Friends First has been criticised for its "exceptionally cavalier" attitude to fraud after it emerged that a former employee remains as a director of one of its companies more than two years after he admitted defrauding a customer of the financial services firm.
Fine Gael finance spokesman Richard Bruton is seeking a report from the financial regulator on how Stephen Donnelly has been able to stay on as a director of Arley Ltd, a property investment company established by Friends First, despite the fact that the life assurance company was aware since February 2005 that Mr Donnelly had committed a fraud.
Friends First terminated the broker agency of Mr Donnelly in April 2005 following a complaint by Cork businessman John O'Mahony that Mr Donnelly had forged letters indicating that he was guaranteed a higher return on an investment bond than Friends First had, in fact, undertaken to guarantee.
Mr O'Mahony now maintains he is suffering a €585,000 loss as a result of the fraud by Mr Donnelly, a former Friends First employee who was acting as an independent broker at the time of the fraud.
In December 2006, Mr Donnelly was disqualified by the financial regulator from "the management of a regulated financial service provider" for five years after the regulator found that he had failed to act "honestly and fairly" in his business activities relating to four clients. Following a report by RTÉ Radio's investigative unit, Friends First said yesterday that it would table a resolution that Mr Donnelly be removed from the Arley board at a meeting of the board later this month.
Labour Party finance spokeswoman Joan Burton said the case suggested an exceptionally cavalier attitude by Friends First to the defrauding of a client.
"It is simply not good enough for Friends First to say that it is now going to seek the resignation of the director concerned," she said.
Mr Bruton said he would write to the Oireachtas committee on finance and public services requesting that the regulator provide the committee with a report on the case and its implications for financial regulation.
Mr O'Mahony, who was promised a 40 per cent return on his investment by Mr Donnelly when Friends First had only agreed to a 28 per cent return, was also charged €25,000 for exiting his investment policy early.
Although it has acknowledged that the fraud took place, Friends First denies that that Mr O'Mahony is out of pocket as a result.
Friends First, which is a subsidiary of Dutch financial services company Eureko, said it would vigorously defend its position in court if Mr O'Mahony issues legal proceedings. But Mr O'Mahony has indicated to RTÉ that he is reluctant to take legal action as he has already incurred €40,000 in legal costs.
