About 20 solicitor firms have been defrauded out of about £1.5 million of their clients' money by a major counterfeiting operation. The firms are currently seeking to recoup the losses from their professional indemnity insurers, but it is understood that some may not be covered for the full amounts lost.
The solicitors had paid their clients' money to a firm of law agents in Dublin to cover stamp duty payments to the State on newly-purchased property.
Instead of passing the duty to the Revenue Commissioners, gardai believe, the fraudulent firm kept it. The fraud has also put the properties of more than 50 house-buyers in a legal limbo as their ownership has not been legally registered.
A man was arrested following the discovery of the fraud within the past six months. A file will be sent to the Director of Public Prosecutions within a fortnight and a prosecution is expected, according to a Garda source. The law agents' firm has collapsed.
Solicitors often hire law agents to pay stamp duty on behalf of their clients on newly-purchased properties. Stamp duty of up to 9 per cent must be paid by buyers of second-hand houses, and some new houses.
It is believed the fraudulent company either printed counterfeit stamps on the title deeds of the properties or simply did not process the documents.
It is understood the solicitor firms will be liable to pay back the lost stamp duty to their clients.
The extent of the fraud was discovered when officers from the Garda Bureau of Fraud Investigation raided a legal agents' office in Dublin city last April.
They seized stamps with face values of between £1,000 and £10,000 attached to title deeds. They also seized photocopying, laser printing and scanning equipment they believe was used to make the stamps.
The firms affected by the fraud are mostly in the Leinster area. Two companies incurred most of the losses. The Law Society has been working with the Garda, the Revenue Commissioners and the solicitors' professional indemnity insurers to resolve the matter.
The society's director-general, Mr Ken Murphy, said it was as yet "undetermined" whether the society's compensation fund would be liable for any of the losses.
He said the society was "absolutely satisfied that no member of the public would lose out" and there was "no question of any dishonesty on behalf of any solicitor in this matter".
Mr Murphy said the clients' titles to their properties were not at risk as a "freeze" had been put on them to protect the "priority of their registrations". This effectively prevented the registration of another interest in the properties, he said.
"We believe they are not at risk. This is just a mess which takes time to resolve . . . Really, it becomes a question of who contributes, and in what proportion, to resolving the matter," he said.
Only about four of the solicitor firms which lost money have made formal Garda complaints, according to a senior officer involved in the investigation.
"We are concerned that there are solicitors out there who have been defrauded, but for a reason best known to themselves haven't come forward. But I would stress that many solicitors have been co-operative with us," said the source.
It is understood that many solicitor firms would want to avoid incurring any bad publicity that might arise if they were named in court as affected parties during a prosecution.