The High Court yesterday appointed two inspectors to investigate the affairs of a National Irish Bank subsidiary relating to the effecting of insurance policies with three companies located outside the State.
The move to have the inspectors appointed to National Irish Bank Financial Services Limited (NIBFSL) was resisted by NIB which claimed the application was ill-conceived, premature and unnecessary, there being already several investigations underway into the bank's affairs.
NIB has spent more than £2.4 million, amassed 60 containers of documents of some 180,000 pages of its records, and allocated up to 65 staff in co-operating with the existing investigations, Mr Richard Law Nesbitt SC, for the bank, said.
However, Mr Justice Shanley granted the application by the Tanaiste and Minister for Enterprise, Trade and Employment, Ms Harney, for the appointment, under Section 8 of the Companies Act 1990, of Mr Tom Grace and Mr John Blayney SC, the former Supreme Court judge, as inspectors over the affairs of NIBFSL.
He said he was satisfied there were circumstances suggesting the affairs of NIBFSL were being conducted in an unlawful manner.
He said NIB was correct in saying there are already six different investigations into the bank's affairs but it was worth noting that these did not have the same teeth as an investigation by court appointed inspectors. This was an application related to a separate company which might well be related to NIB, but the Companies Act must have intended the Minister be free of her own initiative, if she saw fit, to have the affairs of individual companies investigated.
The Minister was entitled to make the application and to have it determined on its merits.
The judge said the inspectors should bear in mind that their report into the affairs of NIBFSL would be admissible in any civil proceedings and would have a probative value. He added that if the allegations against the company were ill-founded, the court would have an inherent jurisdiction to make an order providing for payment to the bank of such costs incurred by the bank or its subsidiary in defending itself against the allegations.
He directed that the inspectors should furnish their interim report by August 5th next.
Under the order made by the court, the inspectors will investigate and report on the affairs of NIBFSL relating to the effecting of insurance policies through NIBFSL with Clerical Medical Insurance Company Limited, Scottish Provident International Life Assurance Limited and Old Mutual (Guernsey) Limited; the role of NIBFSL, its officers, servants and employees in connection with the effecting of such policies and the purposes behind the execution of such policies.
They will also investigate and report on the knowledge of the management and board of directors of NIBFSL of the effecting of the policies and the identity of those responsible for or aware of the effecting of, or the purposes behind, the policies.
Making the application, Ms Fidelma Macken SC, for the Minister, said it was grounded on a belief that there were circumstances suggesting the affairs of NIBFSL have been conducted for an unlawful purpose and/or in an unlawful manner and that persons conducted in its management and affairs have been guilty of misfeasance and misconduct towards it.
It was alleged that, on dates between 1990 and March 1998, personnel of NIBFSL participated in the effecting of insurance policies with Clerical Medical Insurance Company Limited (CMI), Scottish Provident International Life Assurance Limited (SPI) - both companies incorporated in and based in the Isle of Man - and Old Mutual International (Guernsey) Limited (OMI), incorporated in and conducting business in Guernsey.
It was also alleged those companies were not authorised to conduct the business of life assurance in the State. It was further alleged that, as a consequence, the actions of NIBFSL and/or associated companies, in effecting such policies of insurance, customers may have been facilitated in the avoiding of their revenue obligations.
In an affidavit read to the court, Mr Grahame Savage, chief executive officer of NIB Limited, said the Minister's application to appoint inspectors to NIBFSL was ill-conceived. He asked that the application be either adjourned in order to obtain reaction from other investigating bodies or refused.
He said the Bank has complied with the investigations into its affairs and was not opposed to investigations "if they are necessary to uncover the true facts about the life assurance and other products sold by the company". It was opposed to investigations "for the sake of investigations".
As well as the inspectors' investigation into its affairs, NIB was also subject to investigations by the Central Bank, the Garda, Mr Cosgrove (as authorised officer under the Insurance Acts), the Revenue Commissioners and the Director of Consumer Affairs, Mr Savage said.
To be justified, any new investigation should add value to the objective to be attained by the existing investigation, he said. "With respect to the Minister, I am unable to see any value which is added by the investigation she proposes at this time."
He said the manner in which the matter has been handled has the capability of damaging the bank's business "and has certainly frightened many bona fide CMI and other policy holders". He said there was no basis for fears that CMI and other policy holders will not have their policies paid.
Mr Savage said the inspectors into NIB's affairs have encountered difficulty in advancing their work because certain persons whom they wished to interview wished to be certain they would not be deprived of their right against self-incrimination should they attend interviews. The bank was not party to these events and was dismayed the inspectors' work might be delayed.
He said if the bank's view was not shared by the court, it would work with any new inspection "to the same extent and with the same compliance and openness as they have dealt with the six ongoing external investigations which are presently taking place"
