A former Bank of Ireland worker has described as a “fairytale” a suggestion made by Michael Lynn's defence counsel that money could be used for a purpose other than the purchase of specific properties.
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 (INBS).
Paul Comiskey-O'Keeffe showed former Bank of Ireland Senior Business Manager Jim Madden during cross-examination on Thursday a number of internal emails and other documents.
Proposal
Mr Madden gave evidence on Wednesday that he prepared an application for finance to purchase eight residential properties. He also said he met Mr Lynn in 2005 about a proposal for finance for overseas development, but that this didn't go ahead.
Mr Madden told defence counsel that he was not aware that Bank of Ireland officials identified any issues with the registration of the bank's security on a separate loan in 2003 or 2004.
He said he was not aware a bank official had suggested in 2004 that a complaint should be made to the Law Society, which didn't happen.
Mr Madden rejected the defence's suggestion that he was aware Mr Lynn had lending with other banks.
Properties
Mr Comiskey-O'Keeffe put to Mr Madden that he had been aware that it had not been Mr Lynn’s intention to spend that money on those properties, but on overseas developments.
Mr Madden replied that he had not, adding it was “a lie”. He said the loan offer was specifically for the purchase of eight residential properties.
Defence counsel then put it to Mr Madden that it “simply didn’t matter” to him what was in documents submitted to the bank as he had been aware of Mr Lynn's intentions. Mr Madden replied that the bank would not have given the loan without security.
Mr Comiskey-O'Keeffe suggested that the bank had security in the form of a solicitor's undertaking and the professional indemnity insurance.
Mr Madden replied “no”, saying the bank wanted the first legal charge. “The rest is a fairytale,” he added.
During re-examination, he told John Berry BL, prosecuting, that the loan was only for property purchase and agreed he had called anything else a “fairytale” during cross-examination.
Emails
Mr Comiskey-O'Keeffe suggested some of the emails showed Mr Madden made an application on behalf of John Riordan in 2005, was aware of a development in Carrick-on-Shannon and was making attempts “to put right a bad deal for the bank”.
The trial had previously been told that Mr Riordan is a former business partner of Mr Lynn.
Mr Madden said he doesn't recall any dealings with Mr Riordan, but accepted there had been.
He accepted the defence's contention that regardless of any arrangements between Mr Riordan and Mr Lynn, his client took over a liability of €176,000.
Mr Comiskey-O'Keeffe put it to Mr Madden that he was “intimately aware” of the situation at the time. The witness denied this and said the group credit committee had identified a “contingent liability”. “I was passing that message on,” said Mr Madden.
He further accepted that Mr Riordan retained liability until the transfer to Mr Lynn and said, “there was no liability on Mr Lynn until he volunteered to take it over.”
He denied any awareness of the background of this particular loan and said his involvement was limited to “tidying up the outstanding liability”.
The defence suggested Mr Madden was “heavily involved” in this process. He said he couldn't recall, but it had to be “tidied up” as group credit committee had issued this instruction in relation to Mr Lynn's application for finance to purchase eight residential properties.
He agreed that information about Mr Lynn's overseas projects was included in an application made in October 2006.
Overseas projects
Mr Comiskey-O'Keeffe suggested to Mr Madden that he actually spoke to Mr Lynn about finance for overseas projects in 2006, while the discussion in 2005 was in relation to a purchase in Capel Street, which he rejected.
Mr Madden agreed with the defence that it was clear from the documents displayed that there was an earlier application relating to Capel Street. He disagreed that the 2006 application related to foreign development.
Mr Comiskey-O'Keeffe suggested that the interest-only application reflected the “bridging nature of the loan” and Mr Lynn made him aware that “these matters would be redeemed from foreign property deals”.
The witness said: “That was not ever the case. It was a full, normal mortgage from start to finish.”
Judge Martin Nolan told the witness he was being asked by the defence whether the bank loan money to buy houses, to which he replied “from start to finish”.
The judge then asked, “Do you understand the question?” Mr Madden replied, “I understand the insinuation.”
He agreed with Mr Berry that his view of the loan referred to its entire lifetime, not the initial three-year interest-only period.
Mr Comiskey-O'Keeffe asked former Ulster Bank worker Stephen McCarthy on Thursday about a meeting with Mr Lynn in September 2006.
Mr McCarthy gave evidence on Tuesday, November 7 that he was involved in a €3.65 million loan application from Mr Lynn relating to the purchase of 11 residential investment properties in Dublin.
Defence counsel put to Mr McCarthy that his client paid for his transportation on the day of the meeting, and also gave him around “€200 or €300 in cash” to get a drink.
Mr McCarthy replied: “That is total lies.”
Defence counsel said Mr Lynn named Mr McCarthy in previous evidence when listing bank officials who received benefits in kind or direct payments from him.
Asked by Mr Comiskey-O'Keeffe if he denied this, Mr McCarthy replied: “Absolutely, categorically 100 per cent. I can't be more emphatic.”
He said he didn't think Mr Lynn paid for a flight from Cork to Dublin for him.
Mr McCarthy agreed with defence counsel that he was only asked to make a statement to gardaí in 2016.
He rejected the defence's contention that he was “aware of Mr Lynn's intention to use the money” for his international property development business.
Defence counsel suggested the two-year interest-only period was “consistent with a bridging facility” and it was “never intended” that the loan would be maintained for its lifetime of 20 years.
Mr McCarthy said: “No, not at all.”
He agreed with Karl Finnegan SC, prosecuting, during re-examination that the loan documents state that the repayments would change to capital and interest after the two-year interest-only period.
He accepted that he reviewed the documents submitted as part of the application in order to assess Mr Lynn's repayment capacity which included his income from Kendar Holdings.
Mr McCarthy said Mr Lynn did not tell him he later took out a loan with Bank of Ireland on one of the properties he sought a loan for from Ulster Bank.
The trial continues before Judge Nolan and the jury.
