Whistleblower exposed risks of Lynn's empire
Massive loans uncovered after Law Society sent in authorised officer following tip-off
Expensive glossy brochures billed the complex in Portugal as the dream investment. 'Welcome to Costa de Cabanas', Kendar Properties cajoled potential investors in an apartment and penthouse complex on a beach lapped by blue lagoon waters in "laid back" eastern Algarve. It was still under construction.
A businessman who wants to be known as Michael was tempted but did his research.
He visited the area and was re-assured by recommendations of Kendar ventures in the national press and celebrity endorsements from footballers. He selected a two-bed apartment for about €280,000.
Kendar Properties advised him to use Overseas Property Law (OPL) for "independent" legal advice. For a fixed fee -- about €2,200 -- they would sort out all the legal paperwork. Kendar clients also got a 10 per cent discount.
Michael paid half the fees up front and paid a 10 per cent deposit of close to €30,000.
Only when he started reading the contracts from Kendar and OPL, he saw that Michael Lynn's name appeared as director of the company that was selling him the property and the company that was giving him supposedly "independent" legal advice.
"I rang up and said what's the story here," he said. Mr Lynn was a director of Kendar and of OPL but both were separate, independent companies, he was told.
"I was a bit concerned about it so I phoned the Law Society. They basically said, if you can prove there is a conflict of interest we will investigate and the solicitor will have to stop acting for one or other parties."
Michael was reassured and decided to go ahead with his investment.
Soon he had more cause for unease. By June, building work on the development hadn't even begun. When he challenged Kendar, he was told that work to clear the site would start in September.
Last month, Kendar sent out a letter claiming that work had begun but the good news was shortlived. Michael's queasiness proved justified as last weekend's headline in the Sunday Independent named Mr Lynn as the high-flying property developer-cum-lawyer who was under investigation for massive mortgage fraud and misuse of clients' funds.
"It didn't surprise me in the slightest," he said.
Mr Lynn is now struggling to stave off the collapse of his empire. It turns out that he owns 105 properties by allegedly conning banks.
In an act of staggering recklessness, he used the same properties to secure multiple mortgages from several different banks. He borrowed €26.3 million from at least seven lenders since January and bought 40 properties abroad and was preparing to build a €5.5 million house in Howth.
It's thought that a former employee tipped off the Law Society last month, and on September 20, , it dispatched an "authorised officer" to investigate.
She found Mr Lynn's accounts in a mess and "totally unreliable." Money sloshed freely between Lynn's client account and his property firm. One loan of €4.9 million was lodged to a client account, before he withdrew half to buy a property abroad and €1.5m of which he lodged to his personal bank account.
The Law Society went to the High Court to freeze his assets last week, and his legal practice was shut down until the mess is sorted out.
Mr Lynn will have to sell his properties to repay his debt to the banks but his senior counsel James Gilhooley, said it would take a great deal of work to identify them. There are, after all, 105 of them, he reminded the judge. It remains to be seen if they will raise the €26 million he owes.
Hundreds of investors are meanwhile waiting to see whether apartment schemes they have bought into will ever get built, and whether their deposits and investments will be covered by Law Society compensation or some other form of insurance.
Were it not for the whistle-blower, Mr Lynn's unethical excesses may never have come to light until the whole business had gone belly-up under the weight of excessive borrowings, leaving investors and banks high and dry.
Like many dubious professionals who use client's money for their own gain, Mr Lynn may have believed himself in control of the reckless enterprise. Newspaper clippings record a litany of Walter Mittyish advisers who had delusions of control. Many kept their reckless plundering of client accounts secret for years, digging themselves deeper in vain attempts to get out of the hole, and fled when they were found out.
Mark Synnott, the first company director to be jailed for fraud in 1996, pretended for a decade that the family investment firm was ticking over nicely when, in fact, it was insolvent.
His clients, mostly elderly, thought him a gentle, trustworthy fellow who could be relied on to invest their money wisely. Instead, Synnott sunk the money into the ailing firm that operated from a period house in Ballsbridge. He not only paid the running costs to keep his charade going, he also paid himself personal expenses. One former client who lost £100,000 recalled at the time how he "wore a mask of sincerity and trustworthiness and was in no way a flashy person".
Mr Synnott, who turned up to his trial with his lawyer and a priest, got four years for frittering away £2.3 million of his clients' money.
Patrick Blanchfield, an investment broker in Kilkenny, also concealed his theft for almost a decade, during which time he blew about £270,000 on gambling debts from his greyhound habit. His lawyer later claimed he was "robbing Peter to pay Paul".
The filching dated from 1986 until the 1990s when he was caught lodging a client's life assurance cheque for £7,000 into his own account. Mr Blanchfield fled to England to work as a debt collector but the complaints against him mounted. He came home to face trial in 2003 and got a six-year suspended sentence.
Tony Taylor fled the country rather than face the music when his €40 million firm, Taylor Asset Management, collapsed in ruins. The high-rolling former president of the Irish Brokers' Association lived in a fine house on Anglesea Road, around the corner from the Ballsbridge office where he catered for well-heeled clients. He hit a tough patch and covered his losses with clients' money.
In 1986, a US investment firm discovered he had cashed a cheque intended for one of his clients and reported him to the Central Bank. Taylor stuck around for a few weeks, assuring the authorities that he was looking into it. In fact, he deleted client files, sold his car, and vanished, quickly followed by his wife, Shirley. They were tracked down three years later and Taylor eventually got a five-year prison sentence for his misdemeanors.
Reputation is no guarantee of protection either. Stephen Pearson was a partner in one of Cork's best known stock broking firms, Morrough & Co when his out-of-control tradings caused the 100-year-old family firm company to collapse. A former monk, he was trusted. He first defrauded the firm in 1993, but confessed and the senior partner, Alec Morrough, forgave him. His trust was misplaced. Over 10 years he used more than €5m of clients' money to play the stock market, trading in high risk futures and options.
His recklessness and deceit caused the firm to collapse and reduced Alec Morrough to penury in trying to compensate the hundreds of mostly elderly victims whose life savings were lost.
Russell Murphy died before his grand theft was discovered. The Dublin accountant had a celebrity clientele that included Hugh Leonard, Gay Byrne and Twink, and he enjoyed an affluent lifestyle that they also -- unwittingly -- funded. Instead of investing their money, he spent it.
Gay Byrne was particularly horrified, as Murphy was a close friend.
Murphy cost him most of his life savings, about £73,000. Leonard lost three times that after Murphy forged his name on a loan application.
It would be comforting to think that such gross frauds would have resulted in better vigilance to protect consumers.
But apparently not.
Mr Lynn was able to get multiple loans on the same property. Had the banks checked the title deeds they should have discovered this.
It has also emerged that Mr Lynn was the subject of a complaint to the Law Society in 2004, after receiving a complaint from Galway builder, Brian Cunningham and his wife, Marian, for charging exorbitant fees.
Mr Cunningham said he deducted the fees without permission, while Mr Lynn insisted he had permission. The Law Society decided the complaint "did not constitute grounds to warrant intervention" and dropped the inquiry.