A number of bankers have told the multi-million euro theft trial of former solicitor Michael Lynn that he did not have permission to use loan money for alternative purposes, with one witness describing the suggestion as “ludicrous”.
Mr Lynn, of Millbrook Court, Red Cross, Co. Wicklow, is on trial at Dublin Circuit Criminal Court 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 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.
Mr Lynn has told his trial that the banks were aware he had multiple loans on the same properties and that this was “custom and practice” among bankers in Celtic Tiger Ireland. He has said he had “secret deals” with a number of bankers, who gave him permission to use the loan money for his property developments abroad.
Mr Lynn named a number of witnesses who he said were involved in these secret deals. On Monday, the prosecution told the jury it would hear rebuttal evidence. Patrick McGrath SC, prosecuting, took Stephen McCarthy, formerly of Ulster Bank, through some of Mr Lynn's evidence to the court earlier this month.
In his evidence to the jury, Mr Lynn said Mr McCarthy met him and told him Ulster Bank would never agree that they allowed these flexible loans and that it became clear to Mr Lynn that he would be left “holding the baby”.
Mr McCarthy said this conversation “never happened”. He told the court he only met Mr Lynn once in relation to a loan involving 11 residential investment properties and that this was at the start of the lending process.
Mr McCarthy said he remembered the meeting, which took place in Mr Lynn's office because at the end of the meeting, Mr Lynn asked if his solicitor firm could provide the undertaking for the properties in question as part of the security.
Mr McCarthy said the suggestion that Ulster Bank allowed the loan money to be used for developments abroad was “totally inaccurate” and that the money was lent to Mr Lynn “for the purpose of those 11 residential investment properties and only those 11 residential properties”.
“To suggest the bank and I were fully aware of the alternative use of the finance other than the 11 residential investment properties is ludicrous and could not make sense from a lending perspective,” Mr McCarthy told the court. “...Mr Lynn knew the system. He knew the banks were relying on the solicitor's undertaking. The banks were acting in good faith with the solicitor's undertaking.”
Mr McCarthy said he never received cash or any benefit from Mr Lynn in the course of his dealings with him and that he never heard of an undertaking-only mortgage. He told the court that when he found out the bank had been defrauded by Mr Lynn he “nearly fell off (his) seat in shock”.
Under cross-examination from Paul Comiskey-O'Keeffe BL, defending, Mr McCarthy agreed that he first gave a statement to gardaí in 2016, nearly 10 years after the allegations came to light. “I was asked to make a statement at that time,” he said.
Mr McCarthy said there was an internal investigation within Ulster Bank afterwards but he was not sure what investigation documents were produced by the bank. “They would have been handed over to the legal department,” he said.
Going through Mr Lynn's loan documentation with Ulster Bank, defence counsel put it to Mr McCarthy that there was a lot of detail in relation to Mr Lynn's property developments abroad. Mr McCarthy said it was normal practice to look at all of a borrower's activity.
Ciaran Farrell, former Blanchardstown branch manager with Irish Life and Permanent (now Permanent TSB), also gave evidence on Monday. He told the court an allegation by Mr Lynn that he received money from him was “categorically false”.
“I received no monies whatsoever from Mr Lynn in relation to my dealings with Irish Life and Permanent,” Mr Farrell said.
Mr Farrell said he never heard about any “special deals” in relation to loans until the investigating garda said it to him last week. He said any inference that the loan money was to be used for any other purpose was not correct. “I refute that,” he said.
Mr Farrell said that if he had been aware there were multiple mortgages already taken out in relation to the loans, “the application wouldn't have got past 'go'.” “It wouldn't have happened. I wouldn't have entertained it,” he told the court.
Defence counsel put it to Mr Farrell that he was aware that these were undertaking-only mortgages and he was aware of this through his relationship with Mr Lynn and conversations with Mr Lynn. Mr Farrell said he did not accept this at all.
Mr Comiskey-O'Keeffe also put it to Mr Farrell that he had discussions with Mr Lynn about buying an investment property in Portugal at a 30% discount with the aim of flipping it for profit. “This would then amount as a benefit,” Mr Comiskey-O'Keeffe said.
“OK, that is totally untrue,” Mr Farrell replied. He told the court he had no interest in investing in properties abroad and only ever owned his family home.
Retired National Irish Bank worker, Nicholas Robert Hamilton, also gave evidence. He said he never met Mr Lynn or talked to him. Mr Lynn has told the court that he met with a Nicholas Patrick Hamilton, an NIB credit committee member who was aware of the secret loan deal.
Mr Hamilton told the court he was never a member of the credit committee. When asked by defence counsel if Mr Lynn was lying, Mr Hamilton replied: “I just think he's mistaken.”
Former Bank of Ireland worker Sean Dooley told the court that he left the bank in October 2005. He said at no time was he involved in arranging loans for Mr Lynn or anyone else that were to be used for any purpose other than that set out in the agreement.
He agreed with prosecution counsel that he left the bank nearly a year before the Bank of Ireland loan that the jury has to consider was taken out. The trial continues before Judge Martin Nolan and a jury.