A financial services manager who assisted gardaí in investigating a €61 million fraud perpetrated by her employers is demanding to know why she was later targeted for prosecution.
Ciara Kelleher twice went on trial accused of involvement in a conspiracy to defraud customers of Custom House Capital (CHC) out of their investments during the financial crash. Each trial ended in a hung jury.
Last March, 14 years following the collapse of CHC, the Director of Public Prosecutions (DPP) told Ms Kelleher the charges were being dropped and she would not face a third trial.
However, in a letter to Ms Kelleher, the DPP’s office has declined her request to disclose the reason it had decided to drop the case. The office said it is only required to disclose such information to the victims of crimes.
Previously, CHC former chief executive Harry Cassidy, John Whyte, who was former head of private clients, Paul Lavery, the former head of finance, and non-executive director John Mulholland all pleaded guilty to related offences and received prison terms of between one and seven years.
Ms Kelleher was the only accused to deny the charges. Her prosecution followed a complex investigation involving more documentation that the criminal investigation into the collapse of Anglo Irish Bank.
During both her six-week trials, the prosecution stated CHC agreed to buy properties in Germany during the financial crash. It then started to use its clients’ money to pay for these deals, often without the clients’ knowledge.
Mr Cassidy, who was Ms Kelleher’s boss, “pilfered” money from 80 client accounts and was essentially “robbing Kevin to pay Klaus”, the prosecution said.
A recent High Court hearing was told €61 million in client funds was misappropriated. Of this, €41 million has since been recovered.
As a salaried, non-director employee of CHC, Ms Kelleher was the most junior staff member to be prosecuted.
The State claimed emails and other records show she must have known about the scheme to defraud investors. However, the prosecution also conceded she had nothing to gain from the fraud and made no profit from it. She was not an investor in CHC.
Speaking to The Irish Times, Ms Kelleher called the decision to prosecute her, based on what she said was the flawed testimony of a single witness, was “scandalous” and that it had a devastating impact on her health.
She said at no point was she asked by her superiors to mislead clients about the location of their investments and that if there had been such a request then she would have resigned and immediately gone to the authorities.
Ms Kelleher also criticised the now-defunct Financial Regulator for learning about the CHC fraud in 2009 and letting it proceed for more than two years amid fears the company would collapse and leave its clients with nothing.
She said that in 2012 gardaí came to her asking for help in interpreting files seized in Cassidy’s attic. She agreed and visited investigators in Harcourt Square “five or six times” to go through the documents.
“They called me their star witness. I would cycle over after work. I never got as much as a cup of tea,” she said.
She said she had no legal representation, and at that stage there “wasn’t even a whisper” that she might be under investigation herself.
Four years later, three Garda cars arrived at her house and Ms Kelleher was arrested. “I was stunned. I can’t even remember half of what happened that day.”
Ms Kelleher alleged that during her trials the prosecution mischaracterised emails she had sent seeking financial information for clients. They claimed this showed she knew the information being provided to customers was false. “Everything I said was twisted,” she said.
She asked how she could know about the fraud when many other people involved with the company, including its auditors, did not have any knowledge of it.
Ms Kelleher said she never considered entering a guilty plea in exchange for a lesser sentence, despite the pressure she said she was put under to do so. “Under no circumstances would I have done that because I knew I was innocent.”
During the trial, Ms Kelleher was criticised by the prosecution for allegedly not telling clients their investments were at risk. However, the Financial Regulator was also aware of irregularities with the company as far back as 2007 yet allowed CHC to continue operating.
In 2009, an outside professional firm was brought in by the regulator to investigate CHC and identified “a number of serious issues”, a later Central Bank of Ireland report said.
“The main elements of the Central Bank’s strategy during 2009 and 2010 were to understand better the firm’s exposure to its property investments, force the firm to restore those money due to the clients as and when they could be realised in an orderly way, ie avoiding forced sales of property, and to improve the very weak solvency position of the firm until such time as its business could be sold and management thereby replaced,” the Central Bank report said.
“While it was appreciated that CHC management presented a significant risk, the Central Bank’s greater fear was that the removal of its authorisation and consequent abrupt cessation of business would cause even greater potential loss to the underlying customers. The other option, liquidation, would also have had the same potential outcome.”
According to Ms Kelleher, this allowed CHC to misappropriate millions of euro more before the fraud was stopped.
“The Financial Regulator could have and should have stopped this fraud in February 2009 and not leave the four guilty parties pilfering away a further €50 million euro over the following two and a half years,” she said.
“This left the remaining staff unwittingly exposed to the risk of guilt by association, which ultimately came to pass in my case.”
When contacted last week by The Irish Times about the CHC case, a Central Bank spokesperson said: “The Central Bank increased its engagement with Custom House Capital from 2009 to a significant extent, and this engagement led to a series of restrictions being imposed on CHC.
“In July 2011, the firm was prevented from carrying out any transactions or making payments to any clients in order to protect the interests of all clients, and prevent any further effect on client investments, until the impact of the issues involved was fully established. The Central Bank has acted at all times to protect the interests of all clients of CHC.
“In 2010, the Central Bank was given new fitness and probity powers which for the first time gave it the power to investigate and remove individual members of management from a regulated financial service provider. In 2013, the Central Bank was given enhanced direction making powers.”
Ms Kelleher is out of work. She said that despite not being convicted of any crime her high-profile prosecution meant no company was willing to hire her.
In the years since the investigation began, she was diagnosed with cancer and suffered a miscarriage. The deaths occurred of close family members, including her father, mother, her aunt, who Ms Kelleher described as “like a second mother”, and her sister.
“They went to their graves worried sick about me. They were on bended knee saying rosaries and novenas, just because the powers that be refused to listen to the truth,” she said.
