The former chief executive of Aer Lingus Holidays told a jury he did not know a Spanish company had been set up in relation to the purchase and management of apartment blocks in the Canary Islands, and that he was a named director.
Mr Malachi Faughnan also denied that he attended a board meeting of the company, Penamar Campania de Administracion SA, in Lanzarote on March 14th, 1989. He did not know about it until "this whole thing blew up" and he was told by Aer Lingus, he said.
"I was never at such a meeting there. I could swear I was never at a board meeting in Lanzarote," he said in reply to defence counsel Mr Adrian Hardiman SC.
"I didn't set it up and I didn't give approval to set it up," he told the jury during his continued cross-examination on the fifth day of the trial at Dublin Circuit Criminal Court of Mr Peter Keely, of Carrig Avenue, Dun Laoghaire and Mr Desmond P. Flynn of Tritonville Avenue, Sandymount, Dublin, who have pleaded not guilty to conspiracy to defraud.
Mr Keely and Mr Flynn deny that they conspired together and with Mr Peter Noone, former financial controller of the company, to defraud Aer Lingus Holidays by misappropriating funds to purchase part of the Las Hibiscos apartment complex in Lanzarote in the Canary islands.
Pressed by Mr Hardiman, who read from minutes of a board meeting of ALH and from letters, Mr Faughnan agreed he had proposed to the ALH board that a "dedicated organisation" should be set up in Spain to manage the properties. He agreed with Mr Hardiman, who appears for Mr Keely, that he went to Madrid in late 1988 and met the Aer Lingus lawyer, Mr Jose de la Rosa Costa, concerning the purchase of Canary Island apartments. Mr Faughnan also agreed he told the Spanish lawyer that ALH wanted "no tax problems". His use of the phrase "we have learned a few tricks" in one document arose from problems involving extra costs it had encountered with an apartment block in San Francisco, the first one bought by ALH.
Asked about his reference in a report to the ALH board about a "holding company", witness said he didn't want too many companies dealing with the apartments. No such company had been formed, as far as he was aware.
Mr Faughnan agreed in further reply to Mr Hardiman that he told the gardai in 1990 "short cuts" had been taken by the former ALH financial controller, Mr Noone, who set up a company with witness put down as a director. This was done "behind my back", he said.
Mr Hardiman named the other directors as Mr Noone, Mr Maurice Harskins, who sold the properties, and the Aer Lingus lawyer in Spain, Mr de la Rosa Costa.
Witness claimed Mr Noone used the Aer Lingus lawyers to do all this and he learned about it only after he left the company in 1989 and Aer Lingus asked him how he became involved in a company formation which had not gone through the Aer Lingus board.
Mr Faughnan said authority regarding the deals had been given by the ALH board to Mr Noone but not by witness.
Mr Faughnan accepted that Aer Lingus had decided to hide the purchase of the apartment blocks in the Canary Islands by keeping it out of its accounts. He agreed that Aer Lingus didn't want it known in the Canary Islands or in Ireland that it owned the properties. It had to deal with other operators in other countries.
Mr Hardiman suggested that one reason for this was to keep the costs down and that the Penamar company's name was so similar to that of the previous owner that on a superficial look many people wouldn't know the difference.
Mr Faughnan suggested that questions on the matter be put to Aer Lingus because he wasn't party to the decision.
Mr Faughnan also denied knowing of payments made to Mr Harskin for the La Benita apartments through a company called Delmont Investments. The jury was shown details of a £1,174,450 payment into Mr Harskin's bank account in the Midland Bank in London. Mr Hardiman showed the court that a similar sum was paid the following day into the account of Delmont Investments, trading as Harskin Properties.
Mr Faughnan said he was unaware that Delmont Investments was used to buy the La Benita apartments. He didn't sign the contracts for the properties. Earlier, Mr Faughnan said he was not cautioned when he made statements to the Garda in November 1990 about the Aer Lingus Holidays accounts. Asked if he felt under pressure at the time, he replied that it was only natural, particularly as he had never been questioned by the Garda before. Asked if he felt under suspicion at the time, he said that something had happened at Aer Lingus Holidays, and as chief executive he felt he was under a certain suspicion, but was satisfied that he wouldn't be charged.
The hearing continues before Judge Kieran O'Connor.