A loan of just over €4 million given to former solicitor Michael Lynn to buy a house in Howth, Co Dublin, in April 2007 was written off by Irish Nationwide Building Society less than a year later, Dublin Circuit Criminal Court has heard.
The court has begun hearing evidence in Mr Lynn's trial for the alleged theft of almost €30 million from seven financial institutions in 2006 and 2007, by applying for multiple mortgages on the same properties.
It has been hearing about a mortgage taken out by Mr Lynn and his wife Bríd Murphy with Irish Nationwide Building Society to buy Glenlion House in Howth for €5.5 million.
It is the prosecution case that Mr Lynn applied for three mortgages on the house from three different financial institutions for a total of more than €11 million.
Killian McMahon, an internal auditor with INBS was asked to carry out a review of the records of the bank in relation to Mr Lynn's mortgage applications. He had no direct dealings with Mr Lynn.
He was taken through the documents contained in the mortgage application for Glenlion House. The large detached property was valued by a valuer for Irish Nationwide in December 2006 at €5.5m. Mr Lynn wanted to borrow just over €4m from Irish Nationwide to buy the house as a family home.
Mr McMahon agreed with prosecuting counsel, Patrick McGrath, that a memorandum prepared for an underwriter at Irish Nationwide during the mortgage application process was a "ringing endorsement" of Mr Lynn's application.
Glenlion House was described as being completely secluded with its own private beach area. The valuer remarked that the property market was slowing but said this would not have a great effect on this property due to its unique selling points.
The memo outlined that Mr Lynn had been a borrower with Irish Nationwide since 2000 and in early January 2007 had borrowings of over €3.7m as well as an immaculate repayment record.
The memo continued that Mr Lynn was in a strong financial position with profits the previous year of over €1 million and assets valued at more than €45m. The author of the memo, Emma Persson said the branch was fully recommending that Mr Lynn be given the mortgage.
Another document showed the underwriter had discussed the loan with Michael Fingleton the chief executive of INBS, who was satisfied with the mortgage in terms of its Loan-to-Value. Mr McMahon said it would not be unusual for a discussion to take place with Mr Fingleton for a loan of that size.
The documentation also included two statements of Mr Lynn's affairs outlining all the properties and development sites he owned. The second, updated statement had a stamp from accountancy firm Kinsella Mitchell and Associates based in Dublin.
It was signed by Michael Lynn as representing a true and fair record of his assets and liabilities and also signed on behalf of the accountancy firm.
The mortgage application also included a number of documents purporting to be signed by solicitor, Fiona McAleenan acting for Mr Lynn and his wife. These included a solicitor’s undertaking to register the mortgage with the Land Registry and to ensure the first charge on the property would be in favour of Irish Nationwide.
Mr McMahon agreed with Mr McGrath that a solicitor's undertaking was relied on by financial institutions, as solicitors were officers of the court giving a solemn undertaking.
The court heard Mr Lynn and his wife were offered the mortgage of €4.125m on 5 January 2007 on condition that it was their first legal mortgage on Glenlion House. The mortgage was to run over 20 years with monthly repayments of almost €27,000.
The mortgage was drawn down in early April 2007. But an account statement showed there were a number of unpaid direct debits in relation to the mortgage in November and December 2007.
Mr McMahon said the statement showed that the bank wrote off the loan on 25 February 2008, and took the loss of just over €4 million.
The trial, which is expected to last up to 14 weeks, will continue tomorrow.
