Former head of holiday firm tells of false accounts

 

Aer Lingus Holidays gave false financial accounts to the government and to potential purchasers of the company, its former chief executive has told a fraud trial.

Mr Malachi Faughnan denied knowing false figures were used but said that in the light of facts presented to the court he agreed with Mr Adrian Hardiman SC, defending, that the accounts were seriously misleading.

"I believed the accounts were true. I thought Aer Lingus was taking care of these things," Mr Faughnan told the jury.

Mr Hardiman also alleged that a fictitious debt of £388,766 from a non-trading Aer Lingus subsidiary, Cara Management, was used in the 1987 accounts to hide the diversion of a £400,000 loan to the holiday firm.

Mr Faughnan denied knowing of a false debt to this company. He believed this sum was due from Cara Management, but he was not involved in the transaction.

He denied using this money to disguise the use of a loan for the day-to-day running of Aer Lingus Holidays.

Mr Faughnan was under continued cross-examination on the 6th 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.

They deny conspiring together and with Mr Peter Noone, the company's former financial controller, to defraud Aer Lingus Holidays by misappropriating funds to buy part of the Las Hibiscos apartment complex in Lanzarote in the Canary Islands.

Mr Faughnan accepted that a letter he wrote to the then Department of Communications on December 11th, 1985, did not reflect losses of £1.2 million by Aer Lingus Holidays, but said he was working from figures he was given. He accepted it told the Department that Aer Lingus Holidays worked "at arm's length" from its parent company and was not granted any special favours by Aer Lingus.

Mr Faughnan added that this statement was "true in the broad sense", as he did not believe special treatment was being given.

Mr Hardiman, for Mr Keely, read from a statement Mr Faugh nan made to gardai in 1990, saying he was instructed by Aer Lingus not to disclose secret favours given to Aer Lingus Holidays.

Mr Faughnan accepted that if the Department had known Aer Lingus Holidays' true losses, the company's operating licence would not have been granted.

Mr Faughnan agreed that in March 1988 he met Ms Gillian Bowler, then managing director of Budget tour operators, to sell the company.

Budget and its parent company, Granada, were unhappy with the balance-sheet figures of Aer Lingus Holidays because there were so few assets in the company. He denied misleading Budget and Granada by not informing them of the losses.

Mr Faughnan agreed he told gardai in 1990 that potential purchasers of Aer Lingus Holidays would not have touched the company if they knew the debts.

Mr Faughnan also agreed he told gardai he did not approve of "all kinds of internal manipulation" of Aer Lingus Holidays by some executives. He discovered the company paid the private ESB bill of one of its executives. When he tried to take away some staff benefits, he was met with resentment.

The trial continues.