Former AIB chief executive Mr Gerry Scanlan and the outgoing chairman of Irish Life & Permanent, Mr Roy Douglas, were two of the beneficiaries of an offshore investment scheme which involved a breach of tax law.
Another former AIB chief executive, Mr Tom Mulcahy, who is the current chairman of Aer Lingus was one of five other executives who had "tax issues" due to unrelated arrangements.
AIB has refused to name the individuals involved in what its chairman, Mr Dermot Gleeson, has described as "completely unacceptable" practices. It said it was not possible to name them for legal reasons.
However, The Irish Times has learned that Mr Scanlan and Mr Douglas were investors in Faldor Ltd, a company based in the British Virgin Islands and managed by AIB Investment Managers. The other individuals who put money into this company were AIB's former deputy chief executive, Mr Patrick Dowling, the bank's former director of strategy, Mr Diarmuid Moore, and Mr David Cronin, the former AIB executive who was in charge of the bank's US treasury operations which was embroiled in a foreign currency fraud in 2002.
Attempts to contact the Faldor beneficiaries were unsuccessful yesterday, and in some cases spokesmen said they were unavailable. Some €750,000 was invested in Faldor between 1989 and 1996. Faldor benefited from what AIB has described as "inappropriate deal allocation practices" to the tune of €48,000 at the expense of the bank's own in-house funds.
AIB has said its own internal investigation into the existence of Faldor revealed that five other executives " had tax issues in relation to accounts entirely unconnected to Faldor relating to periods ending in 1998." Three current AIB executives were among these five and are now facing disciplinary action that has been sanctioned by the board of directors.
The subsequent investigation also uncovered unacceptable practices in the bank's investment arm, which resulted in the repayment of €330,000 to two clients. AIB has also made an €800,000 settlement in relation to the affair, though the precise reasons for this remain unclear.
Yesterday, Mr Mulcahy, issued a statement, through Aer Lingus, saying he had "no prior knowledge of, or involvement in the investment scheme outlined in AIB's statement". It added that he was "fully tax compliant". However, while Mr Mulcahy was not involved in Faldor, he is understood to be one of the five other executives with "tax issues".
Yesterday AIB refused to make any comment on the matter. A spokesman for the Irish Financial Services Regulatory Authority said it would not allow any individuals associated with "this type of act" to retain senior positions in the financial services industry. "We have ensured that is the case," he added.
Mr Douglas is the only individual who had invested in Faldor who continues to hold a senior position in the sector. Last week, Mr Douglas, announced that he would retire from the Irish Life & Permanent Board on his 60th birthday on June 3rd. The bank announced that he would be succeeded by the founder and chairman of Budget Travel, Ms Gillian Bowler.
Mr Scanlan had been a director of Merrill Lynch Capital Markets Bank based in the International Financial Services Centre up until October 2003. Mr Cronin was dismissed from AIB's Allfirst Bank in 2002 following the $691 million fraud perpetrated by currency trader Mr John Rusnak, who reported to him.
On Thursday, AIB's current chief executive, Mr Michael Buckley, told the bank's employees in a memo seen by The Irish Times that he was determined that the bank would face up to all of these issues and deal with them in a proper way.
"Whatever changes are needed in culture, people, organisation and practice will be made to ensure that we achieve this vital objective," he said. AIB has said that it has informed the Revenue Commissioners as well as other appropriate regulatory authorities and statutory bodies.
The latest revelations come as the bank is being investigated for overcharging certain foreign exchange customers and for assigning payment protection policies to some mortgage holders without their knowledge.
The bank faces another inquiry concerning overcharging for the management of some trusts.