Aer Lingus Holidays made £1.36 million in under-the-counter payment to secure an apartment block in the Canary Islands, it was alleged in a fraud trial yesterday.
Mr Malachy Faughnan, former chief executive of Aer Lingus Holidays, denied knowledge of the transaction and told the jury at Dublin Circuit Court he had only a vague knowledge of some company transactions.
Mr Faughnan told defence counsel Mr Adrian Hardiman SC that he did not have direct involvement in the property in Lanzarote by Aer Lingus Holidays and knew nothing of alleged under-the-counter payments to enable the seller to avoid paying tax.
The allegations of secret payments were made in the course of cross-examination by Mr Hardiman, appearing for one of the accused, Mr Peter Keely, of Carrig Avenue, Dun Laoghaire, who is jointly charged with Mr Desmond P. Flynn, of Tritonville Avenue, Sandymount.
The two men have pleaded not guilty to charges that they conspired together and with Mr Peter Noone, former financial controller of the company, to defraud Aer Lingus Holidays by misappropriating funds to purchase part of the Las Hibiscos apartment complex.
Mr Hardiman read from a statement made by Mr Paul Dalton, former chief executive of Aer Lingus, which alleged that Mr Faughnan was "appallingly vague" and had "an extraordinary lack of knowledge" of the financial affairs of Aer Lingus Holidays. Mr Faughnan replied that was Mr Dalton's opinion and he was not prepared to comment.
Mr Faughnan said that in December 1989 he had a meeting with Mr Dalton to discuss financial losses at Aer Lingus Holidays. Mr Dalton asked why money borrowed for the purchase and refurbishment of apartments had been used in the day-to-day running of the company.
Mr Faughnan explained that Aer Lingus Holidays was short of cash. Mr Dalton said "quite clearly" that Mr Faughnan had not taken the correct course of action. Mr Faughnan replied that the money would be shown on the accounts, but on reflection, the money probably should not have been redirected.
Asked by Mr Hardiman if the redirected money had been shown on the accounts, Mr Faughnan replied that he could not say because it was 10 years since the transactions took place.
It was the job of the former financial controller of Aer Lingus Holidays, Mr Noone, to oversee the transaction, and Mr Faughnan "didn't do his job for him".
Mr Faughnan denied any knowledge of deliberate false accounting but conceded false accounting had taken place in the company.
He admitted he had only a vague knowledge of some transactions in the company. Asked by Mr Hardiman if, in relation to financial transactions of Aer Lingus Holidays, he had told gardai that "I was there to protect them, I was never there to question them". Mr Faughnan agreed that those were his words.
Mr Hardiman outlined that on October 13th, 1988, £347,000 sterling was redirected from loans intended for Aer Lingus Holidays' apartment-purchasing funds and placed into the bank accounts of Aer Lingus Holidays Northern Ireland, and two further payments of £176,000 and £250,000 were made to Aer Lingus Holidays in the Republic of Ireland.
Mr Faughnan agreed both companies would have been insolvent by the start of its new financial year in November if the payments had not been made. Mr Faughnan said he had no specific knowledge of the transactions.
Later Mr Faughnan admitted instructing an employee to take £100,000 off Aer Lingus Holiday expenses to hide a £100,000 subsidy given to the company by Aer Lingus, but denied that this amounted to false accounting.
The hearing continues before Judge Kieran O'Connor.