A former bank manager will be sentenced later this month for stealing €2.7 million from his employer after he created fictitious undocumented loan accounts for customers when their own legitimate applications were delayed or refused.
Patrick Challoner, 54, funded these bogus loans by taking money from other customers who believed they were authorising Challoner to set up an investment fund for them.
These customers gave Challoner authorisation to take money from their accounts for the purpose of investment but the cash was never invested.
Dublin Circuit Criminal Court heard it was effectively a scheme that lasted 16 years and involved Challoner transferring funds from one customer account to another in order to "fill the holes" of the various accounts.
None of the customers were aware of the transactions and a "do not post statements" note was attached to the effected accounts to ensure that the customers remained unaware.
Challoner, of Chanel Road, Artane, Dublin 5, pleaded guilty to five sample charges of theft from Allied Irish Bank, Artane branch, on dates between August 2002 and February 2011 and one charge of deception, in that he fraudulently induced a named person to authorise a transfer of €300,000 from their bank account on 2 December 2016.
The charges were representative of over 100 charges and the court heard that there were thousands of transactions involved.
The bank was at a total loss of €3.2 million, which included reimbursing the effected customers and the cost of an external audit.
Detective Garda Gareth Lynch told Brian Storan BL, prosecuting, that Challoner told gardaí during a number of interviews that the whole situation started when he found that, due to other work pressures, he had not progressed a mortgage application for a customer's "dream house" as efficiently as it should have been.
The customer then became concerned that they would lose the property so Challoner took money from the account of another customer and effectively gave the prospective homebuyer what they believed was a bridging loan. He then set up a bogus loan account without any supporting documentation.
'A game of whack-a-mole'
Det Gda Lynch said the fact that the loan had no supporting documentation meant that the bank then had no way to enforce the payment of the money.
He explained that one way Challoner funded these accounts was by getting other customers to invest funds into an investment account that he never actually created.
When these customers came back to Challoner looking to withdraw cash from these investment funds, Challoner often used his own money to pay them back.
Det Gda Lynch said Challoner also used this scheme to provide loans to businesses that found themselves in financial difficulty.
He agreed with Sean Gillane SC, defending, that in "a perfect world" the people who had been provided with the undocumented loans would have paid back the money and Challoner would then have been able to pay back the original customer but this didn’t happen.
Instead, many of those people couldn’t repay the funds or refused to repay the loans and as there was no supporting documentation, there was no way they could be forced to repay the money. This then left holes in the accounts of the people who believed they had invested money.
"The whole thing spirals and rather than stopping the Ferris Wheel, he kept going trying to plug the holes," Mr Gillane suggested comparing the scheme to a game of "whack-a-mole".
"The immediate problem is solved until the next day when another problem emerges," counsel continued.
Det Gda Lynch agreed with Mr Gillane that it was "a disaster waiting to be revealed but unfortunately it was not revealed for a long time and it escalated out of control".
The detective also outlined that although the bank was at a loss of €2.7 million, as they re-imbursed the majority of the customers, Challoner did not financially benefit from the scheme.
He agreed with Mr Gillane that gardaí carried out an extensive financial profile of Challoner, including checks with the Revenue Commissioners and social welfare and concluded that he did not have any trappings of wealth.
He accepted a suggestion from counsel that Challoner "was trying to meet these demands [of the customers] rather than line his own pockets".
Judge Elma Sheahan said she needed time to consider the various reports and testimonials before the court and adjourned the case to 27 November for sentence.
Challoner was remanded on continuing bail until that date.
