Written answers

Wednesday, 3 May 2006

Department of Enterprise, Trade and Employment

Departmental Investigations

9:00 pm

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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Question 302: To ask the Minister for Enterprise, Trade and Employment the reason his Department did not set up an investigation by way of inspectorate to examine the affairs of banks (details supplied) and other lending institutions in the same way as it did for the National Irish Bank; and if he will make a statement on the matter. [16397/06]

Photo of Micheál MartinMicheál Martin (Cork South Central, Fianna Fail)
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The power to investigate suspected misconduct, or matters of public concern, is available in a number of statutory regimes. Whenever cases arise, the decision to commence an investigation under one particular statutory code, rather than another, is related inter alia to the circumstances involved, the appropriateness of the statutory investigation regime then in place and other factors.

The decision of my predecessor in March 1998 to seek the appointment by the High Court of Inspectors to investigate certain matters relating to the affairs of National Irish Bank Ltd. (NIB) followed serious media allegations that the Bank was defrauding its customers by improperly charging interest and fees to customer accounts. The High Court agreed that such an investigation was warranted and appointed two Inspectors under the Companies Act 1990. The terms of reference of their inquiry were initially focused on the issues of interest and fees, although the Inspectors were also charged with identifying whether other unlawful or improper practices existed in the Bank which served to encourage the evasion of revenue or other obligations on the part of the Bank or third parties or otherwise.

The High Court subsequently agreed in June 1998 that the Inspectors' remit should be broadened to include an investigation of the affairs of National Irish Bank Financial Services Limited (NIBFS) relating primarily to the effecting of insurance policies through a number of offshore companies. This extension was in response to the findings of a separate investigation by an authorised officer appointed by the Minister under Insurance legislation.

Following reports of the widespread existence of bogus non-resident accounts in the financial services industry as a means of evading Deposit Interest Retention Tax (DIRT), the Oireachtas passed a resolution in October 1998 asking the Public Accounts Committee (PAC) to examine and report to Dáil Éireann on a number of related matters. This led to the enactment of special legislation in December 1998 in order to facilitate the PAC Inquiry. The subsequent work of the Comptroller and Auditor General to which the Deputy refers facilitated the PAC's Inquiry. It is generally accepted that the series of published PAC DIRT Reports, which were completed in April 2001, were an excellent and forthright examination of the improper practices which prevailed in the industry in the late 1980s and 1990s. It is no less comprehensive in its scope than if the investigation had been carried out under other statutory powers. In those circumstances, it would have been superfluous for my predecessor to seek to initiate a parallel investigation of other financial institutions at that time. Since November 2001, statutory responsibility for the enforcement of company law was passed to the Director of Corporate Enforcement.

The Deputy will be aware that the main findings in the PAC Report were primarily a matter for the Department of Finance, the Revenue Commissioners and the Central Bank rather than my own Department. In respect of NIB and the other banks, the instances of alleged malpractice were thoroughly investigated, albeit under different legislation. The decision to proceed to use the powers of investigation under company law in the case of NIB was appropriate having regard to the very specific allegations which had been made in early 1998 relating to various aspects of the company's affairs.

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