The chairman of the Revenue Commissioners, Mr Seamus Pairceir, decided in 1984 not to take court action against the former Taoiseach Mr Charles Haughey in relation to £300,000 given to him two years earlier by the Gallagher group.
Mr Pairceir, in a letter written in 1984, said he did not let Mr Haughey's "status" influence his decision not to appoint a liquidator to the Gallagher group in order to try and recover the £300,000 from Mr Haughey. The Revenue subsequently recovered £80,000 in Capital Gains Tax from the former Taoiseach, this being the tax on the £300,000 transaction.
The Gallagher group collapsed in 1982 and the Revenue and the group's examiner, Mr Laurence Crowley, explored the possibility of recovering £300,000 from Mr Haughey. The money was the deposit in a land deal in January 1980 whereby the Gallagher group would buy lands at Kinsealy, Co Dublin from the Haughey family.
Mr Crowley and the Revenue doubted the bona fides of the land deal and considered the possibility of recovering the money, which would have then gone to the Revenue as a preferential creditor. To do this, one, and perhaps two, court cases would have had to be initiated.
The Revenue decided it agreed with legal advice which had earlier been received by Mr Crowley and which warned of the difficulties involved in taking the legal action. Mr Pairceir, in a letter to Mr Crowley in May 1984, said the chances of success "would not seem to me to be great" and his decision was an "administrative" one.
Mr Crowley, a former partner in Stokes Kennedy Crowley accountants, told the tribunal he was appointed receiver to the Gallagher group by AIB, the Bank of Ireland, and the Northern Bank in April 1982. The banks had fixed and floating charges with the group and he took control to seek recovery of these debts. The group had a large number of companies and owned property which was to be developed or was in the process of being developed.
Upon examining the group's books he found a seven-paragraph agreement between Mr and Mrs Haughey and Mr Pat Gallagher, dated January 27th, 1980, and concerning the sale of 35 acres at Kinsealy at £35,000 per acre.
Because Mr Haughey was the Taoiseach, Mr Crowley kept the "sensitive" document in his custody at all times. He thought the document was "strange" for a number of reasons. It did not seem to have been prepared by solicitors and it did not contain the usual conditions of sale. The deal involved a total of £1.225 million but was only seven paragraphs long. The price per acre being paid "appeared high" in view of the fact that the land was zoned agricultural.
The deal contained a condition whereby a 60 acre stud farm to the satisfaction of the Haughey family and within a 20 mile radius of the GPO in Dublin had to be provided by the Gallagher group. The cost was to be deducted from the purchase price of the Haughey lands. There was no mechanism for resolving any dispute which might arise in relation to the stud farm, yet the condition was one which could prevent the deal going ahead.
The £300,000 deposit was non-refundable and equal to 25 per cent of the total amount involved. The deal was to have been completed by 1986. Mr Crowley said he found no evidence in the Gallagher group files of any effort to progress the deal or of any correspondence about it.
The directors of the Gallagher group had no assets at the time of the group's collapse and Mr Crowley said he thought it was his duty to investigate the prospect of getting the £300,000 back from Mr Haughey. He received legal advice that a provisional liquidator would have to be appointed in order for the directors of the Gallagher group to be brought before the courts.
The liquidator would then test the bona fides of the Haughey deal. "Having regard to Mr Gallagher's business style prior to the collapse of the Gallagher group, there must be a real possibility that his [Mr Patrick Gallagher's] stated reasons for entering into an agreement of this kind would not be disproved," the advice stated.
Even if the bona fides of the deal were challenged successfully, and the Haugheys were subsequently sued, there was no guarantee the case would be successful. Also, the costs involved were likely to be substantial, the legal advice stated.
Mr Crowley supplied the Revenue with a copy of the land deal agreement. The Revenue subsequently levied Capital Gains Tax on the deal as if it was a commercial transaction, and £80,000 was paid, Mr Healy said.
Replying to his counsel, Mr Michael Collins SC, Mr Crowley agreed that the senior counsel who had supplied him with legal advice in 1984, the late Mr Raymond O'Neill, was the "leading member of the bar" at the time on issues of liquidation, receivership and taxation.
The tribunal adjourned yesterday afternoon and is not to resume hearings until Thursday June 17th
