Lynn's sweetheart deal with First Active
Monday, January 07, 2008
IF your bank offered to give you a loan for one year of €3.15m with no need to repay a single cent during that time, what would you do?
If you were the fugitive solicitor Michael Lynn, you would take it.
And that's precisely what he did in April 2004, when First Active made him an offer he couldn't refuse. He was also happy to accept another €4.355m in loans over one year on an interest-only basis from the building society's commercial lenders.
The massive sums -- €7.505m in total -- were given to the Mayo-born solicitor and his then business partner, John Riordan, to help them refinance existing loans from other banks and also to purchase properties at the height of the country's property boom. The men ended their business relationship by December 2005.
Details of the extraordinary loan agreements would have been aired in the High Court had Lynn not fled the country last month, leaving a trail of debts and questions in his wake.
Affidavits sworn on behalf of the building society reveal the incredible level of trust lenders at First Active placed in Lynn as his business apparently prospered.
According to the documents, the "purpose of the [April 2004] loans was to refinance existing loans with other banks and to assist in the purchase of commercial and residential properties".
The loans were given on the condition that Lynn and his then business partner would offer 25 properties up as security, and specifically grant mortgages over two apartments in Leitrim to First Active.
While the building society is now seeking to gain possession of the two Leitrim apartments -- 24 and 25 Cluain Bui, in Carrick-on- Shannon -- its efforts are being hindered by the Permanent TSB, which also put up mortgages for the purchase of the properties.
However, it appears neither institution can lay claim to the Leitrim properties, given Lynn's failure to register either of their interests with the Land Registry.
According to First Active's affidavit, the runaway solicitor gave two written undertakings to the building society on April 21, 2004 and December 8, 2005 to deal with Land Registry queries relating to its interest in the Carrick-on- Shannon properties.
Frustrated by his failure to honour his promises, First Active applied to the Property Registration Authority to register its interest on December 23, 2005. They were unable to do so, however, as Lynn had already withdrawn the leases and other necessary documentation needed to register ownership from the authority.
According to the affidavit, "this move by Lynn effectively halted First Active's attempts to register its 2004 and 2005 mortgages on the properties".
Lynn's manoeuvre didn't prevent First Active from advancing €5,181,470 to him, however. The massive amount was given to Lynn in a restructuring of the €7,505,000 in loans it had given him in April 2004.
And while ordinary bank customers face the threat of repossession by their bank if they fail to meet their mortgage payments for even a month, it wasn't until October 18, 2007 that First Active sought in a letter of demand what it termed a "full and final payment of all loans outstanding" from Michael Lynn. With no payment forthcoming, First Active obtained and entered up a judgement against him for €5,108,788.20, the affidavit states.
According to that same document, First Active is now attempting to recover some of its money by gaining possession of 24 and 25 Cluain Bui, claiming that the properties were bought using funds provided by it.
Had the building society pressed Michael Lynn to register its interest in the Leitrim properties as he had promised to do as far back as April 21, 2004, it could all have been so different.
Between that date and September 9, 2005 the then high-flying solicitor secured and extracted millions more from First Active by way of loans to restructure existing loans from other banks, and to buy out the equity share of his former business partner, John Riordan, in their business.
And despite Lynn's failure to stick to his undertakings in relation to the Leitrim properties, First Active continued to provide him with interest-only loan facilities on sums ranging from €503,130 to €1.982m.
Indeed, on September 9, 2005, the building society gave him a total of six loan offers totalling €5,181,470.
The two letters of offer, seen by the Sunday Independent, detail three loans apiece. In one offer letter, Lynn is advanced sums of €940,340, €503,130 and €700,000, all repayable over a period of 20 years. For the first 12 months in each case, the sums are repayable on an interest-only basis, allowing Lynn to make payments of as low as €1,618.40 in the case of the €503,130 debt.
In the other loan offers given to Lynn that same day, First Active advanced sums of €725,000, €331,000 and €1.982m.
Referred to as facilities A, B and C respectively, the loans had three distinct purposes.
Loan A, for €725,000, was given to allow Lynn to purchase the equity share of his then business partner John Riordan in 11 residential properties.
Loan B, for €331,000, was given to Lynn to allow him to refinance a residential investment property to the amount of €331,000 from Permanent TSB.
Loan C, for €1.982m, was given to Lynn to allow him to refinance an existing First Active debt of €1.982m. From the affidavit, it would appear that this particular loan was first given to Lynn and his former business partner John Riordan in April 2004.
According to the document, the €1.982m was offered to refinance existing bank facilities against 11 residential investment properties.
When it was first given in April 2004, the €1.982m was to be repaid on an interest- only basis for the 12 months of the loan agreement. Those repayments came to €5,962.52 a month for the duration of the term.
On the same day that First Active agreed to give this massive interest-only loan to Lynn, they also agreed to lend him €1.575m to refinance existing Bank of Ireland loans which were secured against a site known as Site A in Blanchardstown.
According to the building society's affidavit, all three of the second tranche of September 2005 loans -- totalling €3.038m -- were given to Lynn on an interest-only basis for the first 12 months, with capital and interest payable for the 19 years after that, according to the documents.
In what appears to be the earliest indication that lenders at First Active were becoming somewhat circumspect in relation to Lynn's dealings, preconditions were attached to the September 2005 loans.
In one of those conditions, First Active required him to lodge €90,000 with the bank from the sale of lands owned by him and located at Corduff Cottages in Blanchardstown, Co Dublin.
In the other case, the building society insisted that Lynn's accountant would "confirm his existing availability of capital allowances".
As part of the pre-conditions attached to the loan offer, First Active stated that it could not be "utilised until such time as that all conditions are complied with in relation to the facility letter addressed to Michael Lynn dated the 6th September, 2005 in respect of funds amounting to €3.038m".
Michael Lynn signed the loan agreement on October 6, 2005. And the rest, as they say, is history.
Source: http://www.independent.ie/national-news/
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