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AIB boss faces quiz over 774m Euro loan to Greek tycoon


Newsy

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AIB's new boss faces a grilling today over how his bank loaned over £700m (€774m) to a Greek tycoon who is charged in London with fraud, forgery and money laundering.

Colm Doherty faces questions over what checks were made on poker-playing Achilleas Kallakis, who called himself 'the Don', before the bank approved the loans for a string of plush London properties he bought.

The portfolio included buildings which housed the 'Daily Telegraph', parts of the Metropolitan Police, the UK Home Office's asylum processing centre and Orion House, the tallest building in London's Covent Garden.

Mr Doherty will make his first public appearance as AIB managing director this morning when he will have to unveil about €5.3bn of bad loan losses for 2009 and the bank's first ever annual loss.

AIB's UK corporate banking arm, which extended the loans, ended up booking a £56m loss on the loans in its 2008 accounts.

That loss was recorded after the bank seized the properties and sold them on to Dublin-based Green Properties.

Mr Doherty was ultimately in charge of the corporate banking business that extended the loans between 2003 and 2007, as then-head of AIB's capital markets division.

Mr Kallakis and Alexander Williams were each charged yesterday at the City of London Magistrates' Court with two counts of conspiracy to defraud, 13 counts of forgery, five counts of fraud by false representation, two counts of money laundering and one count of obtaining a money transfer by deception.

It stands as one of the largest such property cases ever investigated by Britain's Serious Fraud Office (SFO).

During 2008, AIB became aware of problems with an element of its security interests in the so-called Kallakis portfolio. However, news of the alleged scam only broke the following March, when it emerged that the SFO had launched an investigation into it.

The probe centred around claims that money had been borrowed, based on fraudulent documents showing leases to tenants in the properties had higher rents and were signed for longer periods than actually was the case.

AIB boss faces quiz over €774m loan to tycoon - Irish, Business - Independent.ie

What in God's name were these people thinking......or were they tipping on head shop stuff????
 

PaddyJoe McGillycuddy

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As far as I know Doherty wasn't quizzed about this today. Or if he was there doesn't seem to be any mention of it in the media so far.
 
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Old News as this has been reported on here last March.

Theo provided fraudulent documents via Solicitors to state leases were worth more than they really were. Its why SFO involved and think he will end up doing porridge.

AIB took a €56 Million hit but properties were transferred to Green Properties last year.
 

PaddyJoe McGillycuddy

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Indeed the story has been knocking around for a while and there's loads of unanswered questions:
How much did AIB lend this fraudster?
It is not clear precisely how much Kallakis, who is dubbed “The Don” for his renowned poker skills, borrowed from AIB. The bank has never disclosed what it lent him, but a source who worked closely with the Greek firebrand claims it was £707 million. Newspaper reports put his total bank lendings at £850 millio
Why such a small write off in the accounts?
Yet despite sinking hundreds of millions of pounds into building up Kallakis’s property portfolio, AIB was left with a relatively small loss – just £56 million. Statements from the serious fraud office reveal this was because AIB took control of the properties and sold them on to Green Property
Why did AIB not make any statement on the affair until the SIFO investigation became public?
It must be asked why such price-sensitive information was not shared with the Irish Stock Exchange. Why also did AIB leave it to the serious fraud office to reveal the fraud – six months after the bank apparently unearthed the problem?
How much will the eventual write down on the fraud amount to?
The bank’s reported loss from the property scam is £56 million but if the portfolio had been valued in late 2008, the write-down would have been far greater. On the basis of the CB Richard Ellis report, a 35.5 per cent fall in market values represents a £250 million drop on AIB’s loan of £707 million. In a fire sale scenario, the price declines may have been even more dramatic. Caught in the teeth of the worst financial crisis since the Great Depression, it is a moot point whether AIB could have sustained a write-down on that scale.
And how did AIB manage to get so badly stung by this guy?
It has since emerged that Kallakis, who was born under the surname Kollakis, has a track record in forgery. In 1995 he was convicted of flogging bogus British feudal titles to unsuspecting Australians, Americans and Canadians.

By 2008, his name and his fortunes had changed. In that year his wealth propelled him to number 325 on the Sunday Times Rich List. Kallakis was now a formidable presence on the British property scene. A four-year spending spree, funded largely by AIB, had amassed him a €1 billion portfolio that included some of London’s s********************iest real estate.
AIB still has questions to answer over Green deal - The Irish Times - Mon, Jan 18, 2010

It should make for a fascinating case!
 

Mitsui2

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Jeez, which cliche should I use?

Their attitude of "never mind the quality, feel the width!" or the old chestnut about Greeks bearing gifts?
 

PaddyJoe McGillycuddy

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Flogging fake titles to American tourists one day; scamming AIB for 700 million odd the next. Sounds like there's a movie plot there somewhere.
:)
 

Dreaded_Estate

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I wonder did Green Property get another 0% financing loan to help AIB hide the losses over a number of years.
 
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Indeed the story has been knocking around for a while and there's loads of unanswered questions:
How much did AIB lend this fraudster?

Why such a small write off in the accounts?

Why did AIB not make any statement on the affair until the SIFO investigation became public?

How much will the eventual write down on the fraud amount to?


And how did AIB manage to get so badly stung by this guy?

AIB still has questions to answer over Green deal - The Irish Times - Mon, Jan 18, 2010

It should make for a fascinating case!
AIB cooperated with SFO and Police in UK and since when does someone make statements about ongoing Police investigations.

AIB is not the only bank ever to get stung
Alliance and Leicster lost £80-100 Million on Thamesmead estates through fraud
Mortgage Express (part of Bradford and Bingley) lost £300 million through fraud
I know how above 2 happened and it was through fraudulent valuations from surveyors
RBS and LLoyds have written off billions either through fraud or bad debts.

AIB's loss has crystallised as in recovering posession of the properties and selling on to Green Properties it did this.

This of course doesn't stop AIB using a certain firm of lawyers in London adept at finding money stashed away and they are pretty good.
 

Schuhart

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AIB's loss has crystallised as in recovering posession of the properties and selling on to Green Properties it did this.
Apologies if your statement is meant to be ironic. For the benefit of folk who might not have followed this story before, the issues are covered neatly in this IT article from January. Because isn't the concern that this transaction actually doesn't insulate the bank from further loss in respect of these properties.
…. despite sinking hundreds of millions of pounds into building up Kallakis’s property portfolio, AIB was left with a relatively small loss – just £56 million. Statements from the serious fraud office reveal this was because AIB took control of the properties and sold them on to Green Property. …. The new owners of Kallakis’s former property empire are a series of Isle of Man-listed companies titled Kish One through to Kish Sixteen. ….. However, the land registry documents show a number of Kallakis’s assets were sold on for roughly the same price “The Don” himself had paid at the height of the boom. In some cases, the Kish companies forked out even more than Kallakis for the same properties. …. According to a leading property specialist, the inflated prices of the Green transaction only “make sense” if the loans are non- recourse, meaning that if the assets fall below the value of the mortgage, AIB takes the hit.
 
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Apologies if your statement is meant to be ironic. For the benefit of folk who might not have followed this story before, the issues are covered neatly in this IT article from January. Because isn't the concern that this transaction actually doesn't insulate the bank from further loss in respect of these properties.
There is another thread that went through this in detail previously.

Whether Green Properties paid more for individual properties is really irrelevant as they would have carried out their own due diligence in valuing them and its quite likely some would have been worth more than expected and others worth less.

If you buying a house you don't really care what someone paid for it previously or what someone elses mortgage is. I have done this in buying a property with a sitting tenant where i knew rentals were well below market rent but previous owner had not refurbed property in 5 years. In buying and refurbing and keeping same tenant got market rent which was a 35% uplift, tenant happy as she got what to her was a brand new house when she moved back in from the kip it was before and I paid 60% of its real value.

There may be options on certain properties that if X happens then they can give back within a year or two but this shouldn't a surprise as Green need to cover themselves BUT given their track record I would be surprised were it to happen.

There is no reason for them to have overpaid as whether its a €56 million or €90 million loss to AIB is irrelevant to them.
 

Schuhart

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Whether Green Properties paid more for individual properties is really irrelevant as they would have carried out their own due diligence in valuing them and its quite likely some would have been worth more than expected and others worth less.
But isn't this the whole point. Its rather extraordinary that, in the midst of a general collapse in property values, that the value of the whole portfolio would be such as to leave a modest loss of 56 million.
If you buying a house you don't really care what someone paid for it previously or what someone elses mortgage is.
Particular if the previous owner gives me a loan to buy it off them on a non-recourse basis.
I have done this in buying a property with a sitting tenant where i knew rentals were well below market rent but previous owner had not refurbed property in 5 years. In buying and refurbing and keeping same tenant got market rent which was a 35% uplift, tenant happy as she got what to her was a brand new house when she moved back in from the kip it was before and I paid 60% of its real value.
Grand, I'm very pleased for you, but there's hardly much prospect of rental values generally increasing for the foreseeable. Which, again, is why there is such interest in this matter..
There may be options on certain properties that if X happens then they can give back within a year or two but this shouldn't a surprise as Green need to cover themselves BUT given their track record I would be surprised were it to happen.
Grand. We'd a property professional here a while back saying how he'd be amazed if properties leased to major companies like Google experienced a fall in rents.

Surprise, surprise.
There is no reason for them to have overpaid as whether its a €56 million or €90 million loss to AIB is irrelevant to them.
Particularly if they are insulated from any future loss.
 

ang

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The Financial Regulator is looking for further information on this deal:-

AIB’S SALE of a suspected Greek fraudster’s €800 million London property portfolio to an Irish developer in November 2008 has come under renewed scrutiny by the financial regulator.

Matthew Elderfield’s office has asked AIB to commission an independent valuation of the 14 properties the bank sold to Green Property, the owners of the Blanchardstown Shopping Centre. It follows an investigation into the deal by The Irish Times earlier this year.
AIB's Green deal under renewed scrutiny by regulator - The Irish Times - Thu, Apr 08, 2010
 

Aindriu

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stanley

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Judge brands AIB 'careless' as €920m fraudsters jailed - Irish, Business - Independent.ie


So the Judge says AIB were careless, this comes as no surprise to anyone in Irl, reading the transcript where the AIB lads are fighting amongst themselves about going to HK to check out the underlying L/G, it is unreal, almost as if they knew the house of cards would tumble.

Wonder if AIB beat off Anglo for this business, Kallakis sounds like the type of punter both were very interested in, was disclosed yesterday the second guy, Williams, tried to top himself, was Bertie doing some consultancy work.

There will be only 2/3 main guys involved in this lending but they will be hiding behind a credit committee and will still be secure in their jobs, maybe have availed of a luxury early retirement.
 

Orbit v2

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Judge brands AIB 'careless' as €920m fraudsters jailed - Irish, Business - Independent.ie


So the Judge says AIB were careless, this comes as no surprise to anyone in Irl, reading the transcript where the AIB lads are fighting amongst themselves about going to HK to check out the underlying L/G, it is unreal, almost as if they knew the house of cards would tumble.

Wonder if AIB beat off Anglo for this business, Kallakis sounds like the type of punter both were very interested in, was disclosed yesterday the second guy, Williams, tried to top himself, was Bertie doing some consultancy work.

There will be only 2/3 main guys involved in this lending but they will be hiding behind a credit committee and will still be secure in their jobs, maybe have availed of a luxury early retirement.
We need a tribunal to get to the bottom of it. It's the only way to expose all the people who destroyed this country.
 

im axeled

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oh jeahsus not another, the only thing they achive is to allow members of the legal profession become millionaires, at the publics expense.
 

Analyzer

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AIB's new boss faces a grilling today over how his bank loaned over £700m (€774m) to a Greek tycoon who is charged in London with fraud, forgery and money laundering.

Colm Doherty faces questions over what checks were made on poker-playing Achilleas Kallakis, who called himself 'the Don', before the bank approved the loans for a string of plush London properties he bought.
Yes, AIB has a track record in serving the Don's of this world.

It is part of their banking tradition...

 
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