AIB believed Greek tycoon fraudster was one of its biggest customers

SENIOR AIB staff, including the current head of executive enterprise and lending services, were led to believe they were part of the “inner circle” of fraudster Achilleas Kallakis, who cost the bank £56 million.

Donal O’Shea, who was head of property and corporate banking for AIB at the time, told a London court he went to London in 2007 to meet Mr Kallakis as part of a review of the bank’s property portfolio.

“Mr Kallakis was one of the biggest customers we had,” he said.

Mr O’Shea said that during his first meeting with Mr Kallakis at his Mayfair office, the pair discussed plans for a St James’s Square property and the tycoon “made it clear to me how important confidentiality was and that I was, I suppose, part of his inner circle in terms of his business affairs”.

Mr Kallakis is accused of conning the bank into handing out cash using forged documents and claiming he was a Greek shipping heir with a company worth more than £1 billion so he could amass a property empire.

Mr Kallakis and his “right-hand man”, Alex Williams, both 43, bought 16 landmark properties mainly around London using loans from AIB but the bank ended up losing £56 million when the scam was discovered.

The court has heard that the millionaire, who lifestyle involved chauffeur-driven cars, private aircraft and five-star hotels, was only found out when a German bank he had dealings with carried out a private investigation which revealed he had changed his identity and had a previous conviction for selling forged honorary titles to unsuspecting Americans in the 1990s.

In May 2008, AIB’s chief compliance officer based in London was contacted by a German bank with “worrying and disturbing news” about him.

This was passed on to Mr O’Shea, who is now head of executive enterprise and lending services at AIB.

Mr O’Shea told jurors: “The chief compliance officer contacted me to say that he had been made aware of some worrying and disturbing news regarding Mr Kallakis. A source from Helaba, a German bank, had been made aware that we may have issues regarding one of our customers. The customer concerned was Mr Kallakis.

“One of the principal concerns was his identity. The other concern was a previous conviction that he had which dated back to the Nineties.”

Mr O’Shea said he contacted his superiors about the concerns, which were so serious that he visited one of them at home after he had just undergone a hip operation. “I brought a copy of the report and we discussed it. His reaction was he was absolutely devastated.”

AIB did not confront Mr Kallakis straight away as it wanted to carry out its own inquiries using a private investigator to test the accuracy of the claims before jumping to conclusions, it was said.

Asked what the concerns were, Mr O’Shea replied: “We were concerned over obviously the identity of our borrower. We had concerns about the strength of our security, over the properties and we had concerns about all aspects of the transactions including guarantees.”

Previously the court has heard the guarantees for the loans were purportedly from a Hong Kong-based property company called SHKP. AIB wrote to SHKP following the discovery but when it replied, it said it had “no knowledge of the guarantees to which the bank were referring”.

“It was devastating that the guarantees were not legitimate,” Mr O’Shea said. “The guarantees were an extremely important part of the [bank’s] structure and without them hundreds of millions would be wiped off the value of our security.”

The trial continues.