Vol. 398 No. 3
1 Mr. G. Mitchell asked the Minister for Tourism and Transport if his share-holding in Aer Lingus plc has in any way diminished by reports of unreported losses of an Aer Lingus subsidiary and if he will make a statement on the matter.
3 Mr. Byrne asked the Minister for Tourism and Transport when his attention was drawn to the reported discrepancy of £10 million in the accounts of an Aer Lingus subsidiary; the action which he has taken as a result; if he is satisfied that the moneys have now been accounted for; if, in light of this discrepancy, he intends to request Aer Lingus to review its procedures for supervising the activities of subsidiary companies; and if he will make a statement on the matter.
I propose to take Questions Nos. 1 and 3 together.
The discrepancy in Aer Lingus Holidays to which the Deputy refers was brought to my attention on 24 January last by the chairman of Aer Lingus who informed me that major losses had been incurred in the Aer Lingus subsidiary company, Aer Lingus Holidays Limited. These losses, I was informed, had arisen mainly from unreported trading losses over a number of years of some £7 million.
The chairman also informed me that, in addition, it had been deemed prudent to write down the value of the company's apartment properties by some £3 million.
I was assured by the chairman that appropriate remedial action had been taken already by Aer Lingus in relation to the subsidiary company situation:
(a) a new chief executive and new financial controller had been appointed at the holiday company; and
(b) new financial and management reporting procedures had been put in place between Aer Lingus and the holiday company.
As is now public knowledge, an investigation into the reported discrepancies is being carried out by a major chartered accountancy firm, Craig Gardner, and the Garda have also been contacted by Aer Lingus. I expect shortly to receive the Craig Gardner report, and I will then consider what further action needs to be taken in this matter. Pending receipt of the report, I am not in a position to comment further in any detail.
With regard to the effect on share-holders' funds, I have been advised by Aer Lingus that as a consequence of the unreported trading losses and property revaluations, the accumulated share-holders' funds in the Aer Lingus Group balance sheet at 31 March 1990 will be £10 million less than otherwise would have been the case. In the group's accounts for the year ended 31 March 1989 shareholders' funds were shown at some £267 million.
I am deeply concerned at the reported discrepancies in the Aer Lingus Holidays accounts and I have requested the chairman of Aer Lingus to review procedures for supervising the activities of their subsidiaries. He has informed me that the board have introduced changes in Aer Lingus to improve and strengthen the finance function, including the financial control function, at group level, in the airline itself and in all the individual subsidiaries.
I have also requested the chairman to let me have a full report on the management information systems and financial control/audit procedures now in place.
The Minister and I are used to preparing and reading sets of accounts. Will the Minister tell the House how it is possible to have unreported losses of £7 million and assets over-valued by £3 million without in some way doctoring the accounts in a fraudulent manner? If there was fraud in this case, what exactly was the involvement of the Garda? What management personnel have been removed from office as a result of these unreported losses?
I share the Deputy's concern in regard to these matters. It will not be clear, until I get the Craig Gardner report, to what extent — if any — fraud was involved. I should have the Craig Gardner report formally presented to me within two weeks and I am confident that it will indicate the exact ratio — if there is one — between fraud and anything else that may have been involved in the unreported losses. We will have to see the report to ascertain how this happened.
How did the chairman of Aer Lingus know of the problems in order to contact the Minister given that Stokes, Kennedy, Crowley, the accountants who did the books for the past number of years, seemed to have failed to notice the discrepancy of £7 million over the three year period? Have Garda inquiries been completed and, if so, will criminal proceedings be initiated against any member of the staff? Why was it necessary to bring in an alternative set of accountants to investigate? Is the Minister happy with the performance of Stokes, Kennedy, Crowley, who are the company's accountants?
I understand that the matter came to light because of inquiries from the group. Their finance department were involved and they brought in a smaller, less well known, firm of accountants in a routine manner to look at the subsidiaries as they were concerned about the reports they were getting. I am very reluctant to comment on the performance of auditors and, obviously, the reason we asked Craig Gardner to look into the matter is that they are not currently involved in the company. It is appropriate that an independent firm of accountants should now look into the situation. Let me assure the House — and particularly the public — that any action required to be taken by me or the Government — and whatever action is open to us — will be taken as urgently and as firmly as possible. In so far as I am in a legal position to do so, I will be making a very full disclosure of all the detailed information as soon as I receive the Craig Gardner report.
The Minister did not answer the question I asked as to whether officials were removed from their positions as a result of this. What rank did these officials hold? Will the Minister agree that a sum of £10 million is not peanuts? It would seem to a reasonable person that there was an attempt to cover up the fact that this had happened. Although the Minister told the House that he was contacted by the chairman of Aer Lingus on 24 January, he reportedly told a Sunday newspaper two weeks ago that this was a rumour and that "we do not investigate rumours". I am very concerned — perhaps the Minister will allay my fears — that there was an attempt to cover up these losses and not to let the Dáil or the public know about them.
I completely reject that. When the information became available every possible action was taken with very considerable speed. The Garda were immediately informed and Craig Gardner were immediately put in place to get the full picture and to establish whether we are talking about unreported losses, fraud or a mixture of both. Correct action was taken with all due speed and, within a matter of two weeks, I will have the formal report from Craig Gardner. I assure the House and the public that I will take whatever firm action is open to me — given the legal constraints on me — without hesitation.
Will the Minister say whether we should be congratulating the chairman of Aer Lingus who, he implied, discovered the loss with the staff of the companies involved seemingly without the assistance — at that stage — of Craig Gardner or Stokes, Kennedy, Crowley? The statement by the Minister that he intends to instruct Aer Lingus to pull out of the business altogether should be reversed, because we should congratulate them for identifying the problem. Does the Minister feel that there might possibly be a conflict of interests for many of these accountancy companies who would, presumably, be doing the books of other tourist interests? Perhaps the Minister should use the Auditor General on occasion to audit the accounts of companies like Aer Lingus when events like this come to light?
I want to point out clearly that I have not instructed Aer Lingus to pull out of the holiday business. I said that when I receive the Craig Gardner report I will discuss with Aer Lingus whether they should continue in the holiday business. How firm I will be in that regard depends a lot on what the report tells me. I want to make that clear.
In case someone who has booked holidays gets the wrong impression, I want to make it crystal clear that there will be no danger to Aer Lingus holidays this season. If members of the public are thinking of booking holidays with Aer Lingus it is perfectly in order for them to do so. There is no reason Aer Lingus should not see this season out. With regard to the future of Aer Lingus in this business, I will be very firm in this regard, but whatever I do the public will not be affected.
It is not really for me to comment on accountacy firms, but I am satisfied that the various accountancy firms looking after the books of State companies are professional, and I have no reason to believe that they are anything other than professional.
May I——
I want to bring supplementaries on these two questions to finality by reason of the fact there is still another Priority Question to be disposed of within the prescribed time, which is 2.45 p.m.
May I ask the Minister——
Brevity please, Deputy.
——for the third time, he has not answered this question, if heads have rolled?
No. I do not know how the Deputy would operate but I will wait for the full report before I pass sentence. If the Deputy was sitting over here I think he would do the same.
Will the Minister——
A final brief question, Deputy Bryne.
——inform the House whether the subsidiary company made a profit for the Aer Lingus group of companies?
That may appear to be a simple and innocent question but I think the Deputy will appreciate that it is not. We are investigating this issue which is at the very core of the difficulty about whether there were unreported losses or profits, and what the exact position is.
I am calling Question No. 2.
