The kept politician: how a judge called Haughey a liar and solved Ireland's great political mystery

`He deliberately shrouded the pounds 1.3m gifts in secrecy to ensure that the Revenue would never find out'

Charles Haughey may face prosecution for misleading a judicial inquiry at which he denied secretly receiving pounds 1.3m from a supermarket magnate while he was Irish premier between 1987 and 1991.

In its damning report yesterday the Dublin tribunal investigating payments to politicians branded him a liar. The Irish Director of Public Prosecutions will be sent documents on Mr Haughey's finances gathered by the inquiry into payments by Ben Dunne when he was head of the Dunnes Stores.

Judge Brian McCracken, inquiry chairman, delivered a blunt verdict on Mr Haughey's conduct. He said that by first avoiding co-operating at all with the tribunal while denying he had received the Dunne cash, Mr Haughey's attitude "might amount to an offence" under a 1921 law governing evidence to tribunals. "The tribunal has been unable to accept much of the evidence of Mr Charles Haughey," it said.

The 112-page report rejects the claims by Mr Haughey, who was Taoiseach four times between 1979 and 1992, that he was unaware that cash was being channeled to him from secret accounts in the Cayman Islands through his friend, the late Des Traynor, a prominent Dublin businessman. Mr Haughey said Traynor had full responsibility for dealing with his personal finances.

In an invitation to tax authorities to investigate the offshore cash movements, Judge McCracken said the tribunal believed the former premier "deliberately shrouded the gifts in secrecy to ensure that the Revenue authorities would never know of the gifts".

It was "unacceptable" that a minister and Taoiseach should be supported in his lifestyle by such personal gifts. The tribunal verdict, confirming critics' views that Haughey was indeed "a kept politician", lifts the lid on the oldest mystery in Irish politics, namely: how Mr Haughey managed to lived like royalty on a limited ministerial salary.

Mr Haughey's admission, months after the tribunal began, that he received the pounds 1.3m, highlights the inquiry's effectiveness in rooting out furtive numbered bank accounts and transactions from Hong Kong to the Isle of Man, and London to the Cayman Islands. Confronted with these facts, Mr Haughey admitted he lied to the tribunal and his lawyers.

The report also opens the way to the former transport minister Michael Lowry facing serious charges over tax evasion and breaching the terms of a tax amnesty by failing, as required in law, to disclose all payments received.

The report said: "It is an appalling situation that a government minister and chairman of a parliamentary party can be seen to be consistently benefiting from the black economy from shortly after the time he was first elected to Dail Eireann."

The amnesty breach alone could lead to a jail term of up to eight years and fines of up to twice the amount of tax evaded. Senior Dail members yesterday called on Mr Lowry to consider his future as a member of the Dail.

Mr Lowry supplies refrigeration services to Dunnes Stores, which effectively held complete control of his firm, with payments devised so as "to assist him in evading tax".

Dunnes paid for a lavish extension to Mr Lowry's country home in Tipperary. His earlier non-disclosure of his full finances to his party leader saw Mr Lowry forced to resign last November from cabinet and the Fine Gael party.

The Taoiseach Bertie Ahern said the cabinet will on Thursday consider setting up another tribunal to examine other gifts to politicians outside the scope of the McCracken investigation. A permanent ethics commission is also likely. Apparently signalling an imminent tax crackdown, he said he expected state agencies to "take all necessary action" arising from the report.