AIB's Green deal under renewed scrutiny by regulator

 

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.

Offshore companies connected to Green snapped up blue-chip London real estate at similar values to those paid at the height of the boom by Achilleas Kallakis, a poker-playing property tycoon who now faces up to 10 years in prison for an alleged £56 million (€64 million) fraud against AIB and an alleged £5 million fraud against Bank of Scotland.

Kallakis’s property empire was thought to be worth about €1 billion at the height of the economic boom.

The Green deal was agreed in the midst of the global financial crisis, when London commercial property prices were sliding by up to 30 per cent.

In a statement, the financial watchdog said it has “taken note of the circumstances of this matter” and said it “cannot comment any further on ongoing supervisory issues”.

It is understood that AIB has been asked to submit an independent valuation by next week.

AIB’s managing director Colm Doherty has defended the deal. At a press conference last month he denied accusations the bank had used Green to “warehouse” the loans in a bid to avoid a large-scale write-down, insisting “it was a normal, arms-length transaction approved by the board and approved by our auditors”.

The bank declined to comment further this week. However, it is understood that the bank’s position remains the same and it believes the independent valuation will support its view.

AIB seized control of Kallakis’s portfolio, which included trophy assets such as the Telegraph building, as well as offices occupied by the UK home office and the department of health, in September 2008. This followed an internal review at the bank which discovered that hundreds of millions of pounds in UK mortgages had been paid out on the basis of bogus lease guarantees that allegedly inflated the properties’ values.

Less than two months later AIB sold the repossessed Greek tycoon’s property empire to Green, and recorded a £56 million loss on the transaction in its 2008 annual report.

The bank funded the deal but the price was never disclosed. However, records in the UK Land Registry office show the Isle of Man-registered companies paid about £653 million for the 14 properties. When the Land Registry prices are added to AIB’s £56 million loss, the figure is about £708 million.