KPMG accused label kids' schoolbags trawl as 'nuclear option'

Clockwise from left: Jon D'Arcy, Arthur O'Brien, Paul Hollway and Eamonn Donaghy

HM Revenue and Customs bosses investigating suspected tax evasion were "gleeful" ahead of raids on the homes of four former partners at Belfast accountancy firm KPMG, the High Court has heard.

Counsel for the executives claimed there was no justification for taking the "nuclear option" of an intrusive operation that also involved trawling through children's school bags.

Details emerged during a challenge to the legality of the process to obtain warrants to search the accountants homes and offices.

Eamonn Donaghy, Jon D'Arcy, Paul Hollway and Arthur O'Brien claim HMRC misled judges into authorising the raids as part of a criminal probe.

All four men were arrested last November, but have not been charged with any wrongdoing.

At the time KPMG said it was cooperating with the inquiry and had placed them on "administrative leave".

In February the company announced the partners in its Belfast office subject to the HMRC probe had retired.

KPMG stressed the investigation related solely to the executives' personal affairs and was unrelated to the company's business or its clients.

It emerged in court that Revenue concerns involved the formation of a separate business partnership and when it was registered.

Loans being issued and written off as bad debt also featured in inquiries.

The four men are now seeking to judicially review the steps taken to search their homes and business premises.

Barrister Barry Macdonald QC acknowledged the decisions to launch a criminal investigation or arrest his clients was not being challenged - although neither action was accepted as reasonable or justified.

"The applicants are making this challenge with their hands tied in relation to the grounds for suspicion, but they completely reject the allegation they were involved in any tax evasion or wrongdoing," he said.

"Even if the suspicion entertained by HMRC is taken at its height, there was no justification for seeking or being granted a warrant to search their homes and offices."

A panel of three judges was told the tax authority should have considered less intrusive steps in an attempt to quell any suspicions.

No attempt was made to put direct questions to the accountants about issues of concern to HMRC.

Instead, it allegedly saw the case as a chance to detain four high-profile men.

"They were (motivated) by an improper collateral purpose... on the night before the warrants were executed senior (HMRC) managers were gleefully exchanging emails to the effect that this had the makings of a great story for them," Mr Macdonald contended.

He claimed judges who granted the warrants were given misleading information about the extent of the four accountants' co-operation with inquiries.

Mr Macdonald also questioned the timing of the raids, which coincided with the British Chancellor's announcement of a crackdown on tax evasion in his Autumn statement.

The case continues


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