A former bank manager has been jailed for two years for stealing €2.7 million from his employer after he created fictitious undocumented loan accounts for customers when their own legitimate applications were delayed or refused.
Patrick Challoner (54) funded these bogus loans by taking money from other customers who believed they were authorising him to set up an investment fund for them. These customers gave Challoner authorisation to take money from their accounts for the purpose of investment but the cash was never invested.
Dublin Circuit Criminal Court heard it was effectively a scheme that lasted 16 years and involved Challoner transferring funds from one customer account to another in order to “fill the holes” in the various accounts.
None of the customers were aware of the transactions and a “do not post statements” note was attached to the effected accounts to ensure that the customers remained unaware, the court heard.
Passing sentence, Judge Elma Sheahan said this case has a unique set of circumstances which resulted in a total loss of €3.2 million from AIB Bank. She noted that the investigating garda said this would have been a difficult case to prove if it was not for the co-operation of the defendant.
Judge Sheahan said the aggravating factors included the seriousness of the offending in itself, the amount of money involved, the fact the offending took place over a long period of time and the repetitive nature of it.
The judge said the mitigating factors were the defendant’s early guilty plea, his level of cooperation, his acceptance of responsibility and his previous good character. She said the defendant had expressed genuine remorse and shame for his actions and noted that he had repaid €60,000. She acknowledged that Challoner is considered to be at low risk of reoffending.
Judge Sheahan said this was an offence in the mid-range and sentenced Challoner to three years in prison with the final 12 months suspended for two years.
Challoner, of Chanel Road, Artane, Dublin 5, pleaded guilty to five sample charges of theft from the Artane branch of AIB on dates between August 2002 and February 2011 and one charge of deception, in that he fraudulently induced a named person to authorise a transfer of €300,000 from their bank account on December 2nd, 2016.
The charges were representative of more than 100 charges and the court heard there was thousands of transactions involved. The bank suffered a total loss of €3.2 million, which included reimbursing the effected customers and the cost of an external audit.
Det Garda Gareth Lynch told Brian Storan BL, prosecuting, that Challoner told gardaí during a number of interviews that the whole situation started when he found that, due to other work pressures, he had not progressed a mortgage application for a customer’s “dream house” as efficiently as it should have been.
The customer then became concerned that they would lose the property so Challoner took money from the account of another customer and effectively gave the prospective home buyer what they believed was a bridging loan. He then set up a bogus loan account without any supporting documentation.
Det Garda Lynch said the fact that the loan had no supporting documentation meant that the bank then had no way to enforce the payment of the money. He explained that one way Challoner funded these accounts was by getting other customers to invest funds into an investment account that he never actually created. When these customers came back to Challoner looking to withdraw cash from these investment funds, he often used his own money to pay them back.
Det Garda Lynch said Challoner also used this scheme to provide loans to businesses that found themselves in financial difficulty.
He agreed with Sean Gillane SC, defending, that in “a perfect world” the people who had been provided with the undocumented loans would have paid back the money and Challoner would then have been able to pay back the original customer but this did not happen.
Instead, many of those people couldn’t repay the funds or refused to repay the loans and as there was no supporting documentation, there was no way they could be forced to. This then left holes in the accounts of the people who believed they had invested money.
“The whole thing spirals and rather than stopping the Ferris wheel, he kept going trying to plug the holes,” said Mr Gillane, who compared the scheme to a game of “whack-a-mole”.
“The immediate problem is solved until the next day when another problem emerges.”
Det Gda Lynch agreed with Mr Gillane that it was “a disaster waiting to be revealed but unfortunately it was not revealed for a long time and it escalated out of control”.
The detective also outlined that although the bank was at a loss of €2.7 million, as they re-imbursed the majority of the customers, Challoner did not financially benefit from the scheme.
He agreed with Mr Gillane that gardaí carried out an extensive financial profile of Challoner, including checks with the Revenue Commissioners and social welfare and concluded that he did not have any trappings of wealth.
He accepted a suggestion from counsel that Challoner “was trying to meet these demands [of the customers] rather than line his own pockets”.
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