The former chief executive of Aer Lingus Holidays told gardai he would have committed suicide if secret loans paid to the company had gone wrong, a fraud trial has been told.
The revelation came on the third day of the trial at Dublin Circuit Criminal Court when defence counsel Mr Adrian Hardiman SC read from a statement made to gardai by the former head of the company, Mr Malachy Faughnan.
Mr Faughnan, during his continued cross-examination by Mr Hardiman, said he never heard of a block of flats in Lanzarote in the Canary Islands called Los Hibiscos that the two accused and a former financial controller of Aer Lingus Holidays were alleged to have purchased for their own advantage. But during later cross-examination, Mr Faughnan conceded his first recollection concerning Los Hibiscos was wrong. That was his "honest belief" when first asked, until counsel showed him a copy of a letter sent to him by Mr Conor Deene, who was in charge of overseas staff, and a copy of a Blueskies tour brochure issued by Aer Lingus Holidays, referring to the Los Hibiscos apartments. "Ask me about 20 or 30 other apartments in our brochures and I probably wouldn't remember them either," said Mr Faughnan. The Aer Lingus organisation used about 200 apartment blocks in total. Mr Faughnan is being cross-examined in the trial of Mr Peter Keely, of Carrig Avenue, Dun Laoghaire and Mr Desmond P Flynn, of Tritonville Avenue, Sandymount, Dublin 4.
They have pleaded not guilty to charges that they conspired together and with Mr Peter Noone, former financial controller of Aer Lingus Holidays, on dates from March 1987 to November 1988, to defraud the company by misappropriating funds to buy the Los Hibiscos apartment complex at Puerto Carmen, Lanzarote.
Mr Faughnan, when asked by Mr Hardiman, who appears for Mr Keely, if accounts in a subsidiary of Aer Lingus Holidays in Northern Ireland were "fiddled", replied that the only "fiddle" he was aware of was to lower charges owed to Aer Lingus Holidays by Aer Lingus Holidays Northern Ireland. These charges were for various expenses incurred by Aer Lingus Holidays on behalf of the Northern Ireland company. The amount these charges could be reduced by was "£20,000, £30,000 or £50,000" but he couldn't recall exactly what the figures were.
Mr Hardiman suggested that much of the problem for Aer Lingus Holidays originated in "mind-boggling" sums which were owed by Aer Lingus Holidays Northern Ireland. Mr Faughnan said he did not recall the details of meetings in which he was told of unreported losses in Aer Lingus Holidays Northern Ireland of £2 million in 1988, which were then expected to rise to £3 million by 1989.
Asked if he was shocked by the extent of the losses, Mr Faughnan replied: "You say `shocked' and you can be sure I was." Mr Faughnan said the reason he hadn't gone to the board of Aer Lingus for help for the troubled Aer Lingus Holidays was because it had been set up on the basis that it would not borrow capital from its parent company. He agreed that accounts for both subsidiary companies were inaccurate and they didn't have enough money to operate effectively. The accounts in Aer Lingus Holidays were not well kept. Some of this was due to slipshod work and some "to hide things".
Mr Faughnan accepted counsel's suggestion that Aer Lingus Holidays had also used some of the loans raised for the purchase and refurbishment of apartment blocks in Lanzarote in the day-today running of the company. He agreed the situation in Aer Lingus Holidays was "desperate" as it was not allowed capital funding from Aer Lingus itself. Asked if Aer Lingus Holidays was a "sham", he said that no proper accounts were presented by the company. Mr Faughnan agreed further with Mr Hardiman that around the middle of 1987 he instructed Mr Stephen Deegan, who was in charge of controlling day-to-day revenue in the company, to reduce the reported costs of various flights by sums between £25,000 and £70,000.
He also gave similar instructions to Mr Deegan in August 1987 in relation to flights to Malaga, Ibiza, Salou and other destinations serviced by Aer Lingus. These reductions were not shown on the books but the company got payments for them from Aer Lingus.
Pressed by Mr Hardiman about this, Mr Faughnan replied that Aer Lingus had provided a special subsidy or bonus to Aer Lingus Holidays and some other operators to assist in advertising and promoting these destinations. "We were not the only people who got these payments and we got nothing more from this that others got," Mr Faughnan said.
He agreed with counsel the payments were not included in the accounts as payments from Aer Lingus. They were used as a credit off its total payments to Aer Lingus for use of aircraft.
Mr Faughnan further agreed with Mr Hardiman that anyone looking at the accounts who didn't know about these "secret payments" would be misled.
The hearing continues before Judge Kieran O'Connor.
