Sunday 11 December 2016

Lynn lying poolside as fraud squad flounders

Reluctant witnesses and lengthy paper trails thwart investigations

Published 03/07/2011 | 05:00

THE global crunch has squeezed out toxic operators and the garda fraud squad is struggling to cope.

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It's been three years since Michael Lynn, the solicitor-turned developer, was caught funding his megalomaniacal property ambitions with an elaborate mortgage scam. He applied to several banks for mortgages on a single property, repeating the scam on a grander scale until he had extracted loans of €80m which he ploughed into grand property schemes in Portugal and Hungary. A colleague blew the whistle, the Law Society called in the garda fraud squad and Lynn did a runner to Portugal. Three-and-a-half years later, he remains poolside on the Algarve, dodging the private investigators (hired by banks), the media pack (to whom he has given interviews) and the odd angry investor on his tail.

Lynn is not alone. Thomas Byrne milked the same mortgage scam for €50m, even putting his mother's family home as collateral against his illicit borrowings. Byrne has made it easier for investigators by sticking around to face the music, but like Lynn, he hasn't been prosecuted.

Christmas 2008 brought us Breifne O'Brien, the high-society entrepreneur, regularly photographed on the arm of his Givenchy-wearing wife Fiona Nagle on the charity circuit. He owned a modest chain of laundrettes and a taxi company but his talent lay in conning old pals, college chums and even relatives to plough more than €18m into his bogus investment schemes. One victim was astonished receive a letter from O'Brien last year in which he promised to repay what he called "borrowings". But O'Brien is free to indulge his fantasy, as he hasn't been prosecuted either.

Then there is the biggest fraud of all, perpetrated on the taxpayer by Anglo Irish Bank. Since Anglo's collapse in December 2008, it has emerged that Sean FitzPatrick, its former chairman, received €80m in director's loans that were concealed from shareholders; Irish Life & Permanent deposited €7bn into Anglo to allow the bank to deceive the market and boost its ailing balance sheet; and the bank loaned a golden circle of 10 of its biggest clients the money to buy up shares in the bank to stop its share price plummeting.

The fraud squad began investigating in February 2008. Since then, there have been two arrests; Sean FitzPatrick and Willie McAteer, the bank's former finance director. Anglo's former chief executive, David Drumm, now bankrupt and in the US, is refusing to come home. Three files have been sent to the Director of Public Prosecutions but there are two more to go.

Martin Callinan, the garda Commissioner, has claimed their inquiries are "90 per cent complete". The snail's pace of the investigation has frustrated politicians, punters and even High Court judges.

When Anglo Irish Bank investigators recently returned to the High Court to plead -- again -- for more time to examine documents they first seized in 2009, Mr Justice Peter Kelly lost patience.

The collapse of the bank "has had profound and serious consequences for the economic wellbeing of this State and its citizens". The least we could expect, he suggested, was a comprehensive investigation by the relevant State authorities.

He didn't stop at Anglo: he also questioned the progress of other fraud investigations despite "prima facie" evidence and even admissions of criminal wrongdoing in court.

Mr Justice Frank Clarke noted that he was "very surprised" that the solicitor Thomas Byrne has still faced no action despite "certain admissions" he made in court.

A fortnight ago, Ken Murphy of the Law Society, found it "incomprehensible" that the garda investigations into Lynn and Byrne were still ongoing even though the Law Society had struck them off and fined them €1m each in 2008.

So what's taking so long?

Gardai will tell you that down at the Harcourt Street offices of the Garda National Bureau of Fraud Investigation, over-burdened detectives are straining under voluminous files, chasing paper trails and reluctant witnesses.

More than 80 people work there, 73 of whom are gardai. There is one chief superintendent; two superintendents; five inspectors; 14 sergeants and 51 detectives, 11 of whom were redeployed to the bureau in February. They investigate computer crime, credit card crime, and money laundering but since the economy imploded, most of their resources have been deployed on commercial frauds.

The bureau is currently actively investigating 110 cases of commercial fraud. It is surprising that only two civilian forensic accountants are employed in the entire fraud section. And one of them was on loan to the Criminal Assets Bureau for a while, according to a garda source. But resources are not the problem, apparently. Alan Shatter used to be a harsh critic of the Anglo investigation's slow progress until he became Minister for Justice. One of the first things he did on his first day in office was to ask gardai if they needed more staff to assist in the Anglo investigation. The force's top brass told Shatter that "resources are sufficient to meet the ongoing daily demands", he later informed the Dail. The Garda Commissioner also shot down claims from various garda associations that there simply aren't the numbers to cope with white collar crime.

One senior officer said: "The level of proof required in documentary-based evidence is remarkably detailed. That is the single biggest difficulty in fraud cases." Every piece of paper that is to be used as evidence in court must be authenticated, he said. And commercial fraud investigations generate lots of paper.

Every email, document and transaction generated along a long and convoluted paper trail must be authenticated by detectives. That means interviewing the author of the document and those who received it, as every alteration or annotation to the document as it progressed along the chain must be verified and initialled in the presence of a detective. If a witness somewhere along the paper trail refuses to cooperate, the evidential chain breaks.

This is one of the problems slowing up the Anglo Irish Bank investigation. More than 800,000 documents and 25,000 phone records have been examined to date by the 60 people working full time on the inquiry. But at least 10 witnesses are not co-operating and gardai don't have the powers to force them to.

The Office of the Director of Corporate Enforcement, which is investigating company law in tandem with the garda fraud squad, said the "reluctant witnesses" are in double figures and include former bank executives. Although he wasn't named, one of them is believed to be David Drumm.

During the many court applications for documents, the High Court has been told how witnesses have refused to disclose key documents or passwords to crucial files. As 'witnesses' to a suspected crime, they cannot be compelled to co-operate.

Detectives say that accessing documents in fraud investigations is also laborious. They apply for a court order, requesting the relevant files, which means they must know exactly what they're looking for before the trawl begins.

Further delays occur when records are held in other jurisdictions, as is often the case with financial institutions. Anglo Irish Bank stored volumes of files in specialist financial storage facilities in the UK and elsewhere. Gardai spent several months going through the diplomatic and bureaucratic hoops to get them. The Irish Department of Justice asked the UK's Home Office to ask the British police to retrieve the files.

When documents eventually do land at the fraud squad's Harcourt Street offices, they are sometimes not categorised, filed or sorted and so voluminous as to be overwhelming. In some cases, said a garda source, detectives have come to regard such "information overload" as a deliberate delaying tactic.

Alan Shatter has responded to these complaints in his Criminal Justice Bill 2011, which promises to address delays in investigating white collar crime.

The measures it proposes include dealing with unco-operative witnesses by giving gardai the power to apply to a district court judge for an order to compel witnesses to produce documents and to answer questions relevant to their inquiries. If they don't, they risk going to jail.

Documents would also have to be properly ordered, identified and categorised before they are released, so that investigators won't have to waste time doing so. Passwords to electronic information will have to be divulged by court order. Witnesses may claim legal privilege over documents, often rushing to the High Court to do so. The new legislation will allow a district court judge to decide whether the material should be released.

Opposition politicians claim these measures are not enough, however. Dara Calleary, of Fianna Fail, has called for a new inter-agency unit to complete the investigation into Anglo Irish Bank. That's only Anglo. The fraud squad has yet to close the book on scores of cases that have bubbled to the surface since the economy collapsed; citizens left out of pocket by rogue investors, confidence tricksters and dishonest members of the professional classes, all on the make during the boom.

If it seems like white collar criminals escape the law, that's because most of the time they do. Greg Connell, the managing director of the Irish Fraud Bureau, says the chance of being prosecuted for fraud in this country is less than one in 40. "It's easy to blame the problem on a lack of political will or inadequate resources at the garda fraud bureau, but in reality the situation is much more complex," he said.

That has to change, according to Fianna Fail TD Michael McGrath.

"The authorities that are in place are the ones who will hopefully bring these investigations to a conclusion. But as a country we are going to have to look at the systems we have in place to deal with white collar fraud," he said.

Sunday Independent

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