- The Washington Times - Sunday, May 30, 2004

DUBLIN, Ireland (AP) — The chairman of Ireland’s state-owned Aer Lingus airline has resigned over his role in an unfolding scandal at Allied Irish Banks, the biggest company in the country.

Tom Mulcahy, who had been Aer Lingus’ chairman since 2001, resigned Saturday, hours after being identified by the Irish Times newspaper as one of 10 current or former AIB executives who invested in tax-dodging offshore accounts between 1989 and 1998.

AIB, Ireland’s most scandal-prone bank, announced Thursday night that an internal investigation had uncovered the involvement of seven former executives and three current executives in tax-evasion schemes.

It declined to identify any of the 10.

But the Irish Times identified Mr. Mulcahy, AIB’s chief executive from 1994 to 2001, and five other former executives as one-time investors in offshore trusts hidden from tax authorities.

The newspaper also identified all five senior former AIB executives who were investors in a British Virgin Islands-registered trust called Faldor Ltd. that folded in 1997. Together, the bank said the five had invested $920,000 in the fund through AIB’s own offshore investments arm.

The five were identified as Gerry Scanlan, chief executive from 1985 to 1994; Roy Douglas, a former head of AIB’s British division who currently is chairman of another Irish financial heavyweight, Irish Life & Permanent; David Cronin, former treasurer at AIB’s one-time U.S. subsidiary, Allfirst Inc.; Diarmuid Moore, AIB’s former director of corporate strategy, who retired in 1993; and former deputy chief executive Paddy Dowling, who is deceased.

Mr. Mulcahy, who during his tenure atop Aer Lingus slashed staff and sharply reduced fares to save the airline from collapse, held funds in a different offshore account that AIB has declined to identify.

Deputy Prime Minister Mary Harney called the latest revelations inside Allied Irish Banks “deeply shocking” and said the Irish public was getting “fed up” with sloppiness and unethical behavior exposed at the bank.

Miss Harney noted that a parliamentary probe in 1999 identified AIB as the biggest offender in an industrywide practice of encouraging thousands of Irish depositors to hide funds in bogus offshore accounts.

AIB ultimately paid tax collectors a record $140 million in overdue tax and penalties.

AIB weathered its greatest crisis in 2002, when it discovered that John Rusnak, its star currency trader in Allfirst, had hidden $691 million in losses from superiors, among them Mr. Cronin, who was among six Allfirst executives fired. AIB subsequently sold Allfirst to M&T; Bank of New York.

Allied Irish has made a string of embarrassing revelations this month after coming under sustained scrutiny by inspectors from Ireland’s Financial Services Regulatory Authority. It has admitted chronically overcharging many of its foreign-exchange customers as well as some of its mortgage and investment customers, and pledged a range of refunds totaling about $40 million.

Miss Harney said revelations of tax-dodging involving senior AIB figures was “far more serious than some of the other matters that have come to our attention. Some of them have been genuine errors, but this was no error,” she said.

The AIB Group is the dominant retail bank in the Republic of Ireland with about 280 branches, and its United Kingdom subsidiary has an additional 105 branches.

It runs a corporate banking and investment arm in the United States and employs nearly 25,000 people worldwide.

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