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 Challoner 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” of the various accounts.

None of the customers were aware of the transactions and a “do not post statements” note was attached to the affected accounts to ensure that the customers remained unaware.

Passing sentence today, 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 cooperation of the defendant.

Judge Sheahan said the aggravating factors include the seriousness of the offending in itself, the amount of money involved, that the offending took place over a long period of time and the repetitive nature of the offending.

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 has repaid €60,000.

She also noted that Challoner is considered to be at low risk of reoffending.

Judge Sheahan said this was an offence in the mid-range for sentencing. She sentenced Challoner to three years in prison and suspended the final 12 months for two years.

Challoner of Chanel Road, Artane, Dublin 5, pleaded guilty to five sample charges of theft from Allied Irish Bank, Artane branch, 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 2 December, 2016.

The charges were representative of over 100 charges and the court heard that there were thousands of transactions involved.

The bank was at a total loss of €3.2 million, which included reimbursing the affected customers and the cost of an external audit.

Detective 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 Gda 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, Challoner often used his own money to pay them back.

Det Gda 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 didn’t 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 repay the money.

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,” Mr Gillane suggested, comparing the scheme to a game of “whack-a-mole”.

“The immediate problem is solved until the next day when another problem emerges,” counsel continued.

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 reimbursed 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”.

Det Gda Lynch told Mr Storan that Challoner began working for AIB when he was 18 years old and resigned following an internal investigation within the bank in 2018.

The offences came too late when the bank conducted an internal audit of a new system, which allowed bank officials to sign for customer loans up to max of €30,000 without any further sanction.

It was through this audit that it was discovered that a high proportion of overrides of the system were associated with Challoner.

The detective outlined that Challoner carried out three different types of fraud.

He set up over 44 fictitious loans related to 21 different customers.

He obtained funds from 22 customers on the basis that he was depositing them in an investment account which was never set up.

Finally, he provided a total of €900,000 to 33 customers without any paperwork or any lending agreements through the new system that was later audited.

In one particular case, outlined as an example to the court, a customer who had known Challoner for over 40 years, told gardaí he took out a loan to build a house without completing any paperwork.

He ultimately paid back some of this loan in cash which he handed over to Challoner in a pub.

The detective agreed with counsel that Challoner was effectively “stealing from the bank” for customers who had loans refused or delayed.

He added that there was a movement of money between customers’ accounts without the customers’ authorisation.

Det Gda Lynch agreed with Mr Gillane that Challoner fully co-operated with the investigation within the branch and then later with the garda investigation.

“It would have been a much larger investigation but for his cooperation. He tried to assist the investigation as best as he could,” the detective said.

He acknowledged that Challoner’s plea of guilty was “significant” and said there were thousands of transactions. “It would have been a massive undertaking”.

The detective again confirmed that there is “no evidence that Challoner benefited financially in any way from the scheme”.

He accepted that he was someone very well regarded within the bank and by customers who had built up relationships with him because he was very hands-on over the space of his career.

He confirmed that Challoner was one of those people that customers could pick up the phone and look to for help.

Mr Gillane described his client as a “shy and quiet” man who was born in rural Galway and grew up on the family farm.

He moved to Dublin and began working with AIB as an 18-year-old man. He later married and has two daughters.

Counsel said his client continues to express his deep regret and asked the court to accept that he assisted the garda investigation and took full responsibility for his offending behaviour to ensure that the finger was not pointed at any other colleagues who may have signed relevant documentation.

Mr Gillane said Challoner feels that he has brought shame on himself, his wife and extended family.

He asked the court to “stand back” and not be “blinded” by the significant figures involved but instead take into account “the very fair evidence” of the detective as to how the scheme started.

“It is a case where someone under extreme pressure initially makes stupid decisions to help people that just got out of control and instead of screaming ‘stop’ it continues,” Mr Gillane said.

He handed a psychological report into the court along with various references and letters from people including Challoner’s wife and a charity he is currently assisting.

Counsel said that all of those who wrote references were aware of why Challoner was in court.

Mr Gillane said since he has left the bank, Challoner has been working as a pizza delivery person.