DUBLIN -- After reading about America's corporate wrongdoing, the Irish now have a scandal they can call their own.
Hundreds of companies are believed to have been involved in a tax evasion scheme stretching over 30 years, along with many prominent Irish political and corporate leaders and, it is alleged, Ireland's Central Bank.
A High Court inspector's report was released to the public last Saturday (July 6). It is 15 volumes long and contains 10,000 pages. Called the Ansbacher report, after the name of the Cayman Islands bank allegedly used to hide the money of wealthy clients from the taxing authorities, the list of depositors includes a former Irish prime minister.
The report notes that leading accountancy firms in Dublin developed strategies to help wealthy clients avoid paying the high Irish taxes of the '70s and '80s. The money was supposed to go to banks in the Cayman and Channel Islands. (A whopping 692 of Enron's 881 subsidiaries were incorporated in the Cayman Islands, allegedly to avoid taxes.) Some of it did, but a lot remained in Dublin under the control of Desmond Traynor and fellow board member, John Guinness, of the Guinness & Mahon Bank. They began establishing offshore bank subsidiaries. Traynor is alleged to have made it possible for depositors to have access to their money in his Dublin office, which was illegal. If one were to make a pun, Traynor and Guinness made it possible for depositors to have their Cayman and eat it, too.
The report says that not all of the depositors necessarily defrauded the government. Some, it says, may not have known about the tax scheme and their money may have remained legally in the offshore account.
An even bigger scandal than what individuals did to shield their money from taxes was the alleged complicity of the Central Bank. The report found that the Central Bank conducted five separate investigations into the activities of Guinness & Mahon and its offshore subsidiaries. As early as 1976, the report says the Central Bank was aware that Guinness & Mahon was being used for systematic tax evasion and did nothing to stop it.
In the '70s and '80s, many Irish banks helped their customers avoid the high taxes of the time. The difference between what those banks did and what Ansbacher (Cayman) Ltd. is alleged to have done is that Ansbacher was not authorized to operate in Ireland and its activities appear primarily designed for tax evasion purposes. Because of the alleged involvement of government figures, the report suggests the tax evasion scheme could have become a conspiracy to corrupt the state.
An indication of the seriousness of the government report was the long line of lawyers, the media and general public who showed up at 7 a.m. Saturday for the 9:30 a.m. release. Like a prostitute's black book of customers, people wanted to know if their names appeared in the report.
The report identifies all but three of the Ansbacher clients, but mentions that a number of documents were deliberately destroyed after Traynor died in 1994. For this reason, there are doubts whether there will be many, if any, convictions in court.
At its height in 1984, the Ansbacher offshore scheme had deposits equal to more than half a billion dollars at current values and involved more than 460 clients and about 943 "trusts," which investigators believe were all a sham.
Many apparently knew of the Ansbacher scheme, but enough high level or otherwise influential people were involved that no one dared blow the whistle.
A major difference between the Irish tax avoidance scandal and what's happening with some American companies is that here it appears only private money was used for personal gain (though the government was denied its share of taxes). In the Enron and WorldCom scandals in the United States, CEOs are alleged to have padded their earnings statements in order to drive up stock prices and give a false impression of corporate economic health. Another difference is that in a much smaller country like Ireland, many more companies and individuals may have been involved in wrongdoing and many government higher-ups may be embarrassed when their allegedly illegal actions are exposed, even if they escape prosecution.
Greed is a universal tempter.