A jury has been told that £553,000 was siphoned from Aer Lingus Holidays funds and used by three men to buy an apartment block in the Canary Islands. Two men have pleaded not guilty before Dublin Circuit Criminal Court to charges that they conspired together and with a third man to defraud the company on dates from March 1987 to November 1988.
Mr Desmond P. Flynn, of Tritonville Avenue, Sandymount, Dublin, and Mr Peter Keely, of Carrig Avenue, Dun Laoghaire, deny they conspired together and with Mr Peter Noone, former financial controller of the company, to defraud it by misappropriating funds to buy the Las Hibiscos apartment complex at Puerto Carmen, Lanzarote.
Mr Kenneth Mills SC, prosecuting, told the jury that evidence would be given to show that money borrowed on behalf of Aer Lingus Holidays to purchase apartment blocks in the Canary Islands and in Malaga on mainland Spain was siphoned to a company formed by the two accused and Mr Noone, who was not before the court.
Mr Mills said Mr Keely was an accountant in the finance division of Aer Lingus Holidays at the time of the alleged offences. Mr Noone was the company's financial controller. Mr Flynn was not an employee but was a solicitor who worked for the company dealing with clients' complaints.
The company was formed in 1983 to take over the running of four travel and tour companies which were subsidiaries of the then Aer Lingus Teoranta, now Aer Lingus plc.
Aer Lingus Holidays management proposed to buy, rent or lease apartment blocks so that it could control the letting of them to lower its ground costs in the holiday business. A property called San Francisco Park was offered to the company by a man called Mr Maurice Harskin and it was agreed to take it.
Mr Mills said it was decided to raise the money legally as "off-balance sheet borrowing". This was done through a company called Capital Leasing, borrowing the money from the Bank of Novia Scotia and leasing the property.
The transaction was so structured that in four years Aer Lingus Holidays had paid for the property and controlled it.
Another property called Las Vegas was offered to Aer Lingus Holidays in 1988 and the company's board again agreed to deal with it through Capital Leasing, with £4.5 million sterling borrowed from ABN Bank. A property in Malaga was offered to Aer Lingus Holidays in the same year and £1.71 million was borrowed through Trinity Bank.
Mr Mills said Mr Noone had been given authority to take charge of the negotiations for Aer Lingus Holidays.
Mr Harskin also offered a property called Los Hibiscos in Lanzarote in 1988, but Aer Lingus Holidays was not interested.
Mr Mills said "a strange thing happened" when the company carried out an investigation in 1988 and 1989 as to where funds drawn down for the deals transacted had gone.
It transpired that in 1988 a "shelf company" called Delmont Investments Ltd was taken over in the Isle of Man by the two accused and Mr Noone. Mr Flynn had made the first inquiry about this from a company called Fleetwood Services Limited which carried out this type of work.
Delmont was empowered to deal with property investment and the three men also registered a trading name, Harskin Properties. They opened a bank account for Delmont in Ramsey, Isle of Man, and all three together were mandated to sign documents relating to transactions.
Mr Mills said payments of £500,000 and £1.4 million made out in the name of Maurice Harskin as payee wound up in the Delmont bank account. There was £1.9 million sterling to the credit of Delmont in October 1988.
Delmont Investments had also adopted a resolution concerning the Las Hibiscos apartments before the end of 1988 in the same terms as the Aer Lingus Holidays board resolution on other properties, and Mr Flynn was active in dealing with the letting.
Counsel said the jury would be told that Aer Lingus Holidays was not interested in Los Hibiscos.
Mr Mills said Aer Lingus Holidays became aware that Delmont seemed to be funded by its money. Proceedings were taken in the Isle of Man to wind up this company, but neither of the accused nor Mr Noone co-operated in any way.
The hearing continues.