independent

Sunday 20 April 2014

Judge brands AIB 'careless' as €920m fraudsters jailed

Achilleas Kallakis, left, and Alexander Williams

Kallakis gets seven years and Williams five, but bank heavily criticised for allowing loan deals

AIB has been sharply criticised for its practices during the boom after a judge said staff there acted "carelessly and imprudently" when lending to two men who have been jailed for a €920m fraud.

Achilleas Kallakis was yesterday sentenced to seven years in prison and his business partner Alex Williams five years for orchestrating a fraud in which they used fake documentation to secure loans for the purchase of high-end properties in the UK.

The pair were found guilty by a unanimous verdict of the jury of conspiracy to commit fraud related to the loans, which were taken out between 2003 and 2008, mainly from AIB but also from Bank of Scotland.

Judge Andrew Goymer said the pair had taken advantage of the lax standards that existed at the time and used subterfuge to hoodwink bankers who were not acting responsibly. The fraud was only discovered when AIB was alerted to previous convictions of the men five years after the first of 16 loans was given out.

"The two banks, Allied Irish Bank and Bank of Scotland, have undoubtedly acted carelessly and imprudently by failing to make full inquiries before advancing the money," the judge said.

"It is, however, quite apparent that both defendants took full advantage of the prevailing banking culture in which corners were cut and checks on applications were superficial and cursory."

The trial heard details of how Kallakis had brought members of AIB's London property team on a series of junkets, including a trip to the World Cup final in Berlin in 2006, and a "thank you" excursion for three days to Mauritius.

Affluent

He used the proceeds of the fraud to live an affluent lifestyle which included a private jet, a yacht and helicopter and an extensive art collection.

"While I do not equate the position of the banks with that of a householder or a car owner who forgets to secure his house or car and becomes the victim of burglary or theft, they do bear some responsibility for what happened," the judge said.

Kallakis and Williams used forged rental guarantees from a reputable Hong Kong property company – Sun Hung Kai Properties (SHKP) – to secure the loans. The judge said "elaborate subterfuges" were used "to ensure that the less responsible bankers got nowhere near the truth".

After the fraud emerged, AIB sold on the remaining 14 properties to Green Property, an Irish firm, under a profit sharing arrangement on future sales. The bank claims to have lost £56m (€67m) as a result of the fraud.

This figure was frequently questioned by the defence in the case due to the rising value of the properties after the 2008 downturn. Yesterday, Judge Goymer said he treated the £56m as a "paper figure and with some scepticism".

Four members of the jury returned to court to hear the sentencing in the case when the judge said neither man was of previous good character as they had convictions in the past – both for a fraud where fake honours were sold to Americans and Williams for passport offences.

Kallakis was described as the "prime mover" in the fraud who had experience in the property market and accumulated wealth. He was sentenced to seven years.

Williams – the forger of documents – was said to have had a lesser role but "not an insignificant one". He received five years. Neither man made any reaction when they were sentenced. Both were disqualified from being company directors for six years.

After the case, Ronan Duff of the Serious Fraud Office said: "This was an audacious, persistent fraud that enabled these defendants, Mr Kallakis in particular, to lead the lifestyle of the super-rich."

Irish Independent

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