Defence tell multi million euro theft trial that Michael Lynn was introduced to Bank of Scotland Ireland by Michael Fingleton

Former solicitor Michael Lynn was introduced to Bank of Scotland Ireland by Michael Fingleton, the chairman of Irish Nationwide Building Society, his defence counsel has told his multi-million-euro theft trial.

Mr Lynn (55), of Millbrook Court, Redcross, Co Wicklow is on trial accused of the theft of around €27 million from seven financial institutions.

He has pleaded not guilty to 21 counts of theft in Dublin between October 23, 2006 and April 20, 2007.

It is the prosecution’s case that Mr Lynn obtained multiple mortgages on the same properties, in a situation where banks were unaware that other institutions were also providing finance.

The financial institutions involved are Bank of Ireland, National Irish Bank (later known as Danske Bank), Irish Life and Permanent, Ulster Bank, ACC Bank, Bank of Scotland Ireland and Irish Nationwide Building Society.

During cross-examination of Bank of Scotland Ireland worker Tom Brennan yesterday, Mark Lynam SC, defending, suggested that Mr Lynn “was introduced to the bank by the chairman of another bank, Michael Fingleton”.

He said it is the defence’s case that Mr Fingleton was his client’s “personal banker” and when he “couldn’t approve a loan” for Mr Lynn because he was on holidays, contact was instead made with senior staff at Bank of Scotland Ireland. Mr Brennan said he wasn’t aware of this.

Mr Lynam said it is his client’s case that “it was inevitable he would get these loans,” as “there was an understanding he was a high-value client,” and that there was to be “flexibility” in that loans would “not be strictly enforced like other clients of the bank”.

Mr Brennan replied: “This was not my understanding.”

In his direct evidence, Mr Brennan told John Berry BL, prosecuting, that he met with Mr Lynn in April 2006 about a potential mortgage application, which didn’t proceed.

He said another proposal was made in November 2006 in relation to offices at Capel Street and 10 residential properties.

An offer letter for €3.5 million was issued by the bank to Proper T Capital Ltd in January 2007 and returned signed by Mr Lynn and his wife Brid Murphy, who were directors of this company. The terms and conditions of this offer included a requirement for the first legal charge (FLC) on the properties.

Mr Brennan said he was not aware Mr Lynn sought finance from other institutions in relation to these properties and the application wouldn’t have gone ahead if he was aware that finance had been provided by others to Mr Lynn or Proper T Capel Ltd.

Mr Brennan confirmed he was aware of the publicity surrounding Mr Lynn in October 2007.

During a meeting at this time, he said Mr Lynn told him, “he would be sticking around to deal with the issues.” He recalled Mr Lynn said it was a “misunderstanding”.

Mr Brennan confirmed that the bank had obtained FLC over nine of the ten properties.

Mr Lynam suggested to Mr Brennan that the statement of affairs “wasn’t crucial” as Mr Lynn had a “relationship with the bank” or individuals within it who were “eager” to provide loans and there was “knowledge in the bank that he would use the loans for other purposes”.

The witness said he couldn’t speak for anyone else, but that the statement of affairs was “important to me”.

Mr Lynam also put it to the witness that his client had previously taken out loans with the bank and repaid them where the title was not registered.

Mr Brennan said he was not aware the FLC was not registered for these properties.

During re-examination, Mr Berry said it had been suggested to Mr Brennan that Mr Lynn had “carte blanche to do what he wanted to do with the money” due to his existing relationship with the bank.

He asked, “Was it your understanding that the process you engaged in was a façade or charade to allow Mr Lynn to get money?”

Mr Brennan said he would have expected Mr Lynn to “point me to my superiors”.

Mr Berry then asked if Mr Lynn mentioned to him during the meeting in October 2007 that it was “all a charade”.

He replied he “never mentioned it”.

Retired National Irish Bank worker, Nicholas Robert Hamilton gave evidence that the bank approved loans for Mr Lynn to purchase property in Dublin, not abroad.

It was put to him that Mr Lynn said they met in 2007, which he denied.

Mr Hamilton said he “never met” Mr Lynn, adding, “the first time I saw him was in court last year at the initial trial.”

When asked if he was aware of a secret deal between Mr Lynn and National Irish Bank to allow monies to be used abroad, Mr Hamilton said he had “no idea what he is talking about”.

Paul Comiskey-O’Keefe BL, defending, put it to Mr Hamilton that the defence says he met with Mr Lynn and was aware that the money was going to be used in relation to his client’s property business abroad.

Mr Hamilton replied: “No, I never met Mr Lynn and never knew about using money abroad.”

He said he didn’t review or assist with the collection of documents for gardaí and was not asked to remove or delete information from the bank’s internal systems.

Mr Hamilton also told Mr Comiskey-O’Keefe that he didn’t recall approving the loan, but his former manager told him he had when they spoke “at the end of the trial last year”.

He said she rang him and they had a “general conversation about the loan” to Mr Lynn, during which she mentioned she thought he’d approved it.

The trial continues before Judge Martin Nolan and a jury.

Arthur King said he was working for ICS Building Society, a subsidiary of Bank of Ireland in 2006.

He said he was aware that Mr Lynn wrote to a senior business manager in September 2006 proposing the purchase of eight residential properties on interest-only basis with an 85 per cent loan-to-value ratio (LTV).

Jurors were shown a number of documents sent to the bank including trading accounts for Kendar Holdings and Michael Lynn and Co Solicitors.

Mr King agreed the application was assessed and the bank issued an offer letter which included the condition that an FLC is registered against the properties in favour of the bank.

He noted that the mortgage offered would be interest-only for the first three years, then capital was also repayable.

This mortgage offer was also shown to jurors.

The jury were also shown other documents including a solicitor’s letter of undertaking with Fiona McAleenan’s signature on it.

Ms McAleenan gave evidence yesterday that she couldn’t recall signing this document and it was not her signature.

Mr Finnegan asked Mr King if he would be “surprised” to hear that Ms McAleenan said she didn’t sign this document.

Mr King agreed that he would have taken the document at face value.

A cheque for €2.74 million was issued by Bank of Ireland to Michael Lynn and Co Solicitors in December 2006.

Mr King said repayments were made on the mortgage until September 2007, however, around the same time, the bank became aware of an issue.

He said the bank carried out certain checks to confirm if there were loans registered in the name of Mr Lynn.

“As far as I’m aware, they weren’t,” Mr King said, noting that it then became apparent that the FLC had not been registered in favour of the bank.

He agreed with Mr Finnegan that the bank also became aware around this time that letters of undertaking had been issued to other financial institutions which also had an interest in these properties.

Mr King said the loan would not have been made if the bank “had known the letter of undertaking couldn’t be fulfilled”.

Mr Lynam put to Mr King that his client says he “came on board to bail out or rescue” Bank of Ireland in relation to a loan taken out in 2003 by a third party.

Mr King said he wasn’t aware of this.

Mr Lynam said it is his client’s case that he was given money to buy property abroad and Mr King replied that he wasn’t aware of this.

Defence counsel then put it to him that his client’s case is that “he was being lent money and the bank understood if something went wrong, they could sue the solicitors,” who would have professional indemnity insurance in place.

Judge Nolan told Mr King that the defence are suggesting to him that if someone in Bank of Ireland knew Mr Lynn “wasn’t going to buy these properties” they took “comfort” from the letters of undertaking since if the loan wasn’t repaid, they could sue the solicitors.

Mr King replied: “Never heard of it.”

The witness said he couldn’t remember if the bank carried out an internal investigation, but noted that the bank had checked letters of undertaking from other solicitors and followed up any that were outstanding.

Mr Lynam then showed him an email from the financial regulator to Bank of Ireland dated October 16, 2007.

The email asked questions about the bank’s procedures and its exposure to Mr Lynn.

Mr King said this was an email between the regulator and the bank’s compliance department.

He recalled having the branch and mortgage files, but he said he wouldn’t have had this internal file.

He told Mr Finnegan during re-examination that he had not heard of a “solicitor-only undertaking”.

Prosecuting counsel suggested that the defence had asked him if the banks would be satisfied to sue solicitors under their professional indemnity insurance if they did not complete an undertaking.

Mr King replied: “No, that’s unsecured lending.”