AIB HAS been partly compensated by insurers for a £56 million loss incurred on more than £700 million worth of loans made to London-based property developers who are facing trial on fraud charges in London, a senior bank official has indicated.

Achilleas Kallakis and Alexander Williams are charged with two counts of conspiracy to defraud, 13 of forgery, five of fraud by false representation, two of money laundering and one of obtaining a money transfer by deception.

Giving evidence yesterday, Donal O’Shea, who was head of AIB’s property and corporate banking division in 2008, was asked by Mr Kallakis’ barrister, George Carter-Stephenson, if a claim for the losses “had been met”. Replying, Mr O’Shea said that one had been met.

Asked if that meant a claim had been paid, he said: “I believe so,” though he said a more senior bank official, Michael Ryan, “would be the right person to ask”.

Mr O’Shea was not involved in AIB’s initial dealings with Mr Kallakis and Mr Williams, who were lent £740 million for a series of property purchases on the back of bogus guarantees from a reputable Hong Kong property company, Sun Hung Kai Properties.

However, Mr Carter-Stephenson said a number of AIB documents appeared to have been altered after copies of the paperwork had been made by the UK‘s Serious Fraud Office as it began to prepare a case against the men.

Mr O’Shea’s name had been added, or deleted “sometime after February 2009” to a risk assessment form and another dealing with standard money-laundering rules that purport to have been prepared in 2006, even though Mr O’Shea had not then been involved.

AIB, said the defence barrister, has an interest in misrepresenting the evidence because its insurance policies on the Kallakis/Williams deals would be “invalidated” if it were shown to have been reckless and negligent. Asked by Mr Carter-Stephenson if he and other AIB employees had “closed ranks” in order to protect the bank’s reputation, Mr O’Shea replied: “I would not agree with that. I would have no interest in doing that.”

Mr O’Shea confirmed AIB “was involved” in offering loans to a series of companies, known as Kish 1 to Kish 14 that were controlled by directors of Dublin-based property firm Green Properties who eventually bought the Kallakis assets. Asked if AIB had included “a claw-back provision” as one of the conditions for its loans to Kish, entitling it to a share of any later profits, Mr O’Shea said he was not aware of the detail but there “may have been”.

Kish had paid market value for the properties, said solicitor Duncan Aldred, who dismissed the contention they could have been sold to Mr Kallakis’ uncle, Lou Kollakis. “He did not offer to buy the whole portfolio and in the end he did not offer to buy any of them.”