Albert's $1.5m Bahrain deal under scrutiny
Sunday October 12th 2003
JODY CORCORAN
and JIMMY GUERIN
ALBERT REYNOLDS, the former Taoiseach, is at the centre of two separate investigations into a bizarre business deal in the Middle East, made by him two years ago when he was chairman of Bula Resources, the Irish exploration company.
The Sunday Independent has learned that the Garda fraud squad and the Office of the Director of Corporate Enforcement (ODCE) are investigating the circumstances surrounding a $1.5m investment in Bahrain in June 2001.
Shares in Bula have been suspended on Dublin and London stock exchanges over concerns about the troubled company's financial position.
Last week, Mr Reynolds said he was unaware of either official investigation but was absolutely confident that he had "nothing to worry about".
Last year, Mr Reynolds lost control of Bula at an acrimonious annual general meeting when shareholders voted against him and he withdrew his name from nomination.
The former civil servant Paul Appleby, who is Ireland's Corporate Enforcer, is investigating the circumstances of Mr Reynolds handing a $1.5m cheque to a mysterious Bahraini general.
The 'mission' of Mr Appleby's office is to "improve the compliance environment for corporate activity in the Irish economy by encouraging adherence to the requirements of the Companies Acts and bringing to account those who disregard the law".
The Garda fraud squad, meanwhile, has travelled to Bahrain to interview the general.
But Mr Reynolds last week was confident no wrongdoing would be found on his part. "I was wasting my fucking time with those boys, you know," he said of Bula Resources.
He explained there was a huge difference between doing business in Ireland and in the Middle East. "Arabs go on the shake of a hand when doing deals, but later on Bula demanded more," he said.
Two years ago, a statement on behalf of Bula said a $1.5m deal was done "with a view to acquiring a producing asset that would assist the Group in funding its ongoing working capital requirements". Albert Reynolds told last year's AGM that he was in disagreement with the other directors of the company, who believed there was a "potential conflict of interest" arising out of the payment of $1.5m to a Bahraini general in 2001.
As a result of the deal, which was not recorded in the company's minutes, the firm's stockbrokers, Davy, resigned.
Last week Mr Reynolds, who is also chairman of New York-listed energy company Life Energy Technology Holdings (LETH), said: "There was no conflict of interest."
As he bowed out of Bula last year, Mr Reynolds said he would be pursuing the Bahrain deal with LETH. Last week Mr Reynolds said that LETH had offered to purchase, for $1.5 m Bula's interest in the Bahrain investment but this offer was rejected by Bula's board. Asked if, in fact, any of Bula's $1.5m had been invested in LETH shares at any stage, he replied: "Not at all. Not at all, no."
The new chief executive of Bula, Viscount Tim Torrington, has said that he has not had a satisfactory explanation of the terms of the Bahrain deal.
"I don't know if there ever was a deal," Mr Torrington said.
A conflict has arisen as to whether the $1.5m was refundable. Both parties had signed an agreement apparently confirming a refund of the investment in the event that a project was not sourced by the first anniversary of the agreement.
To date, over a year later, only $375,000 has been refunded by the general. Last week Mr Reynolds said: "Bula will have to tell shareholders why they accepted $375,000 when they had two offers of $1.5m from LETH."
The Sunday Independent has learned that there exist two apparently contradictory documents on this issue of whether the $1.5m was refundable. These documents are now with the ODCE.
It has also been learned that the ODCE is in possession of several cheques drawn against Bula in favour of Mr Reynolds, his wife, and another company of which he is a director. These cheques were not signed by two people, in breach of a Bula mandate to the bank concerned.
Yesterday, Mr Reynolds admitted he had drawn these cheques in breach of a company mandate, but said he had only done so because the designated co-signatory, Bula director Omas Yazigi, was out of the country.
"You could try to argue that that's outside company mandate, but it's not outside running a business," Mr Reynolds said. "It is perfectly normal, because you can't leave a business running without cheques." When Albert Reynolds stepped down as Bula chairman, the Sunday Independent's Business Editor, Shane Ross, wrote: "Albert was a good choice for chairman of Bula. He is a gambler. He cuts corners. He has a healthycontempt for red tape."
Senator Ross wrote: "Reynolds is certainly reckless, but this is just what Bula needed . . . He is a doer and a dealer. He is impatient, both with people and bureaucracy."
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