The Law Society investigated Michael Lynn after a complaint in 2003, writes Simon Carswell, Finance Correspondent
Last month's investigation by the Law Society was not its first into Michael Lynn, the Dublin-based solicitor and property developer whose law practice was shut down by the High Court last week.
In June 2003 the society received a complaint from Lynn's clients - Galway builder Brian Cunningham and his wife, Marian - over the sale of the Finglas Shopping Centre by their business, The Cunningham Group (TCG), in 2002.
The couple said that Lynn, while acting for TCG, deducted professional fees of €817,747 from a sale deposit of €1.4 million held in his client account. They said the fees were "grossly excessive and inaccurate" and had been deducted "without prior approval".
They filed a claim of €350,000 against the Law Society's compensation fund.
The society sent an investigating accountant into Lynn's practice in January 2004. Lynn co-operated fully, making available 25 boxes of files covering his dealings with TCG. Lynn argued that another director of TCG had approved the fees.
The society's registrar's committee concluded that the complaint "did not constitute grounds to warrant intervention" and its complaints section said it was not in a position to pursue the matter, according to the society's report on its investigation into the complaint.
(The report also revealed that former taoiseach Albert Reynolds, another TCG director, received fees of €28,194 from the group in 2002.)
Last week the society's regulation of practice committee concluded that a separate investigation into Lynn, conducted last month, "disclosed acts of dishonesty on the part of the solicitor in relation to clients' monies".
The investigation was launched over concerns about Lynn's property dealings. It found he had used the practice's client account for personal transactions, which is prohibited, and that there was "a free flow of funds" between the client bank account and one of his property companies.
On Monday, Lynn, who practised as Capel Law from The Capel Buildings, Dublin, gave an undertaking to the court not to practise and his legal practice was shut down. Tens of millions of euros have flowed from banks and investors through Lynn, his practice and his property firms - Kendar Holdings, which developed and sold overseas properties in countries such as Portugal and Bulgaria, and Proper T Capel, which Lynn used to hold some of his properties.
The Law Society's investigating accountant discovered that Lynn had drawn down more than €26.3 million in personal loans. The amount owing could be far higher as this figure only represents Lynn's borrowing this year.
Lynn incorporated Kendar Holdings in June 2003. Its first overseas development came a few months later, a development of holiday homes near the Portuguese village of Cabanas on the Algarve. The court was told on Monday that he owned 105 properties, 35-40 of which were in nine countries, either personally or through Proper T Capel. About 40 properties were bought this year, all with loans.
According to the Law Society's papers in the case, 220 Irish investors had paid Lynn deposits. The society's investigation has also shed light on Lynn's dealings with investors.
One English-based investor, Darragh Tolan, of St Albans in Hertfordshire, gave Lynn €1.443 million in December 2006 to invest in property.
According to a letter, dated November 14th, 2006, to Lynn, which was among the Law Society's papers, Tolan acknowledged a return of €90,000 on an investment of €150,000 in Cabanas.
Tolan continued: "Myself ad (sic) Kieran have clubbed together and wish to support the acquisition of the lands in Bulgaria. I would ask that we issue the share certificate in my Seychelles company."
Lynn and/or his representatives are scheduled to meet banks today to discuss how he will repay their loans. He agreed on Monday to draw up a full list of his properties and make them available to be sold to cover his liabilities.
Irish Nationwide is owed the most, followed by Permanent TSB, Ulster Bank and National Irish Bank. Bank of Ireland and AIB are also owed money.
The Law Society papers also reveal that Lynn had given his solicitor, Giles Kennedy, power of attorney over himself and Capel Law. Kennedy told an emergency Law Society meeting on October 9th, to discuss Lynn's dealings that the implications were "catastrophic", according to the minutes.
The case will be mentioned again in court next week.