A jury has heard that staff at an investment company due to take over part of Custom House Capital's business felt that €35 million was at risk or had been paid to support property schemes.
Ciara Kelleher (51), of Blackhorse Ave, Dublin 7, has pleaded not guilty at Dublin Circuit Criminal Court to one count of conspiring with others to defraud investors in and clients and customers of Custom House Capital Ltd (CHC) by intentionally misleading them as to where or how their assets had been placed in the investment firm.
The offences are alleged to have happened within the State on dates between October 2008 and July 2011.
On the fifth day of the trial, Brian Cahalin told Lorcan Staines BL, prosecuting, that he joined Appian Asset Management in 2011 as Head of Compliance in connection with the company's proposed takeover of some of CHC's assets.
Portfolios
He spoke with CHC staff in late June and early July 2011 to get more information about some portfolios, as some of their contents would not have been considered appropriate by Appian's investment managers.
Mr Cahalin said he wasn't getting information in a format to allow Appian to instruct stockbrokers to sell these units. He went to CHC's offices on July 5th, 2011, and examined an equity portfolio file. The witness said he noticed a large portion of this was invested in a bond, which would have been unusual.
Mr Cahalin said he asked Paul Lavery, Head of Finance, about this, but Mr Lavery was too busy to answer. The firm's CEO Harry Cassidy then called him, asking for this file to be returned. Mr Cahalin said he also asked Ms Kelleher to produce a holding report for two other cash funds.
The witness agreed with Mr Staines that a large proportion of one of the funds was in bonds, which was unusual as he'd expected to see €6.7 million of client funds invested in equity.
Mr Cahalin said he also found it unusual that a PRSA cash report did not state the name of the bank where the money was held, and Ms Kelleher told him she didn't know this.
Mr Cahalin said he spoke to his colleagues in Appian, and they asked John White, CHC's Investment Director, to meet them the next day. During this meeting, Mr Cahalin said Mr White admitted that Mr Cassidy told him to sell down the portfolio, and he did this, even though he knew it was wrong.
Mr Cahalin said Ms Kelleher provided him with more reports, which showed a series of sales from the portfolio between October and December 2010, with money sent to the bond.
Property investments
Mr Cahalin confirmed he spoke with other CHC employees, including accounts assistant Michelle Donnelly. He said he met Ms Donnelly, who explained that she had been involved in a process in relation to property investments that she wasn’t comfortable with.
A series of emails and other documents were shown to the witness.
Mr Cahalin said Ms Kelleher told him that there could be a flag on some client accounts advising staff to contact Mr Cassidy or Mr Lavery if a valuation was required.
She told him Mr Lavery would advise of any entries that needed to be performed on an account to disguise what was happening to the cash in their portfolio. Once the valuation had been prepared, these entries were then reversed.
Mr Cahalin said this meant that the cash amounts recorded in the portfolio would match the daily client cash reconciliation. The witness was shown an example and agreed that the client's valuation stated they had approximately €65,000 in cash; however, the trial balance showed €35,000 was invested with €25,000 in cash.
Mr Cahalin said that when this was compared to the daily cash reconciliation, €25,000 would be attributed to the client in the pooled account. He said he took €25,000 to be the correct cash balance on that day, which meant the valuation was incorrect.
Cash balances
Mr Cahalin said this pattern where the cash balances on statements didn’t correspond to the daily cash reconciliations was identified in other accounts he reviewed. The witness said a meeting was held with Mr Cassidy where he outlined that the investment type qualified as an equity investment.
The Central Bank was then advised about their concerns, and Mr Cahalin said it was felt that €35 million was at risk or had been paid to support property schemes.
Mr Cahalin said Appian's board wrote to CHC to outline their concerns and seek answers. This letter was sent after the close of business on a Friday evening with a Monday deadline.
The witness said he met with Ms Kelleher on that Monday to ask if there was anything she wanted to say to the Central Bank. He said she indicated she might speak to the regulator about the misdating of invoices.
Mr Cahalin said he spoke with Ms Kelleher again, then met her at a coffee shop near the Central Bank's offices as she'd expressed an interest in meeting the regulator. He said she took a phone call, then decided not to make a statement.
Central Bank
Mr Cahalin said he became aware that the board of CHC had met and Mr Cassidy had resigned. The Central Bank acted on the concerns raised, and CHC effectively ceased trading.
Mr Cahalin agreed with Michael Bowman SC, defending, that Ms Kelleher had assisted him by providing the information he asked for.
The witness told defence counsel that he understood that Ms Donnelly told him that she'd been instructed by Mr Cassidy to make improper transfers of funds and that she was aware of the significance of what she'd said.
Mr Cahalin said he did not recall a second meeting with Ms Donnelly at Appian's offices and didn't have any notes of this.
Mr Bowman put it to Mr Cahalin that Ms Donnelly's evidence was that she became distressed during this meeting.
The witness said he recalled a meeting where Ms Donnelly became upset, but he couldn't remember any details.
He said he would not have set out to cause distress, but to make people aware of the seriousness of the situation.
Mr Cahalin accepted he may have misinterpreted what Ms Donnelly said to him, but could not say as he didn't take any notes. He told defence counsel that he didn't take contemporaneous notes, but compiled a timeline during the week of July 11th, 2011.
The trial continues on Tuesday before Judge Orla Crowe and the jury.
