Doing a job in an ordinary decent way
Tony Spollen, who played a major part in exposing bogus non-resident bank accounts in the 1990s, has died, writes Liam Collins
WHEN Tony Spollen went to his grave last week, the secret he had carefully guarded for seven long years did not go with him.
The leaking and subsequent publication of his ‘top secret’ internal AIB memos blew one of Ireland’s biggest and best-hidden banking scandals wide open — even if he never wanted that to happen.
We never spoke, just made eye contact once or twice across a crowded room. But between his documents and my story we made close to €850m in back taxes for the Irish Exchequer.
Tony Spollen got a few appointments to State boards and Jim Mitchell bought me a pint and said thanks the night he wound up the DIRT inquiry.
It worked like this: In 1986, the cash-strapped minister for finance, John Bruton, introduced Deposit Interest Retention Tax (Dirt), a tax on the interest people made from their savings. But if you had an address anywhere outside the Republic of Ireland you could open what was called a non-resident account and you didn’t have to pay this tax.
Tens of thousands of business people, shopkeepers, politicians, farmers — anyone with piles of cash on deposit — conjured up fake addresses to evade the tax.
A bank manager walking down the main street of any town in Ireland would cheerily greet customers who were supposed to be living in London, New York or Sydney.
The Department of Finance, the Central Bank and the Revenue Commissioners allowed this situation to develop until things became so alarming that, in 1991, the heads of the banks were called in and told that if they didn’t phase out their bogus accounts, Revenue would move in and began inspecting their dodgy documentation.
Did Revenue do a dirty deal with the banks? Some of the best financial minds of a generation would later disagree on the issue.
About the same time, the chief executive of Allied Irish Bank (AIB), Gerry Scanlan, a tough, wiry little man with an implacable zeal for success, made what would later prove to be a fatal error of judgment.
On the evening of Friday, January 18, 1991, the group internal auditor of AIB, Tony Spollen, was called to a meeting with two of the bank’s most senior executives, John Keogh and Brian Wilson.
Spollen and Scanlan had a tense working relationship, disagreeing over various internal matters. After the niceties were over, Spollen was told he was being transferred, on the orders of the chief executive, to the position of head of corporate lending.
“I wouldn’t be pleased with that,” he told the two men.
“When Mr Keogh called me that evening, I just said there comes a point at which you say, you know, you just don’t go along with that type of behaviour,” recounted Spollen later. He didn’t. He rang Peter Sutherland, the chairman of AIB and a personal friend since their school days in Gonzaga College, to appeal for help.
The following Monday he marched back into his fifth floor office in Carrisbrook House and resumed his job.
From that moment on, he began sifting through documents relating to the bank’s exposure to bogus non-resident accounts. Within days he was producing internal evidence that the problem could leave the bank with exposure to “hundreds of millions” of pounds, that the number of bogus accounts was “frightening” and that the issue had “serious implications for AIB”.
Scanlan and Spollen met face-to-face on February 4. It was, said Spollen, “a very frank discussion”.
“It was either his job or mine,” recalled Scanlan about the stand off.
Peter Sutherland, as chairman of AIB, was now caught in the invidious position of having to navigate a settlement between his chief executive and his long-time friend. He contacted James Culliton, chairman of the audit committee, and asked him to conduct a “special investigation” into Tony Spollen’s allegations.
Culliton was shocked as he reflected on a board meeting of December 3, 1990, a month before the dispute, where the issue of Dirt and bogus accounts hadn’t been raised during a presentation by Mr Spollen. “How did the liability rock from nil to £100m in just eight weeks?” he pondered.
Worse still he was being told that the bank’s tax expert, Jimmy O’Mahony, reckoned that out of the £600m in bogus accounts, 75pc of it was ‘hot’ money.
Before the annual general meeting of Allied Irish Banks on July 11, 1991, Peter Sutherland convened a meeting at his home in Eglinton Road with Tony Spollen. It lasted for several hours and concluded with the internal auditor agreeing to a generous severance package in exchange for his silence.
It was what one of those familiar with events would later describe as “sealing in the smell”.
At that year’s AGM, Peter Sutherland told shareholders: “We have seen a disquieting increase in the level of ill-informed comment about banks and banking, some of it directed at this bank. The cheap jibe and the misleading headline about our business seem to command more attention than hard facts.”
Mr Sutherland was long gone from AIB when the Sunday Independent of April 5, 1998, seven years on from those events, carried the headline, “AIB had £600m in ‘bogus’ accounts”.
The story was written after Tony Spollen’s 1991 internal AIB memos were leaked.
Gene Kerrigan, in a comment piece, wrote: “Liam Collins’s staggering story not alone discloses the extent of the criminality in which the AIB was involved — tens of thousands of bogus accounts — but reveals the maximum tolerance policies which the Revenue Commissioners and the Central Bank pursue towards certain types of crime.”
Tom Mulcahy, who by then had succeeded Gerry Scanlan as chief executive, said the problem of bogus non-resident accounts was “an industry-wide problem rather than a problem that was specific to AIB”, adding that “savers have an aversion to paying tax on interest”.
He was proved right. A devastating 371-page investigation by the comptroller and auditor general, John Purcell, found that all the major financial institutions colluded and competed for ‘hot money’ while regulators and the tax authorities ignored what was known by “the dogs in the street”.
In September, 1999 came Jim Mitchell’s televised Dirt Committee, the first and only parliamentary investigation to compel witnesses, top bankers and civil servants to come before it and be quizzed in public about the part they played in the drama.
Mitchell concluded that there was “no deal” between Revenue and Allied Irish Bank to settle the bogus account scandal for a once-off payment of £14m. Many would disagree with that finding.
In the years that followed AIB made a settlement of €114m with the Revenue Commissioners and it is estimated that the financial institutions and their customers paid close to €850m in back taxes and penalties for the transgressions highlighted by Tony Spollen in the dying days of his time as group internal auditor of AIB.
“I was simply trying to do my job in an ordinary decent way,” he told the Dirt inquiry in an emotional contribution on September 28, 1999.
“Over the years in the job, and when I left the bank, I kept my counsel... all my old friends often wondered [why I had left]... I suppose in all our lives there’s probably a few defining moments, and I suppose for me what’s terribly important in life is decency — a bit of respect for people.”
Tony Spollen died last Sunday aged 73 after a long illness. He is survived by his wife Gina and their four children.
‘Anyone with piles of cash conjured up fake addresses to evade tax’