Senior Aer Lingus executives set up a subsidiary holiday company with concealed financial deficiencies and were aware at all times its accounts were false, a jury has been told in a fraud trial.
Mr Malachy Faughnan, former chief executive of Aer Lingus Holidays, also told the jury at Dublin Circuit Criminal Court he believed he had been unfairly treated by Aer Lingus when asked to resign in 1989 following disclosures about alleged financial discrepancies in the company.
Mr Faughnan agreed with defence counsel Mr Adrian Hardiman, SC, that Aer Lingus Holidays (ALH) was started with what counsel called "huge undisclosed loans and liabilities". These included a £500,000 loan from Aer Lingus which didn't exist in the company's books. He believed this was known to Aer Lingus.
ALH was formed in 1983 by subsuming four travel and tour companies owned by Aer Lingus - Blueskies, Sunbound, Cara and Enterprise. Shares were allotted to the four companies which were also all debtors of Aer Lingus.
Mr Hardiman claimed that Blueskies and Enterprise were insolvent in 1983 and would not have been licensed to trade under the 1982 Transport and Tour Operators Act due to indebtedness.
Mr Faughnan agreed Blueskies would have had to show its total liability of £650,000 if it applied for a licence under the new Act. Enterprise also would not have been granted a licence due to its indebtedness. He told gardai that Enterprise's accounts indicated a profit but this was false due to debts and loans owed to Aer Lingus.
These loans and debts owed to Aer Lingus were concealed from the ALH balance sheet.
There was also a bogus figure of £200,000 as the value of a five-year-old computer owned by Blueskies.
Mr Faughnan told Mr Hardiman he was not surprised to learn that all the top Aer Lingus executives who had been subpoenaed to give evidence would claim they knew nothing about the false accounts.
Mr Faughan's comments were made on the second day of the trial in the course of his cross-examination by Mr Hardiman, defending one of the accused, Mr Peter Keely, of Carrig Avenue, Dun Laoghaire who is jointly charged with Mr Desmond P Flynn, of Tritonville Avenue, Sandymount.
They have pleaded not guilty to charges that they conspired together and with Mr Peter Noone, former financial controller of ALH, on dates from March, 1987 to November, 1988, to defraud the company by misappropriating funds to buy the Las Hibiscos apartment complex at Puerto del Carmen, Lanzarote for their own use and benefit.
Mr Faughnan agreed he submitted a proposal to the Aer Lingus Holidays board on August 6th, 1985 that it should purchase apartment blocks in Lanzarote to cut down their costs for all-inclusive package holidays rather than renting them from agents.
Four apartment blocks were taken over by ALH through a leasing agreement with Capital Leasing. These were San Francisco Park, La Benita and Los Vegas in Lanzarote and Ecudor in Malaga. The negotiations for these deals were carried out by Mr Noone.
The hearing continues before Judge Kieran O'Connor.
