It was Kevin Rabbitte’s 48th birthday. January 8, 2020, was not the ideal time to be preparing a witness statement but Rabbitte felt compelled to sit down and do so. Rabbitte hails from a small town called Clonberne, about 42 kilometres from Ballinasloe in North East Galway. For years he had worked in the building industry making roads, installing sewers and laying foundations along with an old friend. 

On May 9, 2014, Rabbitte decided to go out on his own by setting up a company called Westman Plant and Civils Ltd. The wife of his friend came on board as a co-director of the business. She later stepped down as a director and neither she nor his friend had any involvement in what was to follow.

On June 11, 2014, Westman obtained a value added tax number with the plan being to go into business together. Rabbitte in his witness statement admits he used this Vat number to allow his company buy a number of machines from Euro Auctions a well known plant and machinery auctioneer in the UK. 

Rabbitte emphatically denied his company was “knowingly” used by him as a “vehicle” to carry out a fraud on the Revenue

Rabbitte said he made these purchases for an unnamed man in return for a “modest commission.” This man he said was known to him in business over the years but he claimed he did not know him well. 

“I now know that this third party is an underworld figure who is extremely dangerous and capable of viciousness. Both I and my wife are petrified of him,” Rabbitte said. 

No details have been given by Rabbitte in relation to this individual but he is thought to be based along the border. He is believed to be involved in various cross-border machinery trading enterprises and to have links to various people.

As Rabbitte tells it in January, 2020, it was this third party who used his Vat number “unbeknownst” to him to “perpetrate a very significant fraud on the Revenue Commissioners.” “I do not dispute that a carousel fraud or an MTIC (missing trader intra community) fraud was perpetrated on the Revenue Commissioners,” Rabbitte admitted. “But it was so perpetrated in circumstances where I was completely ignorant of what was going on.” 

Rabbitte emphatically denied his company was “knowingly” used by him as a “vehicle” to carry out a fraud on the Revenue. He did not deny, however, that his company’s Vat number was used to import nearly €8 million worth of plant and machinery into Ireland but he said this was done behind his back. 

He said that he had told his auditors – who filed accounts showing that no Vat was due – that based on his honest belief his company was doing no business. Rabbitte admitted he had gone to numerous Euro Auctions events in August and October 2014, and in January, April and June, 2015. In total Rabbitte successfully bid for a total of 52 machines on the behalf of the “third party” using his company Vat number to obtain a bidding number. “The third party paid for each of these machines and for their transport,” Rabbitte said. 

He insisted that none of the machines were ever in his or his company’s possession. “I am entirely ignorant of the source of the monies to purchase these machines and I am entirely ignorant as to what became of each of these machines,” he said. Rabbitte said he was paid €7,000 in commission by a man he declined to name for his services. He said that invoices uncovered by Revenue in relation to the selling on of these machines were “fabricated.” 

He said he did not prepare these invoices and that the first he ever heard of them was during later litigation. He admitted that he did advertise the sale of a Daewoo machine on Done Deal but: “This had nothing whatever to do with the company.” Rabbitte said “under extreme threat” he had been forced to give his Gmail account password to the mysterious third party on whose behalf he had bought millions of euro worth of machinery. 

Rabbitte rejected the view of Myles Kirby, an accountant asked by the Revenue Commissioners to liquidate his business, that he was “knowingly a party to fraud.” He said these allegations were based on “surmise and conjecture.” He said it was clear from his personal and company accounts that the money used to buy machinery had not come from either. 

Rabbitte suggested the Revenue’s liquidator should ask the six auction houses which sold machinery what was the “actual source” of the monies they received. He said he received no benefit from any transaction other than his commission. “The true position is that my financial circumstances are dire, and I have not been in a position to pay the mortgage on my family home for several months now,” he said. 

“My solicitor is acting for me on a shoestring and I cannot afford counsel.” He rejected any contention that he knew about the fraud and suggested that the Revenue’s liquidators should follow the “money trails.”

“I never deleted emails from the company’s gmail account and if emails were deleted this was done by the third party,” he said. He said he did send emails from the account, but insisted he was not the only one with access to it. 

Rabbitte said that in late 2015 he had met with Michael Grimes, an accountant, in the Ashling Hotel in North Dublin in order to get advice from him on how best to deal with the situation he had found himself in. Witness statement complete, Rabbitte was then free to enjoy his birthday. He appeared to be gearing up to dispute the allegations being made against him, but things had changed by the time he arrived in the Commercial Court yesterday. 

Revenue closes in

James Foran an inspector of taxes with The Revenue Commissioners said in a witness statement on December 13 2019 that the Revenue had first noticed Westman after the company was dissolved by ‘strike-off’ on April 13 2016. He said Revenue had noticed that the business had filed various returns saying no Vat was due. It began to look closer at the firm.

A person who is registered in Ireland for Vat is entitled to use that Vat to acquire goods at a zero rate of Vat in other member states provided he or she can prove that they are registered for Vat in Ireland. These types of purchases are known as “intra-community acquisitions.” 

Revenue discovered that Westman had acquired machinery worth €7.44 million overseas between July, 2014, and August 2015, and yet it paid no Vat on these goods back in Ireland. 

“The submission of ‘nil’ returns, combined with the acquisition of large volumes of goods as Vat-free intra-community acquisitions, are key indications of participation in Vat fraud,” Foran said. “I am satisfied that Westman was engaged in large scale intra-community Vat fraud…” he concluded. 

Revenue sent officials to Rabbitte’s home in Galway, where it was informed he might be living in Manchester. It was now based on investigations convinced that Rabbitte had serious questions to answer. It cancelled Westman’s Vat registration on July 21, 2015. It then spoke to the UK Vat authorities which supplied it with more information about various deals Westman had engaged in. Foran secured invoices from two Vat registered traders showing that Westman was claiming to be paying Vat. 

Upon access to the email account, it was immediately clear to me that all non-spam emails had been deleted from the email account

John Healy, chartered accountant

In total Revenue found that Westman had dealt with 38 different suppliers in Northern Ireland and the UK, as well as three more suppliers in the Netherlands. Foran calculated that Westman should have paid Vat of €1.7 million in relation to the deals it did. 

Revenue issued a seven-day final payment demand on December 8, 2015, but received no response. Around December 16, 2015, Grimes began acting as an agent for Westman. Grimes in correspondence made various assertions, such as “the goods never went through the South or they did and were exported,” as well as saying “to me it seems a UK issue.” The Revenue did not accept these assertions. 

On February 9 2017, it issued a formal letter of demand to Westman requesting payment of €1.99 million made up of Vat owed plus interest. After there was no response to this letter, it appointed accountant Myles Kirby of  Kirby Healy Chartered Accountants as liquidator. Westman was now heavily under the spotlight. 

Emails deleted to “destroy evidence”

At 11 am on July 2, 2019, John Healy, a chartered accountant and partner in Kirby Healy,  met by arrangement with Rabbitte in the offices of his solicitor Robert Dore on Lower Bridge Street in Dublin 8. Healy’s firm had been appointed by the Revenue Commissioners as liquidator to Westman, and tasked with discovering just what had been going on inside it. Sam Saarsteiner, a solicitor with Clark Hill, also attended representing the liquidator. 

The reason for the meeting was to get access to a Google account called [email protected]. Rabbitte gave Healy access to his account when he was asked to do so and this was accessed that morning on Saarsteiner’s laptop. 

“Upon access to the email account, it was immediately clear to me that all non-spam emails had been deleted from the email account,” Healy said. 

Both the inbox and outbox were empty as was the contacts book and calendar. Healy knew from other documents relating to the liquidation that this account was used regularly as a means to communicate by the business. Not a single email however existed.

Healy, however ,was not about to give up. 

Having secured access to the email account he used the “autocomplete” function to discover what were the email addresses that this account had been used to contact. He also sought the search history related to the account to see what other information might be gleaned. 

These searches revealed an active account that had been used to search for various machine auctioneering houses, construction firms, accountants, businessmen, border bureau de changes and so on. 

In a witness statement, Healy concluded that the evidence collected is “supportive” of the contention that Rabbitte had “acted as a knowing and active participant in the carrying on of the business of Westman with intent to defraud creditors of the company (namely, the Revenue Commissioners) and/ or for any fraudulent purpose.” Healy said he had a further concern that the deletion of emails was carried out to “destroy evidence.”

Fraud on a massive and systematic scale

On December 13 2019, Myles Kirby prepared a witness statement in relation to Westman and Kevin Rabbitte. Kirby said it was his “considered view” based on the documentary evidence that “the type of fraud engaged in by Westman was that of missing trader intra-community Vat fraud (MTIC)” popularly known as a “carousel fraud.” In total, Vat carousel fraud costs EU member states roughly €60 billion annually in lost revenue. 

“Although there is no singular victim of this crime, there is no arguing about the damage it causes society,” Kirby said. “The loss of tax revenue reduces the provision of important public services like policing, healthcare and education and it also increases the tax obligations of honest taxpayers.”

Kirby said that his review of Westman’s financial statements led him to conclude that the company had presented a “deliberately false picture” of its trading history and position. He went through a series of transactions carried out by the company where Vat should have been paid, but wasn’t. 

Kirby said he had liquidated hundreds of companies over the years. In this case, he concluded fraud had been carried out on a “massive scale in a systematic and organised manner.” 

Protecting the public from rogue directors

Three days had been set aside for the hearing in the Commercial Court starting on January 28. But a morning in court was all it took. The case was compromised by an eleventh-hour concession from Kevin Rabbitte. Under Section 610 of the Companies Act, he admitted that while an officer of Westman Plant and Civils, he was knowingly a party to the carrying on of the business of the company with intent to defraud creditors of the company including the Revenue Commissioners or any other person.

While the (liquidator) believed the scale of the fraud to be in the region of €8 million (£7 million), Rabbitte admitted his role in 18 transactions worth around €4 million. The loss to Revenue in Vat was put at €1.2 million.

Rabbitte admitted he was personally liable for debts of €1.5m and that all of the transactions took place at auctions. 

Senior counsel John Kennedy, for the liquidator, gave the court a taste of what the Westman director had been up to. In the month of October, 2014, alone, Rabbitte made two purchases at three auctions, including one in Dromore, before turning up at a fourth auction in Leeds at Halloween. In one month, he had managed to acquire €127,000 worth of machinery. He had used the Vat number of the company.

This is at the very top of the scale, a company whose only purpose was to facilitate fraud

senior counsel for the liquidator

The barrister explained to the court that while they could have fought Rabbitte for the full €8 million sum they would have had to prove the balance of transactions, a process involving the cross-examination of witnesses. This would have been both costly and time-consuming.

But with the admissions in the bag, all that was required of the court was a ruling on Rabbitte’s disqualification. 

Kennedy argued what had been admitted was an “extraordinary level of fraud” and an egregious breach of a director’s duties at the highest end of the scale.

He cited old cases of disqualification – the Bailey brothers of Bovale Developments, Ansbacher and finally Custom House Capital where former chief executive Harry Cassidy was disqualified for 14 years, the longest term ever handed down.

“This is a more serious case. This is an acceptance of a carousel fraud. This is at the very top of the scale, a company whose only purpose was to facilitate fraud,” Kennedy submitted.

Even when the game was up, Rabbitte still flouted the rules, the court heard. He failed to deliver the books and records of the company until a contempt motion was brought before the High Court. 

The purpose of disqualification under company law, Kennedy continued, is to protect the public from rogue directors. “It’s not punitive,” he said of Section 610. He argued Rabbitte’s conduct made him unfit to be concerned with the management of a company.

Justice Brian O’Moore wondered whether Rabbitte should not get some credit for admitting culpability, saving the court a three-day hearing and a possible appeal. Kennedy concurred there should be some discount.

The baton was then passed to Rober Dore, the solicitor acting for Rabbitte. “I’ll be very brief,” he said. “There is a particular background to my client’s position. It’s there on affidavit.”

Pitching his client’s wrongdoing at the lower to middle level of the scale, Dore said that Rabbitte had conceded all along that he used the company Vat number to purchase machines for commission. “He made no secret of that,” he said.

Dore asked the judge to bear in mind that Rabbitte was consenting to disqualification and that personal liability capped at €1.5m was draconian, “by any stretch of the imagination”.

The judge confirmed with Dore that the background he was referring to was an unnamed individual who Rabbitte and his wife claims to be petrified of, citing an incident where his wife was run off the road. On affidavit, Rabbitte complained that he had “stupidly committed” himself, and the company, to be the frontman in buying machines.

The solicitor said from what he knew his client had every reason to take the threats seriously. Asked by Justice O’Moore whether Rabbitte had not felt in a position to go to An Garda Siochana,  Dore replied: “the less I say about that…my client is in a very compromised position.”

However, lawyers for the liquidator pointed out that in the previous contempt case before the High Court, Rabbitte had made no mention of being petrified when, back in 2015, he started to work with this background individual. At the time he was based in the UK. He said the third party had told him he would look after him if he bid on his behalf at a machinery auction in the UK. He said he was given instructions and recalled being paid £500 cash. He said the practice was that he would forward the invoice on to the third party.

Thanking both sides for their submission, Justice O’Moore described the case as one of the more extreme breaches of civil law. He will rule on the length of Rabitte’s disqualification on Thursday, having first considered the relevant legal authorities. 

The judge noted that both sides accepted Kevin Rabbitte should be barred from being a company director for a minimum of five years. “I would have in any event imposed disqualification for that time,” he added.

O’Moore said he had to consider other matters including “the issue that has loomed large arising from the unnamed individual who petrified Mr Rabbitte but appears not to have done so when he agreed to be the frontman for a transnational fraud.”