The Serious Fraud Office has commenced an investigation, together with City of London Police, into an alleged fraud on the Corporate Banking Department of Allied Irish Banks Plc.
Yesterday, during the day and evening, searches were conducted at a business address and two residential addresses, all in Central London.
Background
Between 2003 and 2007 Allied Irish Bank ("AIB") provided loans for the purchase of a number of UK investment properties to companies controlled by an individual who is now the main suspect in the Serious Fraud Office ("SFO") investigation. The main suspect operated with the assistance of others.
During the course of 2008 AIB identified problems with one element of its security interests over this portfolio of UK investment properties. Following an internal review it became apparent that the guarantees of certain lease payments on these properties by an investment grade counterparty (a blue chip property company) were fraudulent.
AIB referred the matter to the appropriate authorities and also took control of and sold the relevant properties. The sale resulted in a write down of the outstanding loan balances by £56m.
The alleged fraud involved borrower companies creating "overriding" leases involving the investment grade counterparty. These leases were generally for longer periods and at higher rents than the existing occupational tenants' leases. The apparent existence of these additional leases increased the values of the properties, with lease payments being a direct obligation of the investment grade counterparty.
The investment grade counterparty has since indicated to AIB that the overriding leases are fraudulent.
AIB is considering legal action against a number of parties in respect of its deficit.
The SFO believes that further financial institutions have also been deceived by the suspects.
Serious Fraud Office
Elm House,
10-16 Elm Street,
London WC1X 0BJ,
United Kingdom
Press Office tel: 020 7239 7001/7045/7000/7132
Main switchboard tel: 020 7239 7272
Mobile: 0781 807 6688
Email: press.office@sfo.gov.uk
