Workers from Bank of Ireland and Ulster Bank refused to accept a suggestion from defence counsel for Michael Lynn in his multi-million theft trial that these institutions were “negligent” in their lending.
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 23rd, 2006, and April 20th, 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.
Former Bank of Ireland senior business manager Jim Madden gave evidence on Wednesday that Mr Lynn contacted him in September 2006 to apply for finance to purchase eight residential properties.
He said he had met Mr Lynn in 2005 about a proposal for finance for overseas development, but this did not go ahead.
Mr Madden confirmed to John Berry BL, prosecuting, that he acted as a “mortgage broker” on behalf of the separate legal entity, Bank of Ireland Mortgages, and prepared the 2006 mortgage application.
The group credit committee approved the application. A mortgage loan offer from Bank of Ireland was shown to the witness, who agreed that it was drawn down on December 13th, 2006.
He said the loan would not have gone ahead if the bank been aware that Ulster Bank had provided finance in relation to some of the same properties.
He added that Mr Lynn did not contact him after drawdown to advise that he had other loans in respect of these properties.
Mr Berry asked if it had been suggested that the loan would not be used to purchase these properties, but for overseas investment. Mr Madden replied: “No.”
Mr Madden said he met Mr Lynn once in Capel Building, “after the date he [Mr Lynn] had been struck off by the Law Society,” while he was waiting to meet another client. He said Mr Lynn came out of a ground floor office and approached him.
Investigations
Under cross-examination from defence counsel, Paul Comiskey-O'Keeffe BL, Mr Madden said he was not aware of any information being withheld from gardaí by the bank, or any internal investigations or enquiries from the financial regulator in relation to loans to Mr Lynn.
Defence counsel put it to Mr Madden that his encounter with Mr Lynn in the Capel Building “wasn't an accidental meeting,” and his client would say it was arranged.
Mr Madden replied: “It was a complete and utter fluke.”
Mr Comiskey-O'Keeffe put it to him that Mr Lynn will say he told him during this meeting that he needed forbearance and Mr Madden informed his client of the bank's position.
Mr Madden said it was “impossible” that he would have said this as he “could not speak for that part of the bank”. He said he spoke to Mr Lynn for “30 seconds” and “wouldn't be saying anything of the nature you described to me”.
When asked by defence counsel if he would accept that he or his colleagues were “negligent” in their lending, Mr Madden responded, “No.”
Mr Madden agreed he met Mr Lynn in 2005 about a proposal to finance overseas property development, but this was declined by the bank, as “it was not something we would have done.”
John Morgan, who works in Ulster Bank's legal division, confirmed that gardaí served District Court orders on the bank in 2009 relating to its dealings with Mr Lynn.
He said the documents were compiled from the bank's records and then given to gardaí.
Alleged negligence
Under cross-examination from Mr Comiskey-O'Keeffe BL, Mr Morgan said he was not aware of any information being withheld by the bank from gardaí on legal advice and was not aware of enquiries from the financial regulator in relation to the loans.
Mr Morgan said he “wouldn't accept” defence counsel's contention that “your bank or colleagues were negligent in your lending” to Mr Lynn.
Mr Comiskey-O'Keeffe asked Mr Morgan if he had “any idea why it took 10 years” for a witness to make a statement.
Karl Finnegan SC, prosecuting, objected that this was an “inappropriate” question for the witness.
Judge Martin Nolan said it was an “outrageous question” and told defence counsel they could ask that particular witness the question.
Mr Comiskey-O'Keeffe replied: “I will.”
Mr Morgan agreed with defence counsel that it would be normal to follow up a phone call in relation to a demand for a mortgage in writing, but said he could not speak to these specific circumstances.
Mr Comiskey-O'Keeffe asked: “Would it be normal for banks to accept arrangement fees in cash off the premises?”
Mr Morgan replied “No”, adding that he would find it “unusual that such a situation would happen”.
Defence counsel said it is “not being suggested” that someone from the bank received cash, rather he was asking if there was a policy under which “it was acceptable for an arrangement fee to be collected in cash off premises”.
Judge Nolan said the question was “pejorative” and implied fraud or deception. “You better have some evidence of it,” he added.
Mr Comiskey-O'Keeffe said he was asking about the bank's policy and that he had to cover all matters with the witness.
Judge Nolan said defence counsel “knew the rules”. He then asked Mr Morgan to confirm if he had heard of this occurring.
The witness replied, “No,” to which Judge Nolan said it would be “very suspicious if you did”.
Mr Comiskey-O'Keeffe told Mr Morgan he was not suggesting that he had done anything wrong.
Security
Mr Morgan agreed with defence counsel that the bank's security team had a process to track and follow up with solicitors in relation to the registration of security on residential properties.
Killian McMahon told Mr Berry he was working in the internal audit department of Irish Nationwide Building Society (INBS) in 2007 and carried out a review of loans to Mr Lynn after he became aware of irregularities.
Documents including mortgage loan offers and letters of undertaking were shown to the witness.
Mr McMahon agreed that he sought information from the Land Registry and found that Mr Lynn was not the registered owner at the time he checked and INBS's interest was not registered against the properties in question.
He agreed with Mr Berry that INBS would not have lent to Mr Lynn if they had concerns about the documents or had been aware he was seeking loans from other institutions in respect of certain properties.
He agreed that INBS proceeded on the basis of trust and the documents submitted, and as INBS's interest was not registered, the bank did not have any security over these properties.
Mr McMahon was also shown documents in relation to a residential mortgage application for Glenlion House in Howth. He agreed with Mr Berry that as far as INBS were aware, this was a home loan application.
The witness was shown a letter of undertaking signed by Fiona McAleenan, of the firm Fiona McAleenan Solicitors.
He agreed with Mr Berry that the loan would not have gone ahead if the building society had been aware the Law Society had no record of a firm called Fiona McAleenan Solicitors.
He confirmed that repayments were made on the loan for Glenlion House until October 2007 and that INBS later discovered that the first legal charge had been registered in favour of ACC Bank.
Mr McMahon agreed with Mr Berry that the total amount lent by INBS to Mr Lynn was around €7.4 million.
The trial continues before Judge Nolan and the jury.
