A Dublin law practice has closed after the High Court heard yesterday that a solicitor and property developer, who has drawn down bank loans of €26.3 million since January, used his clients' account for personal dealings.
Michael Lynn (39), practising as Capel Law from the Capel Buildings near the Four Courts, gave an undertaking yesterday to the President of the High Court not to practise. The Law Society secured a court order last week freezing Mr Lynn's assets after it had launched an investigation over concerns about his property dealings.
Mr Justice Richard Johnson heard yesterday that Mr Lynn owned 105 properties either personally or through his company, Proper T Capel, and that of these 35-40 were in nine countries, including Hungary, Bulgaria, Slovakia and China. About 40 properties had been purchased this year, all financed by loans.
Mr Lynn, who appeared in court yesterday and is the only solicitor in his firm, has undertaken to list all his properties, including details of any mortgages owing on them, and will make them available to be sold to cover his liabilities.
The court heard yesterday that Mr Lynn had put his own money into the firm's clients' account "under different names". It has been alleged he had taken multiple mortgages on a number of properties with several banks.
The Law Society sent in an accountant to investigate Mr Lynn's firm last month over concerns about his property dealings. The society's regulation of practice committee found that the accountant's report "disclosed acts of dishonesty on the part of the solicitor in relation to clients' monies".
The Law Society made its application to the High Court this month "in order to protect clients and clients' monies and to prevent any further misappropriation".
The investigating accountant found the books of account at Mr Lynn's legal firm were "totally unreliable"; that he had used bank drafts which made it "quite difficult to trace transactions"; and he had used drafts drawn on clients' accounts to fund personal transactions.
She said Mr Lynn failed to provide documents as requested and it was "impossible to vouch the underlying transactions and to assess the accuracy of the books of account".
Kendar Holdings, which was set up in 2003, has developed property in Portugal and Hungary.
The Law Society accountant, who spent five days investigating Mr Lynn's firm last month, said the solicitor had used the clients' account for personal transactions and that there appeared to be "a free flow of funds" between the client bank account and Kendar's bank account.
She said it appeared loans were drawn down and lodged to Mr Lynn's client account with money withdrawn within days and transferred abroad to purchase properties or lodged to Mr Lynn's personal bank account.
Mr Lynn had purchased a house in Howth for €5.5 million, financed by a loan from ACC. She said Mr Lynn had given ACC's solicitors sums debited to accounts which were not Mr Lynn's ledger accounts.
The accountant said Kendar and Mr Lynn's legal practice had adjoining offices and common staff, and that the people authorised to sign cheques from the client account in the legal practice were also authorised to sign cheques on Kendar's account.
The accountant said that, at August 31st, 2007, there was a minimum deficit in the practice of €702,820 but that the actual deficit on the clients' account was "much more than this".
After yesterday's court hearing, Mr Lynn cannot make a payment from any of his bank accounts or those of associated companies, nor can he sell assets owned or controlled by him or associated companies. The Law Society said yesterday that it was removing clients' files for safekeeping.
At yesterday's hearing, James Gilhooley SC, for Mr Lynn, said his client's solicitor, Giles Kennedy, had arranged a meeting for Friday with a syndicate of banks, including AIB and Bank of Ireland, to see what measures could be taken to repay liabilities in an orderly way.
The case will be mentioned in the High Court again next week.