The settlement made by Allied Irish Banks with Mr Charles Haughey over his debt of over £1 million was "the worst of all settlements", Dr Michael Smurfit told the Moriarty tribunal.
Dr Smurfit, who was a director of the bank from 1978 to 1983, said the fact that Mr Haughey would continue to be indebted to the bank to the tune of £110,000 even after the settlement meant it "didn't actually sever the situation" or "clean up the issue". "The settlement, in looking at it in the harsh light of today, or indeed any time, was the worst of all settlements," he told counsel for the tribunal.
Dr Smurfit said he could not remember being aware at any time that Charles Haughey had an account with AIB, and he had no knowledge during his time as director of Mr Haughey's indebtedness to the bank. "It wasn't the policy of the bank, I think, to give directors that information," he told the tribunal.
However, he agreed with counsel for the tribunal that "where a very powerful figure, such as Mr Haughey was, had very large indebtedness to the bank and an account which is causing trouble such a matter should come to the board regardless of any thresholds for board consideration of indebtedness".
He told the tribunal it was unfortunate that the advice of the board had not been sought on the matter.
"I think it's a matter that the board should have been fully aware of, fully au fait with and party to the solution because we did have the ability on the board to give [the then chief executive] some better advice than he ended up with."
Dr Smurfit said he did not have all the relevant facts that the then chief executive, Mr Paddy O'Keeffe, had available to him at the time. He said the board "were fortunate to have an extraordinary chief executive . . . a man who I've got great respect for, by the way, and I imagine he had to deal with an extraordinarily difficult situation in relation to something that had blown topsy-turvy on top of him".
Dr Smurfit said Mr O'Keeffe might have felt it was in the best interests of the bank to handle the matter in the way in which he did. He said he did not think he would be regarded at the time as someone who should be made aware of the situation with regard to Mr Haughey's account.
"I didn't remain around after the board meetings. I didn't go to most of the luncheons either . . . I was a bit of a Turk on the board and was interested in getting the facts, so I would have probably asked some questions."
Asked by counsel for the tribunal what he would have done if he had been made aware informally of the indebtedness of someone as powerful as Mr Haughey, Dr Smurfit said:
"I think, personally, as the director of any institution you have a duty, if you have knowledge, to do something about that knowledge. I imagine what I would have been focusing on is: `How did it happen?' "
However, he also said he would want to "get it behind us as best we can and make sure that the institution has procedures in place so that it would never happen again. That would have been my prime focus."
He agreed that it certainly appeared that Mr Haughey's account had been "an enormously difficult one" throughout the 1970s and that the amount owed by Mr Haughey "by any standards was a large sum of money for any borrower in those days other than corporate borrowers".
He could not recall seeing a newspaper article in 1983 referring to the indebtedness of Mr Haughey to AIB and a subsequent statement by AIB refuting that suggestion. He knew nothing about it until it was drawn to his attention by the tribunal. He agreed that this would not necessarily be surprising as he had spent 70 per cent of his time travelling during that period.
