therefore should be reflected in the 2006 accounts. It instructed the accountants to set the payment against the director’s loan.
The trial continues before Judge Martin Nolan and a jury of eight men and three women.
Earlier, a jury heard a woman who was in Mr Lowry’s home when Revenue officers raided it was “startled” and feared she was going to be killed by burglars.
Sheila Hanley, an inspector of taxes, searched Mr Lowry’s home in Holycross, Co Tipperary on July 23rd, 2013 on foot of a search warrant.
She told Michael O’Higgins SC, defending the TD, that the raid was “obviously an unwelcome surprise” for the woman.
“She was sufficiently upset that I gave her a glass of water. She did think we were burglars until she said she heard a woman’s voice.”
She rejected the suggestion that the woman, who was unaware officers had entered the house, was crying and saying “Please don’t kill me”.
“Certainly not,” Ms Hanley said, before accepting that if the woman had said this, it was never reported to her. She agreed the woman had been “startled”.
She agreed Mr Lowry’s clothes were searched but could not confirm if his underpants had been, although she acknowledged that her colleagues would have searched all drawers, including ones in the bedrooms.
She agreed that she and her colleagues were allowed into the gated premises by a tradesman who had been servicing the boiler.
She said she rang the doorbell a number of times but there was no answer. A garda, who was there with her, gave her Mr Lowry’s mobile number and she called it but there was no reply.
Ms Hanley said she was the informed that a door at the back of the premises was open and she and her colleagues decided to enter the house.
Strenuous efforts
She instructed a member of the team to text Mr Lowry stating; “I am Sheila Hanley. I am a revenue officer. I am at your house. Please attend.”
She accepted a suggestion from Mr O’Higgins that if they had not found an open door, she would have made “more strenuous efforts to contact him (Mr Lowry)”. She added she was not under any obligation to wait for Mr Lowry as the warrant entitled her to enter the house and use force if necessary.
Ms Hanley also accepted that an officer was probably searching through the cutlery drawer. “People keep documents in drawers”.
She acknowledged that a “small sheaf” of documents had been recovered from the house and accepted they were “not of evidential value”.