Offshore companies controlled by builders Mr Joe McGowan and Mr Tom Brennan and the auctioneer, Mr John Finnegan, through which political donations were made to Mr Ray Burke, made extensive use of tax-avoidance loopholes in land transactions to avoid capital gains tax, the Flood tribunal was told yesterday.
Mr Patrick Hanratty SC, for the tribunal, said through their solicitors the builders had finally acknowledged they were the two-thirds beneficial owners of the Jersey-based Canio Ltd, through which £125,000 in donations was made to Mr Burke, having previously denied having any connection with the company and its parent, Ardcarn Ltd. Until recently they had claimed the only money they had paid to Mr Burke came from fund-raising events hosted by Mr McGowan.
The tribunal had examined the corporate infrastructure of various land transactions, Mr Hanratty said. These included offshore loans where the partners' identity was not indicated and shares were held in trust in the offices of solicitors. "Therefore a search of companies' offices would not reveal the ownership," he said.
All the transactions were connected to lands in Ireland, he added, with the money originating from borrowings. Money paid by an Irish company to an offshore company was treated as a deductible expense in Ireland for tax purposes. These tax avoidance initiatives were the brainchild of an accountant, Mr Hugh Owens.
One such deal involved the site of the Sacred Heart convent in Monkstown. Two companies, Bouganvale Investments and Rapallo Ltd, were set up, and Bouganvale contracted to buy the freehold. "Rapallo would give financial advice to Bouganvale for £10,000 a month over a period of two years and 11 months," Mr Hanratty explained.
This meant that Bouganvale owed £350,000 to Rapallo. A loan for £20,000 was obtained from a Jersey bank for £20,000 for Bouganvale. The idea was that when £20,000 was in the Bouganvale accounts as an asset auditors would be asked to audit the accounts and take a "snapshot", he said.
The assets would be listed as "lands in Ireland" and cash in bank of £20,000. The auditor would be provided with a certificate from the Jersey bank to this effect. The subsequent sale of these lands by a non-Irish company would mean there was no requirement by the purchaser to deduct capital gains tax to which it would otherwise be liable.
Then the £20,000 was immediately repaid. A Brennan and McGowan-controlled company, Green Isle Holdings and Trustees Ltd took over the Bouganvale interest and thereby the lands in Monkstown.
Green Isle ultimately "discharged its indebtedness to Rapallo". Bouganvale was dissolved by Mr Lawrence Wheeler of the Jersey legal firm, Bedell and Cristin, who was appointed liquidator, and in this capacity he "cross-conveyanced" the freehold interest to the shareholders of Bouganvale Investments. "In Jersey when a company goes into liquidation, unlike Ireland, the assets don't vest in the State, but in the shareholders."
Then the £350,000 "indebtedness" that Bouganvale had owed Rapallo was paid off. "We don't know where the money originated from. It may have been a Brennan and McGowan source." The money arrived in Ireland on December 16th, 1977, and was immediately distributed to the beneficial owners of the Jersey company.
"No services were provided by Rapallo to Bouganvale to give rise to this indebtedness," said counsel for the tribunal. Rapallo was just a name on a piece of paper. There was no staff, offices or `'infrastructure".
A similar initiative was employed in the case of the three acre Herbert estate at Bellview Avenue, Donnybrook.
Another Channel Islands-registered company, Canio, was set up as a vehicle to buy lands in Sandyford, Co Dublin. In the Sandyford case, the contract to purchase was entered into prior to the formation of Canio. Canio was to make two payments, £60,000 in 1984 and £15,000 in 1985, to Caviar Ltd, the Jersey-based company owned by Mr Burke.
Ardcarn Ltd, owned in equal shares by the Finnegan, Brennan and McGowan interests, was the sole owner of Canio. But Mr Finnegan told the tribunal he had no knowledge of these monies being paid to the former minister.
In this case, funds amounting to £412,166 were transmitted from Ireland and distributed to the beneficial owners, Finnegan, Brennan and McGowan, of the Jersey company, giving them £136,336 each after fees had been paid to Bedell and Cristin.
Mr Brennan and Mr McGowan each put up £20,000 and asked Mr Finnegan to do the same. He refused but agreed to pay £10,000 towards administration costs including architects' fees.
"He was quite clear - he did not know the money was being deducted for Mr Burke." The other two partners increased their stake by £5,000 each so that a payment of £60,000 could be made to the former minister.