A £37,000 house loan from Guinness & Mahon bank to former attorney general Mr Peter Sutherland was secured by an offshore deposit, the Moriarty tribunal heard yesterday.
Mr Sutherland believes the offshore account, which was described only as "Guinness & Mahon Channel Islands P3" may have been related to an offshore trust set up by his Spanish father-in-law for his family.
He told the tribunal he introduced his father-in-law to Guinness & Mahon in the mid-1970s, but said he did not know the offshore account was being used as security on his loan and did not give his consent to any such arrangement. He also said he had never deposited any money offshore with Guinness & Mahon or any of its subsidiaries.
The loan was obtained by Mr Sutherland in 1976 to purchase a home in Blackrock, Co Dublin. His first approach to the bank was through the head of accounts, Mr Ru Leonard, with whom he had "been in regular contact" over a period of two years when Mr Sutherland was representing the bank in cases involving the repossession of properties. When Mr Sutherland telephoned Mr Leonard on June 10th, 1976, he told him he had purchased a house in Sydney Avenue, Blackrock, and he needed £5,000 bridging finance for the deposit. Mr Sutherland's own house was on the market and he intended to obtain long-term finance of £20,000 from the Irish Permanent.
The new house was described in Guinness & Mahon documentation as having five bedrooms and four reception rooms. Mr Sutherland's then home in Foxrock Park was expected to raise £20,000 and was "unencumbered", the bank documentation reported. He was expected to lodge the proceeds of the sale of that house to Guinness & Mahon "in due course".
Mr Leonard recommended Mr Sutherland be given the loan, "particularly in the knowledge of his other assets with us which he referred to briefly". However, there is no record of any deposit account in the bank in Mr Sutherland's name and Mr Sutherland said he had no idea to what "other assets" Mr Leonard was referring. A facility for six months was agreed the day after Mr Suther land's telephone call and an account was opened the same day. Guinness & Mahon was to hold the deeds to Mr Sutherland's new house and a solicitor gave an undertaking that the proceeds of the sale of Mr Sutherland's old house would be lodged to Guinness & Mahon.
The first drawing on the account was £5,000 for the deposit, which was followed four months later with a withdrawal of £32,060 for the balance of the house price.
The loan matured in December of that year. Guinness & Mahon's loans officer, Mr Pat O'Dwyer, wrote to Mr Leonard and asked him to "confirm that the position is `suitably secured' ".
"Suitably secured" was code in Guinness & Mahon for a loan being backed by an offshore deposit.
Mr Leonard replied to Mr O'Dwyer: "There is approximately £12,000 on deposit at present." Mr Leonard also assured Mr O'Dwyer, "in any event this client is undoubted for the present exposure".
The P3 Channel Islands account which backed Mr Sutherland's loan contained £12,298.71 in December 1976. Mr Sutherland told the tribunal he had "no knowledge at all of this account or how it became connected with my bridging loan".
He said he did recall discussing with Mr Leonard his father-in-law's desire to set up "a trust for members of his family" in the 1970s. Mr Don Reid had advised in the establishment of the trust.
"I had no interest in the funds, I had no control over them . . . I was not a beneficiary of the trust," Mr Sutherland said.
His solicitor had visited the Channel Islands in an effort to obtain documents relating to his father-in-law's trust, but the documents had been destroyed "a considerable period of time ago".
Mr Sutherland said he had the bridging loan for an extended period because at the time he was "less than attentive to my own financial affairs". He repaid the loan in 1980 out of the proceeds of long-term finance.
Earlier the financial controller of Guinness & Mahon bank, Ms Sandra Kells, agreed with counsel for the tribunal, Mr Jerry Healy SC, that bridging finance was taken out "usually for no more than a month or a few months". She also agreed the bank was "not in the habit of providing long-term finance" for houses.
