Ship of Fools by Fintan O'Toole Page A

when a neophyte inspector, Terry Donovan, was sent to accompany two more senior colleagues on their visit to G&M. He quickly cottoned on to the very strange nature of G&M’s business and raised his concerns, both with the bank itself and later with his superiors at the Central Bank. The details of what happened thereafter are contested, but Adrian Byrne told the Moriarty tribunal that ‘whatever Mr Donovan may have said or not said, concern was not triggered within the Central Bank’.
    What is completely clear is that, as the Moriarty report put it, for the Central Bank as a whole, ‘the serious unfinished business of the back-to-back loans and Mr Traynor’s undertakings was permitted to be ignored or forgotten’. Equally clear is that, apart from the detailed mechanics of the scheme’s operation (such as the secret codes), the Central Bank had the strongest suspicions that Des Traynor was operating a large-scale scam. As the Moriarty tribunal concluded, ‘the Central Bank inspectors were made aware of the essential features of the back-to-back loan arrangements in question, whereby Irish residents were enabled to earn interest on offshore deposits free of tax.’ Had it acted on what it knew, as Moriarty pointed out, it would not merely have put a stop to Traynor’s swindle, ‘it would in all probability have accelerated the rate and level of response on the part of regulatory authorities generally to abuses within Irish banking that were not unique to Guinness & Mahon.’ It might, in other words, have changed the broader culture of Irish banking.
    Instead, the Central Bank didn’t just keep its knowledge of the Ansbacher fraud to itself, it continued to do so even after the scam became public in 1996. In a letter written to the Minister for Finance, Charlie McCreevy, in November 1997,
and subsequently read into the Dáil record by McCreevy, the governor of the Central Bank, Maurice O’Connell, stated that ‘There is no record that the Bank had discovered the system for operating the Ansbacher accounts during its inspections and review meetings. Prior to publication of the [McCracken] tribunal report, the Central Bank had no knowledge of the existence of the “Ansbacher Deposits” referred to during the tribunal hearing or of the role played by G&M [Guinness and Mahon] in the management of those deposits.’
    After it emerged that the Central Bank in fact had extensive knowledge of the Ansbacher deposits, McCreevy read out another letter from O’Connell in the Dáil on 30 March 2000. O’Connell claimed that his earlier letter meant that ‘the Central Bank had no knowledge of the system of numbered offshore deposit accounts known as the “Ansbacher deposits”. These appear to have been deliberately concealed and were maintained outside the normal books and records of G&M.’ His claim of ignorance had referred only to the actual method of operating the accounts (which the bank did not in fact know about). The apparently definitive statement that ‘the Central Bank had no knowledge of the existence of the “Ansbacher Deposits”’ - a claim that was, on the face of it, patently false - did not mean what it might seem to mean. McCreevy, moreover, threw his own weight behind this exercise in semantic escapology: ‘in respect of the issues which arose in the course of on-site inspections by the Central Bank in 1976 and 1978 concerning back to back loans secured by offshore deposits, it would seem that these activities formed part of the G&M accounting system and from the Governor’s letter of 9 February 2000 it would appear that the term “Ansbacher accounts” or “Ansbacher deposits”, as used in the Governor’s letter dated 11 November 1997, was not
intended to cover these accounts. My advice is that it would not be appropriate to enter into discussion on this distinction as this is a matter