£60,000 taxpayers' money lost in deal, fraud trial jury is told


Aer Lingus Holidays lost £60,000 of taxpayers money' on a deposit for one apartment block in Spain, and a further "large sum" on a second block, a defence counsel told a fraud trial jury.

The former Aer Lingus Holidays chief executive, Mr Malachi Faughnan, denied any knowledge of placing the deposits on the apartments in October 1988, months before the company was ordered to cease trading by the government, resulting in a loss of the deposits.

"I went to Malaga to look at apartment blocks but I don't recall that any deposit was placed on them," Mr Faughnan told Mr Adrian Hardiman SC.

Mr Faughnan was under cross-examination, on the seventh day of the trial at Dublin Circuit Criminal Court of Mr Peter Keely, of Carrig Avenue, Dun Laoghaire and Mr Desmond P. Flynn of Tritonville Avenue, Sandymount, who have pleaded not guilty to conspiracy to defraud.

Mr Keely and Mr Flynn deny they conspired together and with Peter Noone, the former financial controller, between March 1987 and November 1988 to defraud ALH by misappropriating funds to buy part of an apartment complex in the Canary Islands.

Mr Faughnan told Hugh Hartnett SC, for Mr Flynn, he was unaware that Aer Lingus placed anonymous advertisements in the Financial Times seeking vendors of Spanish apartment blocks.

He was also unaware of a bill for £750 sent to ALH by Mr Flynn, in his capacity as an independent solicitor retained by ALH, for these advertisements.

Mr Faughnan agreed that he had earlier said it was company policy to disguise itself as possible property buyers to try to keep costs down. Details were also kept from line management and only the board and top management were informed.

Mr Faughnan said he had been unaware of a letter dated June 1st 1988, sent by Mr Noone, the then ALH financial controller, to Mr Flynn. He agreed it tallied with company policy on buying properties and that Mr Noone had authority to handle these deals.

This letter said negotiations on some properties might involve off-balance sheet transactions and might need to be handled outside the company with discretion.

Earlier, Mr Hardiman for Mr Keely, said Mr Faughnan and Mr Noone paid a £60,000 deposit on the an apartment block in Malaga, which was subsequently forfeited. Mr Hardiman said the court should note that the deposit was placed one month after Aer Lingus Holidays recorded "spectacularly disastrous" losses of £5.8 million which had been hidden from its accounts.

Mr Faughnan said he didn't know of any deposit as he was there simply to inspect buildings.

He also denied placing a large deposit on another apartment block without board approval.

Mr Faughnan agreed that no evaluation had been sought on other apartment blocks worth over £5 million bought by ALH in Malaga and the Canary Islands.

Asked why taxpayers' money was used to buy apartments without an evaluation, Mr Faughnan said that the purchases were made with the help of Aer Lingus, the banks, and others, all of whom were watching their own interests. The trial continues.