Dáil Éireann debate -
Tuesday, 1 Feb 1994

Vol. 438 No. 1

Ceisteanna—Questions. Oral Answers. - Out of Court Banks Settlement.

Eamon Gilmore

Question:

17 Mr. Gilmore asked the Minister for Finance if his agreement was sought or given for the out of court settlement of the claim brought by Allied Irish Banks and ICAROM against the former auditors of ICI, Ernst and Whinney; if he has had any discussions with the ICAROM administrator as to the way in which the compensation paid will be used; the impact, if any, it will have on the agreement made in 1992 that the Government would lend the company a further £32 million, interest free; and if he will make a statement on the matter.

Mr. B. Ahern

I was consulted on the terms of the out of court settlement of the claim brought by Allied Irish Banks and ICAROM against the former auditors of ICI, Ernst and Whinney. Following consultation with the Attorney General I raised no objection to the terms of the settlement.

Following the settlement, representatives of my Department, together with those of the Central Bank and the Department of Enterprise and Employment, had discussions with the ICAROM administrator on the extent to which the settlement payment, together with funds made available under the 1992 agreement, that is Allied Irish Banks' annual payments of £8.8 million for 20 years and the £32 million interest free loan advanced by the Exchequer, will cover all the outstanding liabilities of ICAROM. The liabilities include the repayment of the £100 million loan advanced under the 1985 agreement which falls to be repaid in the year 2000. Following these discussions, I am satisfied that the payments under the settlement combined with those under the 1992 agreement, should have the effect of meeting all of the outstanding liabilities foreseen.

My Department will continue to maintain regular contact with the administrator and monitor the situation as it evolves.

Mr. Gilmore

Has any of the £77 million secured in the out of court settlement been paid to Allied Irish Banks? Will the Minister indicate what portion of the £77 million will be used to discharge Allied Irish Banks' liabilities and those of the taxpayer in the matter?

Mr. B. Ahern

The question of Allied Irish Banks receiving money does not arise, it already had to write off a loss of £86 million. I note Deputy Gilmore's question relates to the 1992 agreement but to see the full picture one must consider the provisions of the 1985 agreement under which Allied Irish Banks contributes £5.5 million annually towards servicing the loan of £100 million. That loan is due to be paid in the year 2000. Under the 1992 agreement Allied Irish Banks will contribute £8.8 million per annum for the next 20 years, up to the year 2012, towards the cost of administration. To date Allied Irish Banks has written off £86 million and under the 1985 agreement it will pay £5.5 million per annum up to the year 2000. Under the 1992 agreement it will pay £8.8 million per annum up to the year 2012, in the year 2000 the State will recover the £100 million it received under the 1985 agreement from the reserves of the Central Bank and gave to the administrator at that time. Under the 1992 agreement the State contributed a further £32 million which it will also receive back.

Mr. Gilmore

I understand the State will get back its contribution of £100 million in any event in the year 2000 under the 1985 agreement and its contribution of £32 million on the due date under the 1992 agreement. Do I understand from the Minister's reply that because £77 million was obtained in an out of court settlement from the accountancy firm that figure will have no net effect on what the State will get back? ICAROM has ended up with an extra £77 million as a result of that settlement and it will not improve the return to the State. Is that the position?

Mr. B. Ahern

My notes do not indicate that £77 million is the exact figure. I recall the figure was $110 million but I will verify it.

Mr. Gilmore

Was that figure arrived at during the Minister's devaluation audits?

Mr. B. Ahern

It was calculated after that time. The latest examination of the liabilities of ICAROM confirms that even with the payment of the settlement moneys, estimated at £38 million, the repayment of the interest free loan of £32 million under the 1992 agreement would still be necessary to make adequate provision for the repayment of the £100 million interest free loan. If that money from the settlement did not come forward there would have been a shortfall in repayments to the State. As the Deputy knows, since the commencement of this saga in 1985 it would be a brave person who would assess the administrator's final figure, but as of now the administrator's costs are in the order of £260 million-£270 million.

Mr. Gilmore

The Minister referred to a possible shortfall in the repayment of the £100 million under the 1985 agreement. Will he give the estimated shortfall to which the £77 million will be applied?

Mr. B. Ahern

All the £77 million will not go back to ICAROM.

Mr. Gilmore

Where will it go, to the bank?

Mr. B. Ahern

No, AIB will not pick up all the money. A £32 million loan was given to ICAROM and if no settlement had been reached a difficulty with the figures would arise in the year 2000. However, the difficulty has been averted and the £100 million loan will be paid back to the State. The only loss to the State as a result of the deal is interest foregone on the original 1985 loan and the 1992 loan. The State will get back its money, but it if had had that money to reinvest it would have made some return on it. AIB is losing substantially on the figures I have given.