LAST UPDATE | 13 May 2023

FOUR SENIOR EXECUTIVES of Custom House Capital have been sentenced for their roles in a “highly organised” and “sophisticated” operation to defraud investors in the firm over a decade ago.

The company’s former CEO Harry Cassidy (67) was handed a sentence of six years and ten months by Judge Orla Crowe yesterday at Dublin Circuit Criminal Court.

Judge Crowe said victims were “systematically deceived in a sophisticated operation” which was carried out for over two years by people who owed them fiduciary duties. She said the offending was “most egregious” and involved a “gross abuse” of trust and duty.

She handed John Whyte (53), former head of private clients, a sentence of four years.

Paul Lavery (47), head of finance, received a sentence of three years.

John Mulholland (73), non-executive director of Custom House Capital (CHC), was handed a 12-month sentence.

Cassidy, of Clon Brugh, Aitkens Village, Stepaside, Dublin, Whyte of Beechpark, Lucan, Dublin, and Lavery of Rafeenan, Ballynod, Co Monaghan, pleaded guilty to conspiring with others to defraud investors in and clients and customers of CHC by intentionally misleading them as to where and/or how their assets had been placed contrary to common law.

John Mulholland of The Foxes Covert, Mount Juliet Estate, Thomastown, Co Kilkenny, pleaded guilty to one count of being neglectful in the discharge of his duty as a non-executive director of CHC.

The court heard this was in relation to the commission by the company of acts of dishonestly by deception inducing clients to entrust funds to the company or to refrain from removing funds previously entrusted to the company with the intention of making gain for itself and causing loss to another.

All of the offences occurred within the State on dates between 1 October, 2008 and 15 July 15, 2011. The courtroom at the Criminal Courts of Justice was packed with many people standing at the back of the court as Judge Crowe finalised the case.

Client funds

The court previously heard that CHC entered agreements to buy properties in mainland Europe at the time of financial crash. In 2008, CHC began to use client funds to meet these obligations, often without the knowledge or authorisation of clients.

It was the prosecution’s case that transactions on CHC’s systems were backed out of property before valuations were issued to clients. These valuations were misleading and did not show clients the true location of their funds.

Judge Crowe said the scheme “actively misled clients” because “their money was not where they thought it was”. She noted that this scheme continued for over two years.

When High Court inspectors were appointed to CHC in 2011, they found that €56 million of client money had been inappropriately transferred to property investments. A liquidator was later appointed to the company, with the process of winding down the company expected to continue until 2025.

Liquidator update

In an update to the court, CHC’s liquidator Kieran Wallace said €61 million in client funds were found to have been misappropriated. €41 million (64%) of this amount has been recovered, with clients receiving €39 million so far as of March last. A total of €253.4 million across over 3,000 accounts was held by the company on the date of liquidation.

A total of 202 victim impact statements were submitted to the court in advance of the finalisation of the case.

Judge Crowe said the statements outline the “very significant” effects on the victims and their loved ones. She said the court was also conscious that “some people have passed away in the intervening period”.

She noted that the vast bulk of CHC’s clients were saving for their retirement and many of the victims had suffered “significant financial losses”, which was an aggravating factor.

She said the offending caused “devastation” in the lives of “these blameless people who put their trust” in CHC. She noted that many of the victims referred to feelings of shame for being duped.

“The court views this as misplaced,” she said.

They were systematically deceived in a sophisticated operation which went on for over two years by people who owed them fiduciary duties.

Judge Crowe said other aggravating factors included the “significant breaches of fiduciary duty” and the impact on the affected clients. She said Cassidy was in “overall control of the scheme” while Whyte and Lavery were both “actively involved”.

She noted that the evidence before the court showed that Mulholland was “aware of the issue from early on” but “did nothing about it”.

Guilty pleas

Judge Crowe noted the four defendants had all entered guilty pleas, had no previous convictions and had “until now unblemished characters”. She said the guilty pleas were of value as they avoided the need for a long and complex trial.

She said she would also take into consideration the mitigation outlined on behalf of the four men, their expressions of remorse and the materials handed into the court on their behalf. She also noted that a “considerable period of time” has passed since the offending occurred.

Judge Crowe said conspiracy to defraud is a common law offence with no fixed penalty. She said the courts have generally adhered to the principle that the sentence for conspiracy should not exceed that for the substantive offence, which had been suggested as either theft or deception.

Judge Crowe said the court had carefully considered the offending in this case and in light of its scale and duration, the number of victims involved and their losses, the court was “entitled to depart from the maximum sentences set out” for these offences. She said the threshold for custodial sentences had been reached.

She noted Cassidy was a founder, major shareholder, director and CEO of CHC. She said the court was entitled to conclude that he was the “principal party and originator of the plan” as “nothing happened” within CHC “without his say so” as he was the “dominant” person within the company.

Judge Crowe said Cassidy breached “every duty and all trust placed in him” and imposed a headline sentence of 14 years.

She reduced this sentence to seven years, taking the mitigation into consideration. Cassidy is also to be given credit for the two months he spent in custody in Germany, giving him an effective sentence of six years and 10 months.

Judge Crowe noted Whyte was a director of CHC and a minority shareholder, who took part in the scheme and “didn’t do anything” to stop it. She said his culpability is lower than that of Cassidy and set a headline sentence of eight years, which she reduced to four years.

Judge Crowe said while Lavery was a salaried employee of CHC, he was “actively involved” in the scheme and “carried out duties that he knew to be wrong”.

Judge Crowe noted submissions made on behalf of Lavery stated he was not qualified for the role he held. However, she said he was a qualified accountant and could have chosen to leave the company, but instead “followed instructions”.

Judge Crowe noted Lavery’s culpability was lower than that of Cassidy or Whyte and set a headline sentence of six years, which she reduced to three years.

Judge Crowe noted that Mulholland had pleaded to a different court, that he was neglectful in the discharge of his duty as a non-executive director.

She said it could be “reasonably inferred from the evidence that he was fully aware that matters were awry” and had “demonstrated knowledge” about what was happening within CHC, but “did nothing” during the period in question.

She set a headline sentence of two years, which she reduced to 12 months with the mitigation taken into consideration.

Mulholland was also charged with conspiracy to defraud, but the court was told a nolle prosequi was to be entered in relation to this.