Bank eager to enter inner circle of man who projected 'aura of wealth'
It was September 2003 and AIB had finally drawn a line under the Rusnak affair. Earlier that year the bank had reported profits in excess of €1 billion, having taken a €643 million hit the previous year for the actions of rogue trader John Rusnak. It was back in business and looking to deliver strong growth in lending.
Over in London, the bank was keen to build up its presence in the commercial property market, so when an AIB executive was approached by brokerage firm CLP to see whether the bank could lend an Achilleas Kallakis about £20 million to buy an office block, the bank was ready to listen.
‘Impeccable’ bona fides
Indeed, for AIB this encounter with a supposed wealthy scion of a Greek shipping family appeared fortuitous, with the bank noting at the time that his “bona fides were impeccable”. And so a lending relationship began, with AIB on the right side of Kallakis’s “inner circle”; an enviable position to be in, given his “aura” of wealth.
He had the famous friends, with trips to the Far East with Prince Albert of Monaco; the fleet of cars, including a Bentley Azure and a Ferrari Scaglietti; and he lived in exclusive Kensington.
Kallakis, with his colleague Alexander Williams, wanted to build up a London property portfolio, and with guarantees of long-term payment of rents at top market rates from Sun Hung Kai Properties (SHKP), a well-known, established Hong Kong company, he wanted to borrow in excess of what a property was worth. These guarantees increased the value of the properties substantially, and for AIB were critical in signing off on the deals.
By 2008, Kallakis had built up a portfolio worth some £740 million in 16 properties, with the money borrowed from AIB. Much of the surplus cash generated by his borrowings was alleged to have financed a lavish lifestyle for Kallakis, and he was generous with AIB staff, wining and dining them at parties in St Petersburg and inviting them to a lavish two-day 40th birthday bash in Mykonos, Greece.
But, in May 2008, AIB’s chief compliance officer based in London was contacted by a German bank with “worrying and disturbing news”. He was informed by the bank that it had concerns about Kallakis’s identity and about a previous conviction in the 1980s.
AIB started its own investigation, and contacted SHKP. But the Hong Kong property company said it had “no knowledge of the guarantees”. This was “devastating” knowledge for AIB.
By the time the full scale of the fraud came to light, and with it the knowledge that Kallakis was really Stefanos Kollakis and that along with Williams he had a previous conviction for conspiracy to commit forgery, the credit crunch had hit and the Irish banking sector was starting to fall apart.
But the credit crunch was also hitting the London market, and so, to limit its losses, in September 2008 AIB seized the properties from Kallakis, repackaged the portfolio and sold it on to Green Property for £667 million on what were perceived to be extremely favourable terms. In court, one property expert described the deal as “very strange” given the terms, and “a gift from heaven” for the acquirer.
Today, AIB can consign another unsavoury affair to its history books, as Kallakis and Williams are sentenced in court. But questions are likely to remain about the appropriateness of the transaction with Green Property.