Business And Leadership, Ireland's Business News Service

Sheehy was questioned closely by members of the Oireachtas Joint Committee on Economic Regulatory Affairs on the scheme that Goodbody Stockbrokers, an AIB subsidiary, had in place to allow it to trade shares in the bank, which company law had prevented it from doing.

Eugene McErlean, who was group internal auditor in AIB from 1997 until 2002, had told the committee in March that Goodbody operated the illegal share sales scheme in 2000 and 2001 using tax havens in Caribbean and Pacific.

Responding to McErlean’s claims, the Financial Regulator also appeared before the committee in March and said the scheme at Goodbody had “not operated in accordance” with agreed arrangements.

Sheehy today told the committee that the way the Goodbody scheme had been executed was unacceptable and had been in operation for just eight months, RTE News has reported.

Independent Senator Shane Ross asked Sheehy why no one at the bank had been disciplined for setting up the trading scheme with Goodbody, with the exception of Eugene McErlean.

The committee heard that an AIB press release in 2002, dealing with the Rusnak fraud in the bank’s subsidiary Allfirst, also carried a statement regarding McErlean, who had nothing to do with the scandal, saying that he no longer held the position of group internal auditor with AIB, the Irish Times has reported.

McErlean was still working at AIB at the time, but subsequently left the bank in 2002.

Sheehy said the two statements should not have been paired up, but denied that it had been done on purpose.

The committee also heard today that the former CEO of AIB Michael Buckley threatened McErlean in a letter that he would be liable for any financial losses stemming from concerns he had raised internally about Goodbody’s illegal AIB share-trading scheme.

The allegation was made by Fine Gael TD Fergus O’Dowd. He said he did not a copy of the letter in question, and Sheehy said AIB did not have a copy of it either.

Sheehy, AIB’s group chief executive since 2005, announced his intention to retire from the bank late last month, but is continuing on as chief executive until a successor can be found.