A British judge has sentenced a fake tycoon who defrauded two banks out of £769 million (€920 million) to seven years in jail, but says the banks bear some responsibility because of their poor checks.
Achilleas Kallakis (44) was convicted of fraud yesterday for obtaining £740 million in loans from Allied Irish Bank on false premises, in one of Britain’s biggest real estate scams.
He used the money to buy properties and fund a millionaire lifestyle. Kallakis obtained another £29 million to convert a ferry into a super-yacht from Bank of Scotland, now part of Lloyds, also under false premises.
Alexander Williams (44) was sentenced to five years in jail for producing forged documents that backed up Kallakis’s fake claims to the banks.
“The two banks, Allied Irish Banks and Bank of Scotland, have undoubtedly acted carelessly and imprudently by failing to make full inquiries before advancing the money,” Judge Andrew Goymer said, delivering his sentence.
Responsibility
“While I do not equate the position of the banks with that of a householder or car owner who forgets to secure his house or car and becomes the victim of burglary or theft, they do bear some responsibility for what happened.”
The judge noted that Bank of Scotland had been warned by its lawyers about the risks of accepting a particular letter of assurances from a Swiss lawyer backing up Kallakis’s application for a loan.
Warning disregarded
“It almost beggars belief that senior management chose to disregard that warning in its rush to complete the deal at all costs,” he said.
“It is however quite apparent that both defendants took full advantage of the prevailing banking culture in which corners were cut and checks on applications were superficial and cursory.”
Judge Goymer said he treated the loss of £56 million to AIB with “some scepticism” and branded it a “paper figure”. He highlighted both men’s previous convictions for a heraldic titles fraud and Williams’s conviction for a passport scam, which saw him jailed.
Major scale
The judge said the defendants had to bear their own responsibility for what on the jury’s verdict was fraud on a major scale.
Discussing the host of fake documents, he said: “It’s beyond coincidence that these defendants simply fell victim to the frauds of others.
“Both had an active part in the production and use of these documents. Each was needed by the other for this to work.”
Judge Goymer even referred to the case of convicted Polly Peck fraudster Asil Nadir as he prepared to hand down sentence. “The sums involved were much larger and there was a very substantial breach of trust.”
The scam against AIB allowed Kallakis and Williams to buy a string of 16 prestigious properties across the UK, which included the headquarters of the Daily Telegraph group in Buckingham Palace Road, London.
AIB uncovered the fraud in September 2008, about the same time the troubled bank was bailed out by the Irish State.
They were forced to sell the property portfolio quickly and lost £56 million as a result, while the Bank of Scotland said it lost about £5 million when the fraud against it was uncovered.
Fake guarantees given to Kallakis increased the value of the properties substantially and left him with a £77 million surplus, much of which was lavished on a fleet of Bentleys, a £27 million private jet, a yacht, a £5.2 million helicopter and a villa in Mykonos.
Kallakis and William were also disqualified as company directors for six years.
A confiscation hearing has been set for October this yer.
Audacious fraud
Yesterday UK Serious Fraud Office (SFO) case manager Ronan Duff said: “This was an audacious, persistent fraud that enabled these defendants, Mr Kallakis in particular, to lead the lifestyle of the super-rich.
“The SFO have been equally persistent in investigating this elaborate scam and in ensuring that justice has been delivered.” – (Additional reporting: Reuters)
