Terms offered by bank ‘unusual’

AIB gave “unusually favourable” terms to Dublin-based Green Property to take an €800m property portfolio off its hands, former chairman Dermot Gleeson has told jurors at Southwark Crown Court in London.

Achilleas Kallakis and his business partner Alexander Williams, are before the court accused of more than £60m (€75.6m) of property fraud against AIB and Bank of Scotland. The pair have pleaded not guilty to 23 counts.

Speaking on the ninth day of the retrial, Mr Gleeson was questioned about when AIB discovered the apparent fraud, and how it disposed of a number of properties in late 2008 that it had originally provided funds for Kallakis to buy.

The assets were quickly sold for £650m (€819m) to Green Property. The court heard earlier this week the portfolio could have been worth £1bn a year later.

AIB offered a total debt package of £752m to 100% finance the deal for Green Property, as well as covering costs. It was offering Green a 118% loan to value deal.

Mr Gleeson, who chaired AIB for six years from 2003, said: “They are unusually favourable [terms] to a borrower,” but the situation “required an exceptional rescue plan”.

The AIB directors would not have been used to dealing with serious crime agencies and the City of London police, said Mr Gleeson, “this was not exactly familiar territory”.

“It was not surprising to find that the bank was being easy to deal with,” considering it was getting a firm to “take on what might have been a box of horrors”.

Taking to the stand after Mr Gleeson, Donal O’Shea, who was head of property and corporate banking for AIB at the time, revealed that the bank was notified in May 2008 about concerns over Kallakis and his business dealings.

Mr O’Shea travelled to Hong Kong in November 2008 to meet the people behind the purported guarantees on the properties, Sun Hung Kai Properties.

SHKP said it had not signed any guarantees, and seals on purported documents, were not theirs.