Staff deny banks ‘negligent’ in lending to Lynn

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 23 October 2006 and 20 April 2007.

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

On day nine of the trial, former Bank of Ireland Senior Business Manager Jim Madden gave evidence yesterday (8 November) that Lynn had contacted him in September 2006 to apply for finance to purchase eight residential properties.

He said that he had met the former solicitor in 2005 about a proposal for finance for overseas development, but this didn’t go ahead.

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 13 December 2006.

Loan wouldn’t have gone ahead

He said the loan wouldn’t have gone ahead if the bank had been aware that Ulster Bank had provided finance in relation to some of the same properties. He added that Lynn did not contact him after drawdown to advise that he had other loans in respect of these properties.

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.”

Madden said that he met Lynn once in Capel Building, “after the date he [Lynn] had been struck off by the Law Society”, while he was waiting to meet another client. He said Lynn came out of a ground-floor office and approached him.

Under cross-examination from defence counsel Paul Comiskey O’Keeffe BL,  Madden said that he was not aware of any information being withheld by the bank from gardaí, or any internal investigations or enquiries from the financial regulator in relation to loans to Lynn.

‘Complete and utter fluke’

Defence counsel put it to Mr Madden that his encounter with 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.”

Comiskey O’Keeffe put it to him that Lynn will say that he told him during this meeting that he needed forbearance, and that Madden informed his client of the bank’s position.

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, Madden responded, “No.”

Madden agreed that he met 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”.

District Court orders

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 Lynn. He said that the documents were compiled from the bank’s records and then given to gardaí.

Under cross-examination from Comiskey O’Keeffe BL, Morgan said that 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.

Morgan said he “wouldn’t accept” defence counsel’s contention that “your bank or colleagues were negligent in your lending” to Lynn.

Comiskey O’Keeffe asked Morgan if he had “any idea why it took ten years” for a witness to make a statement.

'Outrageous question'

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.

Comiskey O’Keeffe replied: “I will”.

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 couldn’t speak to these specific circumstances.

Comiskey O’Keeffe asked: “Would it be normal for banks to accept arrangement fees in cash off the premises?”

Morgan replied: “No”, adding that he would find it “unusual that such a situation would happen”.

'Pejorative' question

Defence counsel said it was “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.

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 Morgan to confirm if he had heard of this occurring.

The witness replied, “No”. Judge Nolan said that it would be “very suspicious if you did”.

Comiskey O’Keeffe told Morgan he wasn’t suggesting that he had done anything wrong.

Bank’s security-team process

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 John Berry BL that he was working in the internal audit department of Irish Nationwide Building Society (INBS) in 2007 and carried out a review of loans to Lynn after he became aware of irregularities.

Documents, including mortgage-loan offers and letters of undertaking, were shown to the witness.

Lynn was not the registered owner

McMahon agreed that he sought information from the Land Registry and found that 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 Berry that INBS would not have lent to 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.

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 was aware, this was a home-loan application.

No record of solicitor’s firm

The witness was shown a letter of undertaking supposedly signed by Fiona McAleenan of the firm Fiona McAleenan Solicitors. He agreed with Berry that the loan would not have gone ahead if the building society had been aware that 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 ACCBank.

McMahon agreed with Berry that the total amount lent by INBS to Lynn was around €7.4 million.

The trial continues before Judge Nolan and the jury.